Posted on 04/07/2006 12:53:52 PM PDT by Responsibility2nd
Under Texas' new tax proposal, savvy consumers who get a deal from a private seller on a used car or truck won't get the same deal from the tax assessor.
To get $70 million in extra money for the state's budget, the Texas Tax Reform Commission has proposed a "liar's affidavit" that would crack down on used-car sales in Texas to thwart sales-tax fraud.
That means someone who buys a discounted vehicle would have to pay sales tax on its full value.
The provision is a relatively small part of the overall tax reform proposal, which seeks to raise $6 billion in extra money to replace funds from property tax cuts. But it would hit thousands of Texas consumers, since a third of all used car transactions involve private sellers.
A similar "clunker act" passed by the Kansas Legislature in 2004 was repealed a year later because consumers complained they paid excessive sales taxes. The state now is offering refunds.
The legislation What is it? Would require county tax assessor-collectors to charge sales tax on used vehicles based on average retail value of a motor vehicle. Or consumers could get an appraisal done by car dealer or insurance adjuster. When does it take effect? If approved, go into effect Oct. 1.Why proposed? An effort to reduce sales tax fraud.
How much will it raise? Estimated additional $70 million.
Can I still give a car or truck to someone and not pay sales tax? That provision remains intact. Texas has a $10 gift tax for motor vehicles and $5 tax when trading one vehicle for another.
Source: Texas Tax Reform Commission
Under Texas' proposed bill, consumers would pay sales tax to the county tax assessor-collector based on the car or truck's average retail value instead of its sales price. Tax authorities would use a national assessment tool such as the Kelly Blue Book, which provides values of used vehicles by year and model.
If consumers don't want to accept that value because of a vehicle's high mileage or damage, they can get an independent appraisal from a car dealership or an insurance adjuster.
The bill requires car dealers to provide a certified appraisal of the retail value for a fee, which would be set by the Texas comptroller.
If the bill is approved, the new requirement would take effect Oct. 1.
The proposal has appeared in previous bills in several sessions dating back to 2003, but it never has passed both houses, said Dick Levine, senior fiscal analyst with the Center for Public Policy Priorities in Austin. The center hasn't taken a position on it, he said.
"The argument against it was a lot from the tax assessors and collectors that said they didn't want to be a position to police this," he said.
Theoretically, the legislation sounds good. But in reality, it would create more work, would anger taxpayers and wouldn't generate much revenue, Bexar County Tax Assessor Sylvia Romo said.
"I would say that the majority of the people are honest," Romo said. "I think that this problem is more exaggerated than it really is. In the long run, it's going to be unfair to some people and it's going to create more problems."
One problem for Romo: The Bexar County tax office would have to add more staff to deal with the paperwork and to deal with irate taxpayers.
The crackdown on the motor vehicle sales tax is meant to capture some of the revenue lost when a consumer buys a car or truck from another person and they agree to lower the sales price so the buyer pays less sales tax.
"Dealers have to disclose things that private individuals don't," said Bill Wolters, president of the Texas Automobile Dealers Association. "With individuals, there is less of a paper trail, less verification and less regulation."
The association doesn't object to the sales tax crackdown, Wolters said, but it still is evaluating the overall tax proposal. It doesn't like the fact the bill would require businesses to pay a margins tax instead of an income tax.
"We think it will be a difficult tax for marginally profitable businesses," Wolters said.
Nevertheless, at a news conference Thursday at the Governor's Mansion, Gov. Rick Perry said the bill has plenty of supporters.
So far, 23 trade, education and taxpayer associations representing more than 3 million Texans have endorsed the tax overhaul, he said.
The measure would lower local school property taxes by expanding the business tax, raising the cigarette tax and using part of the state's surplus.
"I think there is momentum growing every day toward the passing of the tax reform plan that we laid out," Perry said. The Republican governor was joined by plan supporters and former Comptroller John Sharp, who headed the special tax commission that developed the plan.
Sharp said in an interview that the average car dealer in Texas would see taxes decrease under the proposed bill.
Another potential beneficiary of the "liar's affidavit:" collectors of antique cars, who often pay above a vehicle's Kelly Blue Book value. Under the tax proposal, they would pay less tax.
Just remember, Virginia insists on taxing cars every year ... We shoved a repeal of that halfway down the buggers throats. Still need to complete the job.
LOL, that's a good one.... very quick....
:::pssst, look over there ---> I see Corzine lurking and taking notes:::
Har har.
:-)
That would figure, though, if he were ever gonna steal a page from Texas, this would be it!
it's also peopled by folks who just couldn't wait for the civil war shooting to start...hehe.
I love taking southern friends to the capitol to see the huge mural celebrating John Brown's victory at Harper's Ferry.
We are descended from simple farm folk who enjoyed gunplay while hating taxes and travel.
We have pages stolen from Texas. Just the blue ones.
This liberal terrorist: http://www.freerepublic.com/focus/f-chat/1610884/posts
Was an implementer in the law I have in post 2 (same thread).
Such wonderful Texas scholars! ::/sarc::
ciao for now Huck! :)
We already have this in Illinois.
Same thing in NY.
When I moved to WV, they charged me sales tax on a used car that I owned and had already paid sales tax on in NY.
I bought a new PU truck in NY to help with my move but used my WV address. That way I got a set of transport tags and only had to pay the WV sales tax which was less than that in NY.
I won't disappoint you...
Texas: The next California.
The tax they want now if for the full sales price at present. Ever since Texas began taxing used auto sales between individuals, most people lied about what the selling price was. If the used auto sold for $10,000. the buyer and seller lied about the amount and and the sales tax paid was a fraction of the actual price.
In Texas and I would guess almost everywhere, you pay sales tax on taxes. Examples: Cigarettes and Alcohol. both have state and federal taxes and when you buy them you pay a sales tax on those taxes also.
So what you're saying is, taxes are a disincentive to commerce? Go figure...
In Massachusetts, even if you bring a notarized BOS to the RMV they put you through a bureaucratic nightmare of paperwork and time delays requiring that you pay the tax and then file for a refund of the difference. Most people throw in the towel.
:(
Actually RINO Rick runs the state.
I can't wait till he calls another highly effective summer legislative session!
/obvious sarc off
Now THERE'S an honest bunch to be in charge of appraisals that determine how much tax you are going to pay!
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