is this tax smaller than the cost of transportation from the state border to the main population centers? Why aren’t there all sorts of businesses helping Californians to avoid it? Or they are already in place but just not very vocal with advertising their services on national TV?
Could you explain California’s sales tax for those of us who don’t know about it?
… or are you just asking how a regional value-added tax works and why it isn’t avoided, and using California as an example?
With big ticket items (refridgerators, washers, furniture etc) you pay a significant amount for tax. If you buy the same item in Nevada, Oregon or Arizona you pay less and then drive it home.
If the cost of the transport is less than the additional tax you save money.
Californians pay something around 8.25% sales tax. Califonrian who travel to a state with a 5 percent tax and shop there, the law requires them to cough up the 3.25 percent difference when they return. Online purchases are taxed as well.
However the trick is getting people to comply. There’s no real way to enforce this.
Chicago has a similar law. If you shop in the suburbs and bring you couch or washer/dryer combo back into the city, you have to pay the difference between the sales tax in the suburbs and the sales tax in the city.
So do you? You’re supposed to. Do people do this? No. Our mayor, Mayor Daley even went so far to try to force delivery companies to collect this sales tax, which is called a “use tax” before they will deliever, if they deliver from the 'burbs to the city.
Of course the stores said, if you do that, we simply won’t deliver to the city and that includes our stores within the city, so you’ll lose all that business. Also people will just have their friends pick it up so you’re not gaining anything
See there’s no real effective way to enforce this, but it’s still the law
No, no and no. The purchaser is responsible for use tax as the sale did not occur in California and therefore sales tax is not due. Online purchases are not (supposed to be) taxed (sales tax) unless the vendor has 1) A nexus (place of business) in California and 2) The item is delivered or shipped to an address in California. And the law doesn’t require anyone to “cough it up upon their return” there is a line item on the CA State Income Tax (Form 540 IIRC) to declare the use tax you are responsible for.
They try to strong arm the merchant into collecting the tax at the point of sale. Example, a company called Tessco, which has no nexus in California, collects California sales tax on purchases shipped to California and then remits it to back to the state. New York is trying this with Amazon, and appears to be having some (limited) success
Other than sales tax vs. use tax (which appears to me to be a distinction without a difference), what you wrote sounds awfully similar to Markxxx’s summary - which you vigorously disagreed with.
For example, declaring and paying use tax on your 540 sounds essentially equivalent to “coughing it up upon your return.”
As others have said, the person is supposed to pay use tax.
It’s also not worth it.
Say someone lives in San Francisco and want a refrigerator, they sell for about $1000 give or take. Sales tax in the city is 9.5% and so they’re looking at $95 in tax, which isn’t good. They could drive across the nearest border (which seems to be Reno) and get it there, which has a 7.75% tax - that’s a savings of $20. Except Reno is 220 miles and at least $50 in gas away for any vehicle that has to haul a refrigerator. Plus 8 hours of driving. Plus, they have to haul and then install a refrigerator. Going to Medford, OR would be ~$90 in gas and a twelve hour drive (followed by installing the refrigerator).
Or, they could just go to Home Depot, pay the sales tax, get the refrigerator delivered, installed, and be enjoying crushed ice the next day with nearly no effort.
Some of my co-workers will buy bigger ticket electronic items when they happen to be traveling in states with low or no sales tax, and then bring it home on the plane. That is, back in the days when you didn’t have to pay for luggage.
Delaware (DE) has no sales tax. None.
People in Southeast Pennsylvania (Philadelphia Metro) and South Jersey frequently head to Delaware (30 - 60 minute ride) for tax-free shopping to avoid 7% sales tax (on luxury items, such as electronics and appliances, etc).
If you have something delivered from a DE store to a PA or NJ address, the DE store will add in the tax in your area, because the sale is being completed in another state.
I’ve known quite a few places of business who will work with a person trying to get around taxes.
A prime example is a Jeweler, said Jeweler sells a $10,000 ring/necklace/watch to a person, hands him the watch and then mails the watches box to the guys mom three states away. Easy evasion of as much as a grand in sales tax.
The Jeweler can only get in trouble if the guy reports, the guy can only get in trouble if the Jeweler reports him. Life goes on, people screw the government out of tax money all the time. Why not, the government’s constantly screwing us out of our income in the form of taxes – it’s a two way street.
I expect the obligatory cries of injustice from the SDMB liberal masses, since sales taxes are a regressive tax. Please, don’t let this economic conservative down.
Maybe in GD, but not in GQ.
As has already been implied: Who the hell wants to haul a washing machine 300 miles just to save $100 (at most), when you can get it down the street?
No, IAmNotSpartacus nailed the facts right and this is GQ, isn’t it? The part about
If your tax return is selected for audit, and you declare no use tax, but most taxpayers similar to you pay some use tax, that could prompt the auditor to probe further in that area.
Here is a discussion of how that relates to Pennsylvania and businesses: http://www.taxfreepc.state.pa.us/revenue/cwp/view.asp?a=13&q=250512
Markxxx and IAmNotSpartacus are describing two different situations, and both are correct.
Markxxx described a situation where you physically travel to a different state and make a purchase in that other state. There, you pay the applicable sales tax for that state. When you bring the item back to California for use, you must pay California use tax, but you are allowed to deduct the sales tax you previously paid. If the other state’s sales tax is equal to the California sales tax/use tax, you owe nothing. If the other state’s sales tax is higher than California’s, you may not try to get a tax refund by deducting the excess sales tax paid.
IAmNotSpartacus describes a situation where you order something via the Internet, mail order, phone, or some such. In that case, you are still physically located in California. As long as the seller does not have a place of business in California, the seller collects no sales tax at all, so the full amount of the California use tax is due.
The biggest item this will commonly affect is purchase of a car, and that can be dealt with. When you register it in CA, if it was purchased recently enough in the other state, they simply asses the sales tax at that time. They had to crack down at one point on people simply registering the car in Oregon, even though they actually lived in CA.
In regions where you have municipal level sales taxes, it can be an added selling point for certain businesses. I remember furniture stores in Denver advertising “We’re in Commerce City - no extra sales tax if you pick it up at the store.”. If they DELIVER it, they have to assess the tax where they delivered. I once had a furniture delivery guy drop something off with “This is Arvada, right?” … “No, this Westminster.” … (wink) “You just moved to Arvada.” … Arvada, of course, had less or no added sales tax. Yeah, I let it go at that point, and colluded in cheating Westminster out of tax revenue, since he seemed so insistent on it.
There’s always some tax bleed around borders, but, as many people have pointed out, being too far away from the border makes this impractical. None of California’s major population centers are particularly close to a state border (San Diego is close to Mexico, but then you have to deal with import restrictions, which are much more onerous), so it’s not a significant issue.
9.75% in Los Angeles. However, it varies by city/county. I think 8.25% is still the minimum.