Whats the best way to address sales tax on exotics

I have been reading about lots of different scenarios concerning the creativity circling the sales tax we pay on the registration of a new or used Exotic.

 

I understand that in California you pay the sales tax monthly based on your ownership terms.

 

There are five states that do not levy sales taxes—Alaska, Delaware, Montana, New Hampshire, and Oregon. Some people open trusts and llcs in these states which probably explains the bulk of the foreign plates I see in Miami.

 

Has anyone used this service before? http://www.alaskanautotrust.com/Default.aspx

 

Looking to spit ball here

Another option is to become a car dealer. In Ohio you just need an office and a sign and fill out the paperwork. Pretty easy, several guys have done this also you can get a universal insurance that covers whatever you are driving that day.

This is a good thread, we definitely need more on-the-table options for this problem...

Here CHP is cracking down on that stuff, they even have a report your neighbor phone number.

Yes, especially now that idiots are openly advertising this in magazines like the DUpont Registry, I wouldnt mess with it. Especially in California.

I can only speak from experience in California, Texas, Florida, Utah, Oklahoma and a few others. However there are a few things you can do that will mitigate your expense for sales tax, across the board. Not a CPA or even a book keeper, just bought and sold thousands of cars.

 

Step 1: Determine if you even HAVE to pay sales tax. Many states have outright exclusions for sales tax collection on gifts. Obviously, this is an often-abused exclusion, so be very careful if you use this option. From my experience, calling an exotic car a gift is going to raise eyebrows. These guys are bureaucrats, registering Fords and Hondas all day long. They get all caffeine wigged out when a Ferrari or Lamborghini rolls in the door. I'd come prepared with evidence to the tax office/DMV that it is in fact a gift. Try to get any gift receipt notarized by the donor and recipient. No state can charge sales tax on a direct-lineage gift (i.e: Father to son) but you will have to pay for title and registration in every state I've ever had to deal with.

 

Also, some states have exclusions on sales tax for antique and "special use" vehicles that transact outside of the dealer network. Texas has a 25 year rule, and you just pay for antique plates and titling. Special Use exemptions are rare.

 

Last thing is to look at intended use. Never going to drive it on public roads? Just put insurance on it, stuff the title in your safe next to your guns and gold and call it good. Only time you'll need to pay tax on it is when you sell it or when you have an insurance claim.

 

Step 2: Mitigate your expense. This is largely a function of HOW YOUR PARTICULAR state collects revenue. Often, this matter zilch. Except if you're talking about a $250K exotic. How do you do this? Well, for example, in Texas each county levies it's own tax rate on individual to individual transaction. A rural county might only have a 5.25% sales tax rate, and Austin might be 8.75. On a quarter million dollar used car, that's $9000. It would be worth your drive to register it out of your county of residence.

 

Other way to mitigate your expense is to register it in Delaware to a corporation. Problem solved, EXCEPT that you can't get a license plate since most of the states are already on to this. However, if you have an actual office in Delaware, you can have your plates sent to the office and then just roll around with DE plates on the car. Last I heard DE needed an insurance card with a DE home address and a DE license to get plates. I think that Arizona is similar. Not sure, I'm sure some Arizonians can chime in.

 

Step 3: Invoke the appraisal clause (CAREFUL!) All states let you pay sales tax on 2 things: 1) Dealer-established sales price, contractually stated. 2) Appraisal books like NADA or KBB. MOST states are now offering a third option, which is 3) The appraisal clause.

 

This process requires you to go to a licensed dealer in your state and get a certified appraisal. This appraisal clause usually costs about $250 to $300 to get a dealer off his fat ass. The good news: You normally can slip the guy an extra hundred and he can find *all* kind of things wrong with it, and voila- your $250K Lamborghini is suddenly a $40,000 kit car. Here's the kicker: if the appraisal is HIGHER than the book or dealer-established price you are *obligated* to pay that higher appraised price. YIKES! Nothing stopping you from going to 10 dealers until you get a happy appraisal amount but you might have to pay a lot of money to get a lowball appraisal.

 

WARNING: STEP 4 through 6 can get you in trouble and it's kind of jicky.

 

Step 4: Use a trade-in. This is actually the point where it starts to get helpful to have a dealer friend. Most states do not have an inventory accounting system, and none of them make dealers report their cost of goods sold to establish value or report taxes.

 

Each state treats trade-ins differently.

 

So, here's an example. You find a used 2012 Gallardo on eBay that you fall in love with. Call up the seller (if it's an individual) and wire him the $300K. Ship the car to your front door. Take your wife's 1999 Honda Accord down to your buddy's dealership, and have him write up a bill of sale for ya. You have to actually trade in the car, so the cheaper the better. Write a check for $1,000 to your dealer buddy, and hand him the title to your 1999 Honda Accord. Nothing forces a dealer to sell a car at a price, so in theory (I've never done this before) he could write up the bill of sale for $50,000 for your Gallardo less $20,000 trade in value= thus netting $30K in taxable due to the state. This is where you start crossing the line into the gray area. Nothing "illegal" but you could compromise your buddy's dealership, if it raised any flags. Likely, if anything happens, it would just be a slap on the wrist. This is the shit that the dealerships in California are doing right now, and they ARE going to get busted soon. That's the problem when you blab your mouth about a loophole. Dipshits.

