How Come The Dealer Charged The Wrong Sales Tax?

Illustration for article titled How Come The Dealer Charged The Wrong Sales Tax?
Photo: Raphael Orlove (Jalopnik

As Jalopnik’s resident car buying expert and professional car shopper, I get emails. Lots of emails. I’ve decided to pick a few questions and try to help out. This week we are discussing sales tax on vehicle purchases, and a $20,000-ish sports car that is good for mods.

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First up, why would a dealer charge local sales tax for a customer that is registering the car out of state?

I’m a Denver, CO resident. Last week, I flew to Arizona to buy a car on a great deal and drive it home to Denver. The vehicle was sold by a Kia Dealership.

Regarding taxes, the local Flagstaff tax rate (9.18%) was included on the bill of sale, as well as a $57 AZ registration/license/title fee . The dealership sent me away with a 90-day temp tag. The Denver area tax rate where I live is 8.31%.

Did AZ do the tax collection piece correctly? I’ve purchased other vehicles out of state and other dealers have collected the estimated CO taxes and registration fees to include in the new lien. AZ did things differently and I’m a bit confused.

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Typically you should be paying tax based on where you register the car not where you buy the car. However, this happens frequently with AZ and CA dealers, according to several dealers I have spoken with in both states. They have said that if you purchase a car within the state and are driving it out, they charge you the local sales tax rate. Whereas, if the car were to be bought remotely and shipped out they would either not lump the tax into the purchase or they would roll in your local tax rate.

Since you already paid AZ tax you should not have to pay CO tax, though in this circumstance you paid a higher rate than you normally would have.

Next, what would be a solid replacement for a 2014 Vette that is reasonably priced and good to modify?

I recently sold my 2014 Corvette and have been sitting on the cash since around July. I don’t need a car right now, but have been looking for something fun and more importantly affordable.

All of the used cars I have seen recently have been 10-20% higher than their KBB values and I am nervous to buy something if it is just going to plummet in a few months. I have been looking in the $20k range for something RWD, manual transmission and less than 80k miles. I’ve looked at MX-5 Miatas, but am worried they don’t have enough HP or the build quality to justify the price.

I’ve looked at used BMW135 and 335s and most I see are either overpriced or have 120k+ miles.

I’ve also looked at Zs, but they are either expensive or high mileage. I do plan to modify which is part of the reason I want something cheaper than the Vette.

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We have a few concerns we are tackling here, cost, size, ability to modify, and resale value. If you plan on modifying the car that conflicts with your desire to maintain resale value, as not only it is it unlikely you will ever recoup those modification costs, in some instances, mods can lower the value of the vehicle. If you like modifying cars to make them faster or suit your tastes, just do so and enjoy the car.

As to the cost and size thing, the turbo-six BMWs are great but can be risky with higher-mile examples, and since you drove a Vette, I don’t think the Miata is going to give you the performance you are looking for.

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I’m sure the readers will chime in with some excellent solutions, but my suggestion would be an EcoBoost Mustang. It’s a tad smaller than the Vette but more practical. You can find low-mile examples within your budget zone and there is some great aftermarket support to make those already quick cars quite a bit faster.

Got a car buying conundrum that you need some assistance with? Email me at tom.mcparland@jalopnik.com!

Tom is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He saves people money and takes the hassle out of buying or leasing a car. (Facebook.com/AutomatchConsulting)

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DISCUSSION

SBA Shilling For Big Hydrogen

On the Sales Tax issue, strictly speaking the Reciprocity Agreements between the states let their respective State Treasurers sort it out.

When the buyer presents his paperwork to his home state, proving he paid Arizona’s outrageous sales tax, his local DMV is supposed to credit him the full amount he paid— in the reconciliation for the title and registration fees. At the end of the day his net Sales Tax bill should only be the applicable sales tax be where he registers the car. I know that sounds weird but the interstate system is supposed to allow his home state treasury to “collect” it back from Arizona in this case.

If he didn’t get his full credit when he registered at home? The system failed.