Today TaxMama hears from Dawn in Hawaii who is upset: “I bought a concrete boom pump in 2006 for $295,000 in Canada. I just received a letter from the IRS stating that I owe $35,400 for a Federal excise tax. I have not been told by the seller or anyone else about this. When I first brought the truck into Hawaii, I had to get an extra loan for $11,800 to pay for Hawaii general excise tax. Is this something that I am liable for?”
There is a Federal Retail Tax on a variety of Truck Bodies that is 12% of the purchase price. [code 33] http://www.irs.gov/pub/irs-pdf/i720.pdf . $35,400 is exactly 12% of $295,000.
If you had bought the truck from a US Dealer, they would have included it in the price.
The Canadian dealer, if he sells a lot to US customers, should have known about it and alerted you. You might have shopped around more if they had been truthful. Personally, I’d have a friendly chat with the Canadian dealer about this major non-disclosure. And if he doesn’t make good (share at least some of your burden), I’d be sure to spread the word in my industry that his place may not be the best place to shop.
That’s downright dishonest on his part.
On the other hand, it’s your responsibility to understand YOUR business and your industry. When you see that the price is SO much lower there, than from US dealers, you needed to find out why there was such a big disparity. There’s a reason Chapter 1 of Small Business Taxes Made Easy tells you to research all the taxes and licenses related to your industry.
For a purchase this large, you needed to have gotten quotes from dealers in many locations. Did you read
the quotes – and see the components of the price?
Or did you think you could avoid US tax by buying it out of the country? Lots of people do things like that – shopping in states that have lower sales taxes, or outside the US where the taxes are lower…only to be
shocked when they get hit with Use Taxes in their state – and excise taxes by the Feds.
This is an expensive mistake. Especially since you’ll be paying penalties and interest on that tax, too. Good luck trying to work it out.
And remember, you can find answers to all kinds of questions about excise taxes, and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- Small Business Taxes Made Easy :: Chapter 1 – Business Checklist
- IRS Form 720 – Instructions :: Quarterly Federal Excise Tax Return
- IRS Form 720 :: Quarterly Federal Excise Tax Return