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Sales Taxes - pay in two states!!

Electricfan

Active Member
Aug 24, 2013
1,252
378
Houston
I live in Houston and am buying my second Model S. I asked my DES about the possibility of flying to Fremont and picking the car up there, and driving it back to Houston. I was shocked when she told me that if I did that I would have to pay sales tax in both CA and TX! Since I took delivery of my first one in TX I only paid TX sales taxes, and I didn't learn about this as I didn't think of picking it up in CA back then.

I am sure she knows what she's talking about, but was also amazed I had not read that on the forum. Has anybody picked up their car in Fremont and driven it home to another state?
 

MikeL

some guy
Jan 24, 2013
1,044
139
Yes indeed. You (anyone) will pay sales tax in the state in which you register the car. The unfortunate double whammy would come because you took possession in CA so you owe them too. Now that the SuperChargers are up across NV on I-80, I would LOooVE to pick up my Model X at the factory, but no, I guess. I'll just have to take it back the other way!

I think they would have quite an active out of state owner pick up operation going in Fremont - maybe too active :rolleyes: - were this not the case.
 
Check your states rules. You'll never escape paying the California taxes (which is something insane like 8-10%). But your state may give you credit for paying the out of state taxes. Florida wanted 6% sales tax, and would charge you a 6%
"use" tax on any car less than 6 months old. However, they would reduce the 6% if you could prove you had paid sales tax to another state. But then nothing in Florida really made sense.
 

BerTX

Active Member
Supporting Member
May 2, 2014
3,508
3,658
Texas/Washington
No, you won't pay tax in Texas. Texas has a 6.25% sales and use tax on vehicles. If you buy in a state where the taxes are lower than that, they you would have to pay the difference to Texas. Since, as stated, California tax is higher (9.5% in Fremont), you would pay no additional tax.

So, i will cost you an extra $3000-4000 in taxes to pick the car up in California. I hope it's fun. :scared:
 

AudubonB

One can NOT induce accuracy with precision!
Moderator
Mar 24, 2013
8,906
37,791
This situation has boggled me since I first begain figuring out how to pick up my Tesla. And while I bemoan certain things about my lifelocation choice, most of you know that taxes aren't one of them....but let's leave that out of the discussion ;)

The biggest bogglementhoodshipness I have is why we haven't seen-heard-sensed an active campaign - not necessarily by TM per se - towards Sacramento to provide large-dollar item manufacturers like Tesla the incentive to maintain the highest level of production facilities within California. That is, to exempt customers like our OP from this double whammy (again, there might be some solace from the TexasTaxes; the overall point is valid).

It may not be satisfied, in the short run.
It may not be satisfied, in the long run.
It may not be satisfied, ever.

But goodness, gracious - why isn't anyone trying?
 

bonnie

I play a nice person on twitter.
Feb 6, 2011
16,429
9,935
Columbia River Gorge
This situation has boggled me since I first begain figuring out how to pick up my Tesla. And while I bemoan certain things about my lifelocation choice, most of you know that taxes aren't one of them....but let's leave that out of the discussion ;)

The biggest bogglementhoodshipness I have is why we haven't seen-heard-sensed an active campaign - not necessarily by TM per se - towards Sacramento to provide large-dollar item manufacturers like Tesla the incentive to maintain the highest level of production facilities within California. That is, to exempt customers like our OP from this double whammy (again, there might be some solace from the TexasTaxes; the overall point is valid).

It may not be satisfied, in the short run.
It may not be satisfied, in the long run.
It may not be satisfied, ever.

But goodness, gracious - why isn't anyone trying?

If we drop the fact this is a car for a moment, there is some consistency on this. If I'm traveling and make purchases while traveling, two different outcomes regarding the local sales tax: If I take it there, I pay sales tax. If I have it shipped out-of-state, then I don't have to pay state sales tax. (Can't speak for all 50 states, but this is true as a resident of Minnesota, Colorado, and California.) Pick up the Tesla in California, pay local/state tax. Ship it out of California at the Point of Sale, and you do not pay local/state taxes.

Cars are no different, other than the fact that your local DMV has a chance to take a swing at you & you need to show you paid tax.

Think of all your online purchases. Typically, if you buy something online from a company bases in your home state, tax is applied. If the online store is based out of your state, you don't pay tax. (Some states have specifically addressed this loophole in recent years, so there are exceptions now.)

