1> About 20 years back when I started working on techno-commercial proposals for international petrochemical/refineries projects, there used to be something called high seas sale for high dollar value equipment (say greater than 50 million USD). As an engineer, as far as I could tell nothing really happened differently - it was just the financing and purchasing guys did paperwork to show that the sale happened at high seas and thereby not pay a lot of taxes - sales tax comes to mind for one. It was not an easy process though and involved lots of paperwork that needed to be done around the insurance and bank guarantee guys. It was legal as far as I could tell because I worked for one of the model corporations. So my first question is : is this still legal and still practiced ?
2> Question 2 is a followup on question 1. If it is still legal for corporations, is it also legal for private individuals to have such sales ? Say for example a US citizen buys a Lexus or BMW or something made outside the US on the high seas and thereby is not required to pay sales tax or such other taxes ?
Probably not. It depends on each state’s laws but I believe most of them require you to pay sales tax on a new vehicle when you register it in that state. You can usually get an exemption if you paid sales tax in another state but the laws are set up to close loopholes like you described.
Well, from your description the costs of structuring a sale as a “high seas sale” were evidently such that it wasn’t worth doing unless the transaction value was $50 million or more. So even if you could structure the purchase of a single car this way, it would cost you more - a lot more - than purchasing the car in the normal way and paying the sales tax.
As to whether it’s open to an individual even in principle, the question can’t be answered unless we know how the “high seas sale” was structured and why it worked to reduce tax. Don’t be misled by the term “high seas sale”; that may a colourful term for a tax-avoidance mechanism whcih doesn’t in fact, involve the high seas at all.
Plus, of course, cars are a special case anyway. If you buy a car outside the US and want to use it in the US, and have it regarded as your property here, you’re going to have to import and register it. Plenty of opportunity for them to collecte taxes at that point.
No matter where you buy a car, you won’t pay any sales tax on it at all until you title and register and plate it in your state, and then you pay the DMV whatever your state’s tax rate is. And you won;t be able to legally plate it and drive it until it has been brought up to meet all US safety and environmental standards. If it wasn’t manufactured for export to the USA, that will cost many thousands of dollars, and in the case of some cars, virtually impossible to satisfy.
First, it would be a lot easier to go to Oregon, Montana, or New Hampshire where they do not charge sales tax. But as stated previously, your home state has figured out these tricks and will make you pay them instead.
You can only buy a new car from a dealer in all 50 states. But in the 80s people figured out they could travel to Germany, buy a Mercedes (that was the color they wanted, with all the options they wanted), drive it around Europe for a month, ship it back, and still save thousands of dollars. The U.S. dealers pitched a fit and Congress passed the Vehicle Safety Act of 1988.
So, in order to bring a newish car in, it must match exactly match a model being sold in the US complete with US emissions and all the weird US safety standard stuff (the rest of the world has one single standard and we have another).
And the only way to get such a car overseas, is if the manufacturer sells it to you directly. Which they won’t.
Still, the idea off shore car lot is cool. But would have to find and agreeable manufacturer, and figure out how to set up shop 200 miles from anywhere.
Yes. But to benefit from duty free purchases, you have to be able to bring your purchased goods back home without paying tax, excise, customs and whatnot at the point of importation. And most countries have fairly strict limits on what kind of goods, and what quantities of them, an individual traveller can import duty free on his return. A Lexus is right out.
You can still do this. My friend did it about a month ago with a BMW (and also did it about 10 years earlier with a similar car). It’s an American model of course, which he ordered and picked up at their German plant. After a few weeks of vacationing he drove it to the port, flew home, and waited another few weeks for the car to arrive. Basically saved enough to get a free European vacation out of the deal.
If you buy a car in the EU specifically for export you do not have to pay VAT. To drive it on public roads however, you would have to register, tax and insure it which would cost some cash. Having it delivered directly to the port might be an option.
VAT in Germany is at 19%, so there would be an almost $10,000 saving on a 40,000 Euro car. The USA would want a 2½ import tax so that would take a bite out of the savings, and shipping is likely to be around $1000, so provided there is no hassle with conformity, it should show some savings.
If you shopped around in Europe you could probably get a healthy discount off that 40,000 as well
In Canada, you pay the sales tax when you buy the car at the dealer’s. but, same principle applies to new cars bought out of province and brought into province: you have to show tax was paid. (Doesn’t apply to second hand cars, as there’s no sales tax on them,)
Technically the OP is correct however when you title/register it in your state there is a use tax that you need to pay equivalent to the sales tax you would have paid buying it in the state minus any sales tax you paid in another state.
If I may derail slightly… If this is the case, what happens if I buy a new car in Alberta (which has no provincial sales tax) and drive it to Quebec (9.975% provincial sales tax)? Other than, of course, days of boring driving.
What countries did your companies or clients operate in? The “high seas sale” could have been a scheme to avoid, say, Saudi Arabian or UAE taxes on equipment and have had no relevance under US law. Maybe Saudi Arabia had an incentive in their tax law where they wouldn’t charge property or use tax on petroleum equipment imported into their country on the understanding that the country would recoup the benefits through taxing production and through the increased investment in local infrastructure. Sort of like the same thing that overseas financial havens do nowadays - offer shockingly low taxes now but reap the benefits through sheer volume and reputation.
That’s because in Canada, sales tax (and income tax) is all collected at the federal level. Most remains in the federal coffers, with some redistributed by Ottawa back to the provinces.
As I remember, part of the appeal was that when the car was brought into the US, it was treated as a used car, so the taxes might have been lower. And the German auto manufacturers would do a sort of formal presentation of the car to the new owner. The new owner might take a a tour of the Mercedes or BMW factory or take the car for a spin on the company test track. And you’re saving the cost of a rental car for the duration of your European vacation.
First, all provinces (except Alberta) have sales taxes which they have enacted themselves, as a matter of provincial law.
Second, some provinces have harmonised their taxes with the federal GST, but not all. In those provinces that have not harmonised, the retailer collects federal GST and remits it to the federal revenue agency. The retailer also collects the provincial sales tax and remits it to the provincial revenue agency.
Third, in those provinces which have harmonised, the feds don’t get to keep the revenue from the provincial portion of the tax. The province is entitled to receive the provincial portion from the federal revenue agency, less their share of the admin costs for the feds to collect the tax on their behalf.
states with a sales tax also typically have a “use” tax covering purchases made out of state. Michigan works this way. If you buy a car elsewhere for the express purpose of bringing it here, you either have to have evidence of sales/use tax paid, or you’ll have to pay it at the Secretary of State when you title the car.
That’s not right. Just going over and buying one would have only been an option up until 1974. After that, a car you bought in Europe wouldn’t meet the US emissions regulations.
As the others have mentioned, there were and are tourist delivery programs where you pick up a US-spec car in Europe, but you still do the whole transaction through a dealer. It saves money on the import duty, but I think you’d still have to pay sales tax (although since you aren’t physically taking delivery there, there’s no real reason not to do it through a dealer in a non-sales tax state.)
Note that the OP is talking about the international petroleum industry. So almost certainly they were talking about purchasing equipment that would never be imported into the United States, but rather used overseas. Buying a car or an oil rig somewhere, and using it somewhere, but never importing it into the US, would likely avoid all sorts of US taxes. But bring that car/rig into the US and suddenly all sorts of Federal, State, and local taxes apply.