Double-taxation is a meme used by partisans arguing for getting rid of various taxes that has no legal basis.
By the same argument, you could say you paid income tax - why is your after-tax money being used for property tax and tax on new goods?
When you buy a new car, the components (assuming it was assembled in the US) were taxed when the car company bought them.
I don’t know for sure, but I think you are supposed to charge sales tax at garage sales (however, if you sell stuff, including a used car, for less than you bought it for, you don’t owe income tax on it).
No, it is not double taxation. That term usually means you tax a tax: for example, you pay $200 for an item, but 10% Federal Tax and 5% state tax. The state and Federal tax have to be charged on the $200, not on $210 or $220. There’s been a movement to obscure the issue by redefining double taxation to mean two different people are taxed on the same money, but that’s nonsense.
I don’t know about Colorado, but in NY, you’re supposed to pay sales tax on every transaction in that state. Garage sales are usually not generally exempt, though it’s not likely that it’s worth it to the state to prosecute violators unless the amount is worth their while. The tax on the $200 you make at a garage sale is going to cost more to collect than it’s worth.
As for the car, most states charge sales tax simply because it’s a sales transaction: you’re selling something. And you’re not selling it a wholesale, which is often exempt. I can’t imagine why you’d think this wouldn’t be taxed.
Colorado seems to follow the same policy as NYS: the tax is calculated on the value of the vehicle. That’s to prevent people from selling a $10,000 car for $10 (officially – with the rest under the table) and claiming they only have to pay $8.75. Your bill of sale would be ignored. You can sometimes get a lower value if someone (probably womeone not a part of the transaction) will attest that the actual value of the car is less than book value; otherwise you owe tax on book value.
Well, yes, but that’s not double taxing. Double taxing is when they tax your income then tax it again when you spend it. Oh, wait a minute. . . . :smack: If you walk into a used car dealership, they will charge you sales tax and pay the state. If you buy from a used clothing store, same deal. The fact that sales tax was paid when an item was sold new doesn’t change the fact that you’re buying it and sales tax applies.
Bingo. But nobody every does this and the state doesn’t care enough to collect the pittance it would get on $0.10 Barbie dolls.
Well, I can’t answer that because it would be giving you advice to do something illegal. Let’s just say you’re not the first one that ever thought of that. Remember how the state gave you an estimate of the value of the car? They know how much it’s worth. Some states even charge you the sales tax on the full market value if you execute a below-market-value transaction, like Massachusetts, although Colorado appears to look only at the sales price.
Laws vary from state to state, and YMMV. In general, in states that have sales tax, tax is supposed to be collected every time something is sold. Doesn’t matter whether it’s new or used. If you buy it from a retail store or other business that is licensed to collect sales tax, they will collect it at the point of sale.
If you buy from an individual, in the case of a car, the state will collect the sales tax when you register the vehicle.
Other things that you purchase from individuals (such as garage sales) or over the internet, or from outside the state, you are supposed to declare these purchases along with your income tax (in Utah anyway, and I’m sure in some other states) and pay “use tax”, which is equivalent to sales tax, at that time. Nobody that I know has ever done this, however.
Yep. I verified that with the State of California several times.
And, in fact, a family member who had a big annual garage sale was visited by a government representative and told that collecting sales tax would be required. Again, this was California–just one of the many reasons I moved away from there.
IIRC that only applies if you are transferring your stake in the vehicle to another vehicle like trade ins.
Sales and use taxes I’m pretty sure always apply if the transaction takes place in a jurisdiction that charges it, its just that many such things are below the radar so to speak. A couple hundred dollars runngin a grage sale every few months is no biggie. Start moving a couple thousand dollars a month in product and someone somewhere is going to notice.
Actually, I think the manufacturer can avoid paying the sales tax on the components by filing a resale certificate. At least that’s what we did when I worked for a NYS company that bought components for use in products we were selling.
To illustrate why this is nonsense, suppose that there were only one kind of tax (we’ll say income tax for this example, but it could be anything). I go to work, and I earn a dollar. Since this is my income, I pay taxes on it. I then pay that dollar to the guy at the gas station to buy a fraction of a gallon of gas. Now it’s income for the guy running the gas station, so he pays tax on it. He then pays his landscaper. Now it’s the landscaper’s income, so he pays tax on it too. He then buys a jug of milk with it, and the grocery-store employees pay tax, and so on. It’s not just getting taxed twice; that same dollar keeps on getting taxed forever. Nor can you argue “It was taxed when it was originally earned”, because you can’t pin down when it was originally earned, either: Before it entered my pocket, my employer got it by selling a widget to a customer, and they got it from someone else, and…
Not that I dispute this is nonsense, but I think the usual argument (not a legal argument, AFAIK) is against the same person paying tax more than once on the same money. I think this is part of the argument against estate taxes; the person who established the estate paid taxes on all that money when he earned it; why should the estate have to give money to the government just because he died? But I digress. Sorry.