(Does anyone know if Detroit has special laws in place to allow people picking up cars to bypass local/state taxes?)
 

BoerumHill

not great not terrible
Apr 23, 2015
736
218
New York, NY
I live in Houston and am buying my second Model S. I asked my DES about the possibility of flying to Fremont and picking the car up there, and driving it back to Houston. I was shocked when she told me that if I did that I would have to pay sales tax in both CA and TX! Since I took delivery of my first one in TX I only paid TX sales taxes, and I didn't learn about this as I didn't think of picking it up in CA back then.

I am sure she knows what she's talking about, but was also amazed I had not read that on the forum. Has anybody picked up their car in Fremont and driven it home to another state?

http://comptroller.texas.gov/taxinfo/taxpubs/tx96_254.pdf

This is the Texas Motor Vehicle Tax Guidebook, put out by the state Comptroller. Scroll down to page 17 to view Form 130-U. Let's look at Section 21, Sales Tax Computation.

(a) Sale Price
(b) less Trade In
(c) n/a
(d) taxable amount (add A + B)
(e) 6.25% Tax on Taxable Amount
(f) late tax penalty (n/a)
(g) Tax Paid to ________ (state)
(h) Amount of Tax and Penalty Due (E + F - G)

The Fremont rate is 9.50%. The Texas Sales Tax rate is 6.25%.

No sales tax due.
 
I might be mistaken, but wasn’t there a ‘loophole’ in CA tax law that allows for you to drive out of the state within a certain number of days of purchase (2 days or something) and legally avoid CA taxes? (you would of course, still be on the hook for your state’s taxes if any).
 

BoerumHill

not great not terrible
Apr 23, 2015
736
218
New York, NY
I might be mistaken, but wasn’t there a ‘loophole’ in CA tax law that allows for you to drive out of the state within a certain number of days of purchase (2 days or something) and legally avoid CA taxes? (you would of course, still be on the hook for your state’s taxes if any).

Not applicable when buying from a licensed dealer who collects/remits/reports Sales Tax.

The situation you describe is applicable when buying from a private party and immediately removing the vehicle from CA.

Private party purchase for out-of-state use, one-trip permitThe purchase of a vehicle from a person in California, who is not required to hold a dealer’s license or a seller’spermit (private party), is generally subject to use tax at the time the vehicle is registered with the DMV. However,a purchaser is not required to pay California use tax if the only use of the vehicle purchased from a private partyin California is to remove it from the state and it will be used solely thereafter outside this state. This exclusionfrom use tax requires that no other use can be made of the vehicle in this state. A One-Trip Permit may be issuedby the DMV in lieu of registration, for operating certain vehicles while being moved or operated unladen for onecontinuous trip from a place within this state to another place outside this state. This exclusion does not apply tosales tax.
 

AudubonB

One can NOT induce accuracy with precision!
Moderator
Mar 24, 2013
8,906
37,791
Your points have some validity, Bonnie, but mostly because you skewed the playing field to make them. That is, we are dealing with an automobile here, and every state uses their DMVs as a means to ensure that their Governor will get his slice.
Or hers.

The internet sales morass is not germane to this conversation; it is, indeed, a doozy.

My argument for Sacramento actively to consider this runs as follows.

Consider:
1. An automobile sale is going to occur to a non-Californian.

2. It will occur either
a. Outside California, or
b. In California

3. If (a), then California will accrue zero additional revenue to the transaction. So how to change that?
* Answer: By providing the customer incentive to be in the state (to pick up the car, of course), there will accrue an utter minimum of several hundred dollars, and potentially a number of thousands, in transportation, food, lodging and entertainment expenditures all of which financial transactions immediately generate tax revenue and indirectly, by the multiplier effect, a real, significant effect...all times the number of such new-car-pickups the state is able to engender each year.

