Sales tax is collected in order to fund various local and federal projects and departments. It can vary from state to state and even from city to city within a state. Sales tax in Orange County, for example, is 8.75 percent, and it's 9.75 percent in Los Angeles. Sales tax is collected when you purchase an item or service, but in some cases, such as with certain online sales, you will not be charged sales tax if you're buying something from a different state.
It's important to consider that when you buy something from another state and don't pay sales tax, you might find some local (and even some federal) services suffering. After all, sales tax is used in helping to keep local roads repaired and even to offer assistance to small businesses in tough economic times. When you decide to avoid paying sales tax when you buy from a state that doesn't charge sales tax, the tax money you save will not be helping fund local industries and services.
One area where not paying sales tax can prove to be quite economical is when it comes to buying a car. If you buy a new car for $25,000 in Texas, for example, you'll wind up paying over $2,000 in sales tax. This is one reason why you might consider buying a car from a state that doesn't charge sales tax --- or that charges a lower sales tax than the state you live in. In addition, some states, such as Nevada, no longer charge sales tax on used cars sold after 2006. The logic behind this is that the tax on the item was collected during the first sale and subsequent sales shouldn't be taxed.
In many cases, you won't be charged sales tax from another state when you buy online, unless the state specifically charges online sales tax. In most cases, if the online store also has a physical brick-and-mortar setup in a state, it has to collect sales tax for its online sales. However, if a business doesn't actually have a physical location --- including a warehouse site --- it doesn't have to charge sales tax. This causes lawmakers to consistently attempt to pass laws forcing online businesses to collect sales tax.
Virtual goods are still a gray area when it comes to paying sales tax. If you buy an item that only exists in a virtual world --- such as Second Life, for example --- you will sometimes actually pay for that item with real-world money. In addition, there are online games where you can purchase a weapon or clothing item using real money. Lawmakers have been trying to decide how to go about taxing these virtual items since 2007.
- "Los Angeles Times"; California Lawmaker Pushes to Tax Online Sales; Marc Lifsher; January 2011
- "The Orange County Register"; Where Do Your Sales Tax Dollars Actually Go?; Teri Sforza; September 2009
- CullmanTimes.com; Following the Money: Where Does Retail Sales Tax Go?; Trent Moore; October 2010
- Nevada Department of Motor Vehicles: Vehicle Registration
- Window on State Government: Texas Sales Tax
- Nolo; Sales Tax on the Internet; Richard Stim
- Photo Credit TAX TIME image by brelsbil from Fotolia.com
When Do You Pay Taxes When Buying a Vehicle out of State?
States differ in tax and collection procedures, but most require tax payment once the vehicle is titled or registered. Few states do...
How Do I Buy a Car Out of State & Drive it Home?
How Do I Buy a Car Out of State & Drive it Home?. ... How to Buy a New Car From the...
Florida RV Sales Tax Laws
If you buy an RV in another state that has a sales tax less than Florida's, you must pay a use tax...
Do I Pay Sales Tax on Out-of-State Purchases?
... collect sales taxes on items you purchase in another state. ... Do I Have to Pay State Sales Taxes If I...
Which States Require Schools to Pay Sales Tax on Purchases?
... unless the purchase falls under another tax ... Sellers must pay sales tax to the California State Board ... a sales...
How to Avoid Paying Sales Tax
Do I Pay Sales Tax on Out-of-State Purchases? Paying Sales Tax on a Used Car Bought out of State; Print this article;...
When You Buy a Car From New Hampshire Is There Sales Tax?
... but don't count your savings too soon if you cross the state border to buy a car. If you live in...
How to Buy a Car in Delaware State
... even if you do not live in the state. If you are buying a car in ... You know that you're...
Do I Have to Pay Taxes on a Used Car?
Do I Have to Pay State Sales Taxes If I Buy From a Different State Than I Live In? ... or a...
How to Buy Tax Deed Properties
The property you buy will likely need some ... While there are no truly tax-free states, there are many that do not...
How to Calculate Nevada Sales Tax on a New Automobile
Don't forget to budget for sales tax when buying a new car in Nevada. Each ... you may want to figure out...