 

Step 5: Make "friends" with a dealer. This is, in all honesty, the #1 best way to mitigate your tax exposure if you are buying just a few cars a year. You can't just walk into a dealership and make friends with people, so it's probably the hardest way and it's no shortcut. But dealers that buy "inventory" can make some pretty neat things happen WRT their friends and family. My family hasn't paid taxes on their used cars in years, and it's perfectly legal. Make sure you don't make friends with a dealer who abuses this State-granted privilege. Just make sure you trust your new "friend."

 

Step 6: Lie on the forms. You're on your own, here. But for some perspective only 1 out of 10,000 Title applications gets reviewed in California. There's one lady that reviews 2 title applications (two) per day in Sacramento. And, they are chosen at random.

 

Step 7: Invest in a dealership. This is where you have to look at your total tax exposure. One friend of mine buys about $3M a year worth of cars. It's cheaper for him to invest $100K into my dealership than it is for him to pay taxes. It's completely on the up-and-up and he has 2 or 3 "AUTOMOTIVE DEALER" license plates with magnetic backing that he slaps over the license plates when he wants to take out any of his cars. And when it comes time to sell, it's just an in-and-out and there's no tax liability. If you are a heavy hitter big-spender, reach out to an already-established licensed dealer and they can normally accept a minority ownership position for a few grand. I have seven 1% owners and three 5% owners in my dealership and it doesn't cause any problems. I think if you had 20 or 30 1% owners it would start to create a problem.

 

Step 8: Start a wholesale dealership. Much easier than starting a retail dealership, however you are much more limited in your options. Some states require a certain % of sales to be completed dealer-to-dealer to maintain your wholesale license. Again, #7 is probably a better option for most people.

 

Step 9: Start a retail dealership. This is a lot of damn work, but if you are high-limit player then you need to look into it. You'll likely find yourself looking at Step 7. :-)

 

Hopefully this helps start the conversation.

 

In summary. Consider your total acquisitions per year. Consider making friends with a dealership or investing in a dealership. If you are buying a LOT of cars or a HEAVY MONEY car then definitely take the time to consider all of your tax strategies.

 

whew. That was a lot of typing. :-)

> Here CHP is cracking down on that stuff, they even have a report your neighbor phone number.

 

I for one pay my annual renewal fees with bounties that I get for reporting all those tax cheaters.

> Here CHP is cracking down on that stuff, they even have a report your neighbor phone number.

 

I for one pay my annual renewal fees with bounties that I get for reporting all those tax cheaters.

 

You get a commission if they are caught?

Paid snitch I mean imformant , lol no.

 

used to be in CA you paid no sales tax (use tax) on a vehicle if you kept it out of state and drove it for 3 months out of state..it was nice you could buy it out of state, send it to a tuner and visit it and get it back..no sales tax..now I think its up to 12 months...its covered in this tax Code Section 6248. Registration is a whole another matter...

used to be in CA you paid no sales tax (use tax) on a vehicle if you kept it out of state and drove it for 3 months out of state..it was nice you could buy it out of state, send it to a tuner and visit it and get it back..no sales tax..now I think its up to 12 months...its covered in this tax Code Section 6248. Registration is a whole another matter...

 

This is what Wayne (g-force) used to do, and it worked nicely for a looooooong time. They closed that loophole as you mentioned unfortunately.

This is what Wayne (g-force) used to do, and it worked nicely for a looooooong time. They closed that loophole as you mentioned unfortunately.

yup i did it a lot also, the tax savings bought a few mods!

Even then (90 days period) would only work for buyers paying cash on the purchase, would'nt most lien holders ask for proof of registration before then?

 

 

 

This is why, in California, there is such a high propensity to lease. You have no tax savings when you trade either. If you flip a lot, pay on the payment.

fcuk, what happened to all my posts in this thread?

fcuk, what happened to all my posts in this thread?

 

Porter didn't like what he saw, you got fooooooked.

I read somewher that Texas has started prosecuting people for using some sales tax avoidance schemes. I just paid the tax since I was buying my G from a local dealer.

fcuk, what happened to all my posts in this thread?

 

 

I had a post in here with some useful info for AZ pertaining to having a dealer's license and its gone too.

In Georgia we do not pay any sales tax when buying from a person in or out of State. Buy from a dealer, in or out of State and you have to pay sales tax at registration. We also have ad-velorum taxes, but on the old slow cars i buy its not that much, usually under $200.00 a year on say a 308 or 911. Classic muscle cars ( Z28, Trans Am) are $25.00.