Buying new car outside California/ Tax questions

[Schroeder0202]

Several buyers have contacted me about buying cars.
Most from California since there is no current inventory there.

Can someone please clarify if a California resident buys a car from say IL
does he/she have to pay sales tax twice on the car? Tesla seems to be telling people they will
have to pay sales tax twice which doesnt seem correct.

 

[rhaekar]

You shouldn't be paying sales tax in the state that the car comes from but you'll pay the sales tax when it's registered in California. Maybe some states have crazy laws that they'll charge you tax regardless of where you are registering it but for California, any car registered with under 7500 miles is considered new and will be charged sales tax on the purchase price.

 

[Schroeder0202]

I would agree you pay taxes in the state in which the vehicle is registered in.
Tesla saying otherwise.

 

[OCR1]

Virtually everything Tesla reps say is wrong.

 

[DopeGhoti]

Generally you only have to pay sales tax for the state in which you live, even if you are ordering something from another state. This is why historically you are not charges sales tax for mail-order purchases -- unless the seller has a presence in the state in which you live.

 

[IraB]

It depends on how the customer takes delivery of the car. If the car is delivered in some states and gets a temporary tag in the state of delivery, then the state will demand sales tax. This tax may or may not be credited against the tax due in the state of actual registration. That also depends on the individual state law. Thus, for example, if a buyer from CA flies to IL to pick up the car and drives it back to CA, there is a good chance that both states will demand payment of the sales tax.

On the other hand, if the seller ships the car to the buyer's state and the buyer registers the car and gets temporary or permanent tags in his / her state, then, as far as I know, the state from which the car came should not require any tax payment.

 

[Schroeder0202]

I believe Tesla is requiring all paper be done in the state in which purchase is done which im guessing is the issue

 

[mongo]

You shouldn't be paying sales tax in the state that the car comes from but you'll pay the sales tax when it's registered in California. Maybe some states have crazy laws that they'll charge you tax regardless of where you are registering it but for California, any car registered with under 7500 miles is considered new and will be charged sales tax on the purchase price.

CA is such a state. If you pick it up in CA, you pay CA sales tax 9%+ regardless of where you live.
We can't buy Teslas in Michigan. If we buy in Ohio, we pay their 5.75% tax there and then 0.25% in Michigan. If we buy in IL, they do not collect any sales tax and we pay the full 6% to Michigan.

 

[SageBrush]

Each pair of states can end up being a different story.

In general, if the sales tax of the originating state is lower than the sales tax of the destination state then things will work fine since either the originating state will collect its tax and the destination state will collect the amount remaining or the originating state will let the destination state collect it all.

The first case might work this way (numbers are not real.)
CA collects 9% on a car purchase in CA
IL collects 7% on a car purchase in IL
If the originating state is IL and 7% is paid before car transfer to CA, then CA will collect 2%.

If the originating state sales tax is the higher of the two then either the buyer or seller eat the extra costs or you hope you live in a state that lets the destination state collect the full state amount.

For specifics ask the DMV of each state. When I bought a (new) car out of state I bought a temp plate from my local DMV and stuck it on the car. I avoided telling the local DMV that the car at that moment was not in state since that would have been a reason for the office to not let me buy a temp plate. This was in Colorado and the temp plate cost $6.

 

[cpa]

California requires proof of the sales tax paid to another state before the DTFA via the DMV will allow the credit against your California rate. No proof, no credit.

 

[miimura]

California requires proof of the sales tax paid to another state before the DTFA via the DMV will allow the credit against your California rate. No proof, no credit.

I'm surprised California gives any credit at all.

 

[cpa]

I'm surprised California gives any credit at all.

Why? California might tax the air we breathe if they could find a way to measure, assess, and collect it, but they do pay attention to the Constitution and other import bodies of law.

 

[IraB]

Why? California might tax the air we breathe if they could find a way to measure, assess, and collect it, but they do pay attention to the Constitution and other import bodies of law.

Less attention to the constitution than you might think. Prior to about 2001, CA charged a $300 "fee" to register a car purchased outside the state if it was a "49 state" car, because "the California version of the car was more expensive because of CA emissions standards." This was the case, even if the car fully passed all CA emissions tests upon registration. I believe it was in 2001 that angry new residents filed a class action lawsuit claiming this was a violation of the constitution. CA fought the case and lost and had to refund (with interest) everyone who was charged this fee.

 

[p4594spa]

When you ultimately go to register in California, they are going to make you pay the delta between what you paid in the purchasing state and the sales tax in California. THere are some exceptions for "used" cars, but they don't apply if the same owner bought it originally and now try to register it in California