Crossing State Lines

Today TaxMama hears from Juan in Dallas, Texas who wants to know . “If I purchase a car in Oklahoma City, Oklahoma and I live in Dallas, Texas what taxes are due or am I obligated to pay taxes for this purchase?”

Dear Juan,

Back, a long time ago, I used to be a dispatcher for the Official Police Garage. Naturally, cops used to hang out, listening to my scanner, rather than cruising their routes.

They used to do the same thing you did. They’d buy their cars and register them in Arizona. Back then, AZ had a much lower tax and DMV rate than California.

Yes, they were definitely breaking the law. But they figured…nu, so who’s going to arrest me for this?

How does this affect you?

While your state, Texas, doesn’t have income taxes, it does have sales taxes. And use taxes. Use taxes are what you pay when you don’t pay the sales tax to the merchant within the state.

The state use tax is 6.5% + the local tax rate. You can look up your county’s rate and find forms here: http://www.window.state.tx.us/taxinfo/local/

Also, did you register and license the car in your state? I don’t know how stringently Texas enforces these laws. So you’ll need to decide how risk tolerant you are.

And remember, you can find answers to all kinds of questions about sales and use taxes and other tax issues, free. Where? Where else? At TaxMama.com

P.S. How often do you think people cross state (or even county) lines just to save money? The states are concerned because, apparently, it’s too often. In fact, many states have added a line for use taxes to their personal income tax return forms.

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