Fllipping???

If you live in a red state, you don't pay 8% tax.

Dave

 

Mark
You are correct. Sale's tax is unavoidable. But this is how flippers make money. In 2001 when the 360 spider arrived, the MSRP was around $175K. The resale market for the spider was around $325K. The fippers made a $150K minus the sale's tax.
Here's another scenerio. Say you live in a state that does not have a Ferrari dealership or you have multiple homes and you buy the Ferrari in one state but intend to register it in a different state. In both these cases the Ferrari dealership cannot collect sale's tax because the car is going to a different state. The dealer gives you title to the car and a 30 or 60 day permit. The flipper needs to sell the car within this 30/60 period.

 

lease it and you'll only pay tax on the portion you use. you'll get dinged a payment or two for early termination on sale, but it'll still be a heck of alot less than the sales tax saved.

 

Check to see if you can register it as a title only. You don't get a plate and can't drive it, but you don't pay the sales tax either. I have done this twice when I came across a good deal on used sports cars. Not sure if it can be done on a new one or direct from a dealer.

 

In Illinois, you get the joy of paying the sales tax on the ENTIRE car when leasing. Better yet, if you decide to buy, you pay sales tax on the residual!

 

I'm not sure what kind of lease you are refering to but in most auto leases you get dinged for what is known as "make whole penalties" which in effect gives to the lessor the whole income he would have generated over the life of the lease. It works out to a lot more than one or two payments, especially if you terminate early. You pay back the amount the lessor loaned you to get the car (the capital cost) and then you pay the entire amount of interest or profit that was in the deal, less a discount for the time value of paying early. Not a great idea IMO. It really behooves a lessee to read the lease document and understand exactly what your lease payoff amount is at any point. Some lessors will give you a schedule with the payoff amount for each month that you are committed to the lease.

 

If you intend to flip the car, and you live in California, get an Oregon delivery, and sell it there. You sign a verification with the dealer that you aren't paying tax because you're getting an Oregon delivery. They deliver the car to you in Oregon, you then deliver it, in Oregon to the new owner, and take the cash. Simple, since the transaction doesn't occur in a state that has a sales tax, you don't have to pay same. There are other details which can screw you up on that, so get counsel or a CPA to assist on setting it up properly. That way you make the extra 16k on the car, instead of paying it when you planed on reselling the vehicle anyway.

Art

 

Hm.. could you then sell the car to a friend for $1, then buy it back for $1 and avoid the taxes?

I'm slighter bitter since I just bought a 355 in CO and brought it back to FL where I'm getting stuck with a 6% usage tax.. bleh.

-R

 

my stradale is leased through putnam and (i considered leasing the cgt instead of buying it, but the residuals were so crappy) it carries a 1 month pre-pay penalty if sold after 12 months and 2 months if sold before. premier has a similar arrangement. as far as i know, chase is the only other lender who leases fcars. these are open ended leases and vary greatly from your avg run of the mill lease.

 

Putnam and Chase are great programs for owners who want the car for themselves but want the tax deductions related to leasing. The intention in just about every open ended lease is for the user to ultimately purchase the car at a depreciated value, while getting the tax advantage of writing off the lease payments as a "business" expense. The only catch is that you have to have a business with sufficient taxable income, where the lease payments won't raise a IRS red flag by being too great a percentage of taxable income.
There are many ways within the current legal stuctures to realize a net profit on a flip, be it pure profit or reaping a tax advantage in the sale of an asset below its "market value". Something along the lines of evaluating the market value of a charitable donation. This is the kind of stuff that creates tax accountant and tax lawyer positions.
You could also apply for an auto dealer's license ( fairly minimal expense) and treat the cars as inventory without ever paying tax on them. Only the ultimate buyer and user pays the sales tax.

 

I opted to establish a "dealership" to avoid the tax man. In Texas you have to sell 5 cars per year to keep your license, maintain a facility, a phone, posted office hours, etc. I did all of that, got my license, and said "heck with it...I might as well have a REAL dealership.

So now I do. Small-time though. I think we have 16 cars on the lot right now.

 

I'm glad you guys are helping support someone taking up allocations for the sole purpose of re-selling to us (consumers) for a profit plus making the wait much much longer ... TOOL go flip somewhere else!

Great,
Dario

 

I thought that making a profit was a fundamental cornerstone of the the American Way and a market driven economy. If you really want to buy at MSRP, spend some time on a dealer's list, buy at sticker and build up goodwill so that your next purchase will have you higher up on "the list".

If there were enough cars to go around there would be no premium, like with Porsche's and other limitless supply brands.

I guess one's perspective on this subject changes with possession . If you have a Ferrari, you'd like to have the excess value on your balance sheet, yet if you want one you don't wan't to pay the premium. Such is life in the big city.....