Legally avoiding California Sales Tax
I've mentioned in a couple threads that I am looking at a Newmar Baystar. Unfortunately the actual price is coming in ~35K lower than MSRP. From what I understand California charges sales tax on MSRP ...
Forum Discussion
jplante4 wrote:toedtoes wrote:darsben1 wrote:RognBon wrote:
I don't know where you got your information, but California charges sales tax on the actual sales price, not the msrp.
But any trade is not deducted from sale price
So a $250,000 Rv
with a
$100,000 Trade
difference
$150,000
but tax is on $250,000
I don't understand why this would be considered paying taxes on more than you paid for the RV? The RV cost $250,000.
Person A buys the RV and pays cash for the total $250,000. They are taxed on the $250,000.
Person B buys the RV and pays $150,000 cash and trades in their old RV for the remaining $100,000. They are taxed on the $250,000.
Why should person B pay less in taxes than person A?
It's triple taxation. The original owner paid tax on the purchase price. He/she didn't get the tax on the trade in value back when he sold it, so that tax on the trade in has already been paid.
You pay tax on the purchase price of the new rig and whoever buys the trade in pays tax on that. So if you pay the tax on the purchase price rather than what you paid, you're taxed on that $100k and the next buyer of your trade in also pays tax on $100k. That means that the tax on that $100k value of the original rig has been paid 3 times. It's quite the racket.
The sales tax isn't about the item, it's about the purchase of the item. You're still paying $250,000 for the new RV regardless of how you pay for it. Just because you use an older vehicle to pay for part of it doesn't mean you didn't pay $250,000 on the new RV. What you or anyone else paid in sales tax previously doesn't matter - it's about what you're paying for a purchase now.
As for the $100K value of the original rig being paid 3 times, again, it's not about paying tax on an item, it's about paying tax on a purchase. Each time you purchase an item, you pay sales tax. If you don't want to pay sales tax on the purchase price of a new RV, then don't buy one.
And the value of the original rig has decreased over the course of multiple sales, so 3 sales does not equate to tax on 3 times the original purchase price.
