Tuesday, October 25, 2011

Pay No Sales Tax? Possibly.

In some transactions, you can legally avoid paying sales tax, while in others, people don't bother to collect it.

Sales taxes are rising in many jurisdictions.   Here in Georgia, they talk about tacking on 1% more sales tax to pay for various things.  1% here, 1% there, pretty soon you are living in New York and paying 8% or more.

It is a significant amount of money and it does add up over time.  But there are some legitimate and perhaps-not-so-legitimate scenarios where sales taxes are not collected.

Ordering online or through a catalog, for example, may avoid sales taxes.   This is a hotly contested area right now, as many States rightfully believe that sale made into their State should be taxable, and some States are pressuring vendors to pay the taxes - and vendors are resisting.  Amazon, for example, charges sales tax, but only for five States.  But even today, most online retailers collect sales taxes only in their own States or States that have aggressively pursued the matter.   The Internet Tax Freedom act prevents States from imposing onerous taxes on Internet transactions, but does not necessarily exempt Internet transactions from taxation.   But in many cases, if you order from out of town, you pay no sales tax.

Personal sales of small items are another area where sales taxes are missed.  When you buy a car from an individual, the State usually collects the tax at the time you register the car.  However for other items, such as things you buy on Craigslist, eBay, or at a garage sale, no such tax is collected.

This is a real savings over the purchase price of new goods, in addition to the steep discounts off store prices.

Thus, for example, if you buy a $500 washing machine that is a year old, for $250, you are saving not only $250 off the "as new" price, but also not paying the $30 in sales taxes you might pay at an appliance store.  It is something worth considering, if you are in the market for a fungible commodity like a washing machine.

Now granted, technically, in many States, the seller is supposed to report the sale and collect the sales tax and hand it over to the State.  And of course, I am not advocating any tax cheating or anything illegal.  But realistically speaking, is this really an issue?  Probably not.

Buying a lot of crap, as I noted in my previous post, means you pay a lot of taxes.  Think about this before you run off to the store to buy whatever POS you've decided you desperately need right now.  Perhaps there is a way to order it online and save not only on price, but on the taxes (which may cover the shipping costs).  Or buy something lightly used at a steep discount AND avoid the sales tax as well.

Just a thought.

UPDATE:  Since I wrote this back in 2011, the States have geared up and now collect (or force vendors to collect) sales taxes on Internet transactions.  The glory days of ordering online are gone!  It was the same back in the days of the "Carol Wright" catalog - sales taxes were collected only for sales within the State the vendor was in.  Those days are gone, too, I guess.

But again, if you buy something used from your neighbor, not only are you getting it for cheap - like half-price or less - you are not paying sales tax.  Win-Win!

Or sometimes things are even free.  At the local campground, people have a book exchange and sometimes even small appliances can be found there.  Why pay $150 for  a bread machine or even $50 used on eBay when they can be had for free from friends and neighbors?