Here's a real-life counterexample. The state of Washington absolutely recognizes this phenomenon by permitting all residents of Alaska, Montana (and possibly other sales-tax-free states like DE and NH - I'm not sure) to be exempt from all sales tax of goods purchased whilst in WA. I've no idea how many Montanans take advantage of that, but we Alaskans love avoiding the Alaska Penalty on the price of merchandise and are purchase-crazy shoppers there, really making a very noticeable difference in the economic activity in the Puget Sound area.
 

bonnie

I play a nice person on twitter.
Feb 6, 2011
16,429
9,935
Columbia River Gorge
Your points have some validity, Bonnie, but mostly because you skewed the playing field to make them. That is, we are dealing with an automobile here, and every state uses their DMVs as a means to ensure that their Governor will get his slice.
Or hers.

Heyyyy! Wasn't trying to skew anything. Just pointing out that this isn't anything new - not a mad power grab for cash by the State of California (though god knows we need it!).

I'm not defending the status quo or saying there shouldn't be an exception for vehicles, since every state has a DMV to ensure taxes are collected.
 

cpa

Active Member
May 17, 2014
3,458
4,896
Central Valley
Read all about it starting with Division 2, Section 6001 et. seq.

http://www.leginfo.ca.gov/.html/rtc_table_of_contents.html

Essentially in California the sales tax is collected at the point of sale, regardless of the destination of the item. The converse is true too: If Tesla's factory were in another state, and I paid sales tax to that state, I would receive a credit for the amount of sales tax that I paid to the other state when I registered my car. I believe this is not only a fairly common practice, but also fair. The key item is "point of sale." When we pick up our car at the factory, the point of sale is Fremont. When we pick the car up at a location near our home in another state, the point of sale is where we took delivery. I would guess that a lot of this is legal: Who bears the risk of loss during transportation from Fremont to my door? Is the car being shipped on a "common carrier?" Is the contract "free on board--shipping point" or "free on board--destination?" All these liability concepts serve as some basis for determining where sales tax gets assessed. (I am also wagging here that there are certain Constitutional issues here between states' rights to collect and assess taxes on non-residents.)

There is a segment of California residents who purchase and register their automobiles in Oregon because Oregon has no sales tax, and vehicle registration there is cheap, cheap, cheap. I happen to think this is patently wrong.

And a note to Bonnie: States collect sales taxes from out-of-state buyers when the seller has "nexus" in that particular state. In other words, if ABC Inc. has a presence in California, either with real or personal property or a sales force, then ABC Inc. MUST collect sales tax on your purchase even though the warehouse is in Indiana. ABC Inc. has "nexus." When a California resident makes an out-of-state purchase from small company that does not have California nexus, then the California resident MUST pay USE TAX on the purchase (which is at the identical rate to the sales tax.) So, when a California resident registers their car purchased from out-of-state, he is really paying use tax and not sales tax on the difference in tax rates. These two taxes are complementary.

A person may think that he is escaping paying sales tax on out-of-state purchases, but in fact is not self-reporting the purchase and remitting the correct amount of tax due to the Board of Equalization (or adding it to their annual income tax return.)

The truth of the matter is that most purchases of items by individuals subject to use tax are trivial. The amounts are not worth pursuing by the BOE examiners. I have heard anecdotes that the BOE has examined out-of-state vendors for sales tax issues and determined that the vendor indeed had California nexus. Then the BOE has sent out bills to its California customers for the sales/use tax that escaped collection by the vendor.
 
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Cyclone

Cyclonic Member ((.oO))
Jan 12, 2015
5,058
1,153
Charlotte, NC
Is California special in this regard? When we picked up ours in PA we didn't pay PA sales tax. (and NJ has no sales tax on EVs!)

Yes. CA is not alone, but they are the special ones. I bought my car two weeks ago in VA, paid $0 to VA and drove it home to NC. When I picked it up in VA, Tesla even collected NC taxes on my behalf so I don't have to do anything.

More on this topic, CA used to allow a vehicle that was purchased from a "dealership" in CA to be driven out of CA within a short window without any fees. This was a popular option when Priuses first came out since CA was a major delivery point for them and people bought the cars from CA since their state's dealerships may not have had a supply of them. CA got wise to how much money they were "losing" on these sales (never mind the incidental recreational spending others mention CA would see) and they closed that "loophole" and require any non-private party vehicle purchase to pay CA tax and deal with their state's rules about whether they can get an offset.

There are threads on the forum of people who live in WA or CO who get a full tax waiver on EVs and wanted to do factory pickup. They ended up getting their cars delivered and then drove the new car back to the factory to do the tour. That way, the avoided taxes altogether.
 

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