How to Avoid Paying Sales Tax
February 22, 2007
My niece asked a very good question the other day. “How come they charge you 54 cents for a candy bar when the sticker only says 50?” When I told her the extra money was for sales tax she wrinkled up her nose and said “I don’t like tax!’. Smart kid!
Sales Tax Sucks
Who does like to pay sales tax? It’s kind of like being kicked when you’re down. Inevitably there are things we don’t want to buy but have to for one reason or another. Pulling out your wallet to pay for something is bad enough. Then they slap the sales tax on top of the bill, ouch!
Avoid Paying Sales Tax in Your Neighborhood
The good news is there are several ways around paying sales tax. If you buy something that wasn’t purchased or made solely for resale, it is typically considered a “casual and isolated sale”, in which case no sales tax is charged by the seller.
Instead, most states have a use tax in place that relies on consumers to pay tax on the honor system. I wonder, is that the same honor system that politicians use when they waste your tax dollars? I digress. The point is that the use tax is rarely enforced mainly because most states do not have the resources to do so.
Whether you pay the use tax is up to you. Let me just ask. When was the last time your neighbor was fined or hauled away to jail for not paying their use tax? The best way to capitalize on this “honor system” is to buy used items directly from individuals.
- Garage Sales
- Newspaper Classifieds
- Flea Markets
Avoid Paying Sales Tax Online
I explained in an earlier post about the Streamlined Sales Tax Project why we don’t currently pay sales tax on many things we buy online.
“In 1992, the Supreme Court ruled that forcing remote sellers to collect sales tax in states in which they do not have a physical presence would constitute an undue burden on retailers and commerce in general.
Since that ruling, states are prohibited from collecting remote sales tax until they have simplified their tax regimes enough to lift the burden on remote sellers why we don’t have to pay sales tax on many items that we pay online.”
Unfortunately, the states have figured out they’re missing out on huge amounts of tax revenue and are on a mission to change that. Take advantage of this consumer benefit while you can, it won’t be around forever.
Celebrate Sales Tax Holidays
Our state and others offer a sales tax holiday prior to the start of the school year. The intention is to give parents a break as they buy “back to school” items for their kids. Check out this link to the sales tax holiday in Texas. I don’t know if all states offer this, if yours does, pay attention to the dates because it’s typically only once a year.
If you know of any other (legal) ways to avoid paying sales tax, please let us know. Taxes cut into our hard earned salaries and it’s nice to reduce them any chance that we can.
Below is an update from a reader on another way to save on sales tax.
Avoid Paying Sales Tax in Your Neighboring state
Another way to avoid sales tax is to purchase an item from a local retailer in a neighboring state and have it shipped directly to you across state lines.
We did this for my wife’s wedding ring before we were married. I lived in Missouri and she lived in Kansas. We went to a local jeweler in Missouri and had it shipped to Kansas, no sales tax! However, this won’t work if the company has nexus (a location) in your resident state where it is shipped.
All posts by Ben Edwards