California Car dealership "forgot" to charge sales tax!

[stream41]

The car was purchased in California, but I live in Arkansas.

So, I bought a car a couple of days ago from a California car dealership and picked it up. During the negotiations on the phone, I said that I assume that I'll pay sales tax on the car when I get home to register it in Arkansas. The salesman told me that's correct. This is how it has worked with the other 10 to 12 cars I've bought out-of-state in the last few years, so I didn't think anything more of it.

Well, apparently he was very wrong. While I was on my second day of driving home, their finance manager called and said that an error had been made, and they hadn't collected sales tax on the sale. Of course I told her what the salesman had told me, but she quickly pointed out that he was wrong, and that I owed them $1900 in sales tax. I've researched it a little, and apparently they are correct - you do pay sales tax in California on ANY car sale from a dealer (unless it's being shipped out-of-state). Clearly if I had known this, I would have had it shipped.

My question is: can I basically tell them to shove it? I'm going to have to pay sales tax in Arkansas as well (they aren't "reciprocal"), so I obviously don't want to pay sales tax twice. We have a signed contract (the bill of sale) showing $0 in sales tax, and that the total price was $23,000. Are they allowed to come after me for something that was totally their mistake? How do you guys think I should proceed? Should I call their bluff?

 

[tranquility]

Since the purchase was made in California and you were in the state to take delivery, there is a nexus over the deal and a jurisdiction over you. I believe you may need to file a non-resident return and report the uncollected sales tax. I'm not sure, but I am sure the sale was taxable and the state would have jurisdiction over you for the sale. Clearly, the business has to pay if you don't. If you financed the car I don't think they could add the amount into your payment schedule without your permission, but they may have remedies.

You may be right. But see an attorney who will research the law before telling anyone to pound sand.

 

[stream41]

I paid for 90% of it with a bank wire, and the other 10% (which was a deposit before I got there) went on a credit card.

 

[Zigner]

I paid for 90% of it with a bank wire, and the other 10% (which was a deposit before I got there) went on a credit card.

Please understand - whether you pay it to the dealer or you pay it to the State directly, you DO owe the money.

 

[stream41]

Please understand - whether you pay it to the dealer or you pay it to the State directly, you DO owe the money.

So there's very little chance that I can tell the dealership that since we have a signed contract showing $0 sales tax and the deal has been completed, that it's now their responsibility to pay the sales tax?

After all, they did sign a legal and binding contract (the bill of sale) showing the total price. The salesman even told me I wouldn't have to pay sales tax. And finally, I can argue that I would have had the car shipped if I had known that would have saved me from paying sales tax.

 

[tranquility]

Sales tax is not a contractual issue, but a legal one. If you had not taken delivery in the state, since you are a non-resident, I don't think you would owe CA sales or use tax on the purchase and that would have been a better way to go.

You owe the tax. I thought your question got to if the dealer or the state could enforce the collection. I'm not sure the dealer can without suing you. I know the state can but probably wouldn't as they would collect from the dealership and would have little reason to pursue it with you.

 

[stream41]

Well, darn.

I'm getting married in a month, and we've got a ton of stuff going on, so it looks like I'll just have to pay the tax, since I don't want a car dealership in California trying to sue me right now.

 

[TinkerBelleLuvr]

Arkansas will recognize the California state sales tax that was paid. If California's tax is more than Arkansas' tax, then Arkansas will not make you pay more. If less, Arkansas will expect you to pay the difference of what you would have paid had you been in Arkansas.

http://www.arkansas.gov/dfa/excise_tax_v2/et_su_conuse.html

Do I owe Use Tax?
You should pay Use Tax if you:

Purchased items outside Arkansas that would be taxable if purchased in Arkansas (including items from catalogues, TV advertisements, magazines, the Internet, etc.)

Use, store, consume, or distribute these items in Arkansas, and

Have not paid Arkansas sales tax or an equivalent amount to another state.


What if I do pay tax to the other state?
If you legally paid sales tax on the items in the other state, you maybe entitled to a reduction in tax for the tax paid to the other state against the tax due Arkansas. If you pay less than the Arkansas tax rate to the other state, you must pay Arkansas the difference.

 

[stream41]

Arkansas will recognize the California state sales tax that was paid. If California's tax is more than Arkansas' tax, then Arkansas will not make you pay more. If less, Arkansas will expect you to pay the difference of what you would have paid had you been in Arkansas.

http://www.arkansas.gov/dfa/excise_tax_v2/et_su_conuse.html

I thought so too, but I've spoken with 4 or 5 people at the DFA and Revenue Office, including a "statewide supervisor" - they all say the same thing. Apparently that Sales and Use tax credit doesn't apply to cars, because Arkansas isn't reciprocal. I read that whole page to them word-for-word, and they just keep saying that cars are different and don't count.

 

[Zigner]

Then maybe you'd have more luck contacting the folks here in California. Perhaps Calif. won't require the tax if you can PROVE that you paid sales tax in AR. Can't hurt to ask.
The dealer definitely should help with this, as it's their screw-up that caused this in the first place.

As an afterthought...even if you have to pay the tax in both places, you may be able to claim it on your state taxes for a refund...

 

[TinkerBelleLuvr]

sales tax rules

http://www.arkansas.gov/dfa/rules/et2006_9.pdf

Look in there - I don't have time to go looking thru 169 pages.

 

[stream41]

http://www.arkansas.gov/dfa/rules/et2006_9.pdf

Look in there - I don't have time to go looking thru 169 pages.

Well, I spoke with the supervisor who is in charge of sales tax for motor vehicles, and she told me point-blank that Arkansas isn't reciprocal, and they don't give credit for sales tax paid in other states on motor vehicles. I think that's pretty much the end of that line of inquiry.

I will do as Zigner suggested and contact CA just for the heck of it.

 

[onetime123]

Re:

Doing similiar research now. Reading Ca Tax Code, the retailer is required to pay sales tax on mechandise sold. They have the right to pass on the sales tax to the customer if it is properly posted on the premises, contracted, etc.

Pull a copy of the code. My interpretation: Since they did not disclose to you that you would be required to reimburse the retailer for the sales tax then they can not charge you. If they sued, 1. They would have to serve you half way across the country. 2. They would have to prove that they informed you that you were responsible for the sales tax. Number 1 would be costly and likely ineffective (don't answer the door!). 2. It sounds like they did not properly notify you per state law.

I would just ignore them til they quit calling. If they try to put it on your credit (seems any business can do this now a days), simply dispute it and attach a copy of your sales reciept.

Business's are always taking advantage of the system to screw the customer. I am glad you will be able to repay them in kind.