[QUOTE=Belrix]
This seems suspiciously like double taxation, which I thought was a no-no. Wasn’t this car taxed at the original sale?QUOTE]
If you were to purchase this used car from a dealer, you would still have to pay sales tax. I am not saying to do this, but I have seen some people say they bought the car for a lower price from a private party to avoid paying a higher sales tax. Mr. Smith sells a car to Jane for $10,000 but Jane went to register it and said she paid $5000, and saved paying tax on $5000. NOTE: This is illegal and I am not saying to do this at all. I have even see people go as far as saying they paid $1 and only paying eight to nine cents in sales tax.
No I’m pretty sure you only have to report a sale of your property on your 1040 if you turned a profit on it (and you get one lifetime exemption on trading down your house).
You may be thinking of the (legal, at least in IL) trick of a dealer taking money off the price of a new car for a trade-in, thus saving you some sales tax. So if you want to sell a used car on your own instead of trading it in, make sure you get more than the sales-tax-worth of difference between the trade-in transaction and the other one.
Yep. Good old Colorado. I bought my car from a friend who charged me $300 (1998 Saturn) because I suddenly needed a car and she suddenly needed to get rid of same. The Colo. Dept. of Collecting Your Money gave me a really bad time about the whole thing, i.e. why didn’t she just give me the car (she basically did), wanting a copy of not just the bill of sale but the canceled check, and then they ended up using the value of the vehicle anyway, so I had to pay $300 for the car and $265 to get the tags.
Here in Minnesota (and in some other states), the Sales & Use Tax law has a specific exemption for “occasional” sales like a garage sale.
So you’re exempt, as long as you don’t do this too often. The state has been known to go after people who regularily hold such sales, and earn significant income from them. I think the unofficial guideline is that if you hold more than 3 garage sales in a year you’re expected to collect & report sales tax.
Also, attempting to under-report the sales price on a used car is fraud, and many states check for this. In Minnesota, a friend worked on programming state computers, and they use a table of reasonable values (rather like blue book values) to check the reported price, and flag ones significantly below that value. And the license clerks can insist that you pay tax based on the fair-market value of the vehicle, even if the seller gave you a better deal for some reason.
Also, the value you report is available to insurance companies. So if you bought a car for $10,000, but reported a sales price of $5,000 for sales tax, and then had it destroyed in a traffic accident, the insurance company could claim that the value of that car was the $5,000 that you had reported, and only pay that amount for your claim. I haven’t heard of this personally, but I sure wouldn’t put it past them!
In the state of Pennsylvania, you would have to fill out a form explaining to the state why the car was sold at less than market value. I am not a lawyer, but at that point I believe you would basically be guilty of tax evasion and/or fraud. I’m sure people do it all the time, but I suspect the penalty if you get caught would be rather uncomfortable.
I’ve had to fill out the form twice, and both times I had to list in detail what was wrong with the car and the estimated repair costs to justify the lower sale price. It wasn’t as simple as just saying “well, that’s what the junk heap was worth”. In fact, once I bought a car for $300, and the book value was $500 (because basically anything that runs is worth $500). Despite the fact that both I and the seller both agreed that the car in question really wasn’t worth more than $300, I still ended up paying sales tax on $500.
"Current law requires businesses that engage in retail sales to collect the sales tax on those sales, but exempts “occasional sales” from sales tax liability. If you sell occasionally, you don’t have to ask for permission from the government (by getting a seller’s permit) to sell. The reason for that rule is that the state really shouldn’t require anyone who has a yard sale to get a government permit to sell their old shirts and dirty bird cages. Recently, the Board of Equalization started trying to tax occasional sales by saying you could only have two yard sales a year. That regulation is not consistent with the spirit of the occasional sales exemption in law, so the board wants a law to justify its intrusion. That law is SB 607, introduced by Senator Debra Bowen (D-Redondo Beach) which would allow tax auditors to invade your home if you have three garage or yard sales, or sell three items, which net you $1,200 or more in a year."
I had to fill out a similar form swearing that I was **giving ** the car to my brother-in-law, and not just lying about it to help him avoid the sales tax. We even had to swear to our legal relationship.
I have to register my new car in a couple of weeks and pony up over $1000 for the privilege. It just doesn’t seem fair somehow.