Avoiding Sales Tax

Many of you know that Mark Patricks, founder of League of Power, got his start in the business working for an eccentric millionaire. Mark worked for a number of years managing this man’s many businesses. Until one day he’d decided he’d had enough of making other people rich and struck out on his own. League of Power was started shortly after that to teach others what Mark had learned about becoming rich during his indentured years.

The eccentric millionaire taught him a great many things. More than once Mark Patricks and I have sat outside on his backyard patio in the evening, sipping a cool cocktail and talking about those days and some of the more exotic money-making practices he picked up. Now-a-days we don’t do this as often as we used to. Mark has become quite a busy man these days with all of his business ventures, but I had the great pleasure of having dinner with him this past weekend.  To my delight we fell back into our old habits of discussing his younger years working for that unconventional, rich, old coot.

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Most rich people didn’t get rich by being frivolous with their money. Oh no. In fact a lot of rich people are tight wads, who have serious hang-ups about money. Even when they can afford it, many rich people go to extraordinary lengths to save themselves money. The story Mark told me is about the extraordinary lengths his previous employer would go to, to save money.  I found it fascinating and I thought you might too. If it’s good enough for a ridiculously rich man, it’s good enough for us 99 percenters as well.

We all know that rich people seem to acquire a lot of “toys.” Motorcycles, yachts, antique cars, jet-ski’s, private planes…you get my drift. Well toys like that cost a lot of money…thousands of dollars, sometimes hundreds of thousands of dollars. The sales tax on one of those toys usually ads several thousand dollars to the final cost of the toys. A modest seven percent sales tax on a $200,000 yacht purchase will run a buyer an additional $14,000. Nothing to sneeze at, even if you’re rich.

There are ways to get around paying sales tax, but only for those in the know. Apparently Mark’s old boss was one of those in the know. For starters he used to regularly visit the states of Alaska, Delaware, Montana, New Hampshire and Oregon to buy his toys. These five states don’t charge sales tax. Buying big ticket items from one of these five states can save you boat-loads of money. Consider making a road trip if you live near one of these states. If your purchase totals will exceed what you would spend in gas, then the trip will definitely be worth it. Also think about going on a vacation in one of these areas and stocking up on goods then.

If you live in or near these states, rest assured you are paying the least amount of sales tax of anyone in the country: Alabama (4%), Colorado (2.9%), Hawaii (4%), Louisiana (4%), Missouri (4.225%), New York (State) (4%), Oklahoma (4.5%), South Dakota (4%), or Wyoming (4%). Goods bought in any of these states can save you money as opposed to buying goods from any of the following eight states that enjoy charging the highest sales tax in the country: Washington (6.5%), Tennessee (7%), Rhode Island (7%), New Jersey (7%), Nevada (6.85%), Minnesota (6.875%), Indiana (7%), and California (8.25%).

Another way to avoid paying unnecessary money for goods is to buy wholesale. Basically anything that you buy that you plan to resell, you don’t have to pay sales tax on. The rich use this tactic to purchase goods for their own businesses. Business owners can buy products at wholesale prices (which usually are cheaper than retail prices too), save money by not paying thousands of dollars in sales tax, and then resell them for more money to consumers. It’s a win-win for them.

If you don’t have a business, you can still buy goods at wholesale prices, you just have to know where to shop. Buy your goods from eBay, Craigslist, auction houses, garage sales, flea markets, anywhere that goods that have been previously owned are sold. These are all examples of retailers that aren’t required to charge consumers any sales tax. The bigger the purchase you make from a second-hand retailer, the more you save! Big ticket items like home goods, sporting equipment, furniture, and tools represent the biggest bang for your buck. When you buy direct from individuals you can save yourself anywhere from 4% to 8.25% of the total purchase price, depending on what state you live in.

You can also avoid paying sales tax if you shop online. Retailers that don’t have a physical presence in your state are not legally required to collect sales tax from you. For example most people who purchase goods from Amazon.com aren’t charged sales tax. Only consumers living in Kansas, Kentucky, New York, North Dakota, or Washington are subject to tax by Amazon. Most online retailers only charge sales tax to consumers who live in a few states. If you find you are being charged sales tax on your online purchases, switch to one that doesn’t maintain a residence in your home state. Most goods can be bought from multiple retailers now-a-days, if you comparison shop you can save yourself a hefty profit.

Don’t forget about tax free holidays as well. Most states don’t charge sales tax one or two times a year and call it a tax free holiday. In the majority of states, these tax free holidays fall in August to help out parents buying back-to-school goods for their children. A smattering of states also have these tax free holidays in January to help stimulate the local economy, when spending goes way down. My home state of Florida holds one such holiday weekend at the beginning of hurricane season (June 1st) every year. It gets us Floridians to stock up on emergency goods like flashlights, generators, and batteries. To find out when your home states next tax free holiday weekend is enter your states name and the words “tax free holiday” into your favorite search engine.

The rich are usually rich because they’ve figured out how to do something the rest of us haven’t. Finding out about deals like this can really add up, even if the idea originally comes from a miserly, old millionaire.

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Keeping Money in Your Pocket,

Nancy Patterson

9 Responses

  1. John Galley

    Avoiding sales tax is not as easy as you imply. Most “home states” are on to this. Even if you purchase a Big Ticket item elsewhere, you will still likely have to register it in your home state. And when you do, the tax man will be waiting.

  2. Stevie Knight

    Interesting post. Thanks for the info. BTW, here in Colorado, we are also one of the states where Amazon had to collect and pay sales tax to the state if it had affiates here. So Amazon cancelled ALL its Colorado affiates and NOW no longer pays taxes to the state. As you see, it’s not just individuals who look for legitimate ways to avoid taxes! Our state legislature did us no favors when it decided to tax internet transactions.

    When New York state did it, they received no net gain from taxing internet merchants, just the loss of tax revenue and purchasing power from he thousands of Amazon affiliates in their state who got the axe. The same is happening to Colorado.

    Also, while state tax here in Colorado may be 2.9%, by the time each city and the transit system put out their hand and add their portion, our average consumer good tax is about 8%. :(

    When you tax productivity, you decrease and de-incentivize it. Sad to see the way the nation is headed…

  3. Mike Jensen

    Although you state that you are able to avoid paying sales taxes through various means, most state require you to file and pay a “Use Tax” on things you buy elsewhere if you were not charged sales tax on your purchase. What you are advocating is actually a means to break local or state tax laws. In other words, you are encouraging people to break the laws of their resident state in many cases!

  4. sandy

    Wow. Usually I agree with your articles, but this one shows a total lack of understanding as to how sales taxes work. If you live in a state like California with a high sales tax rate, and buy something in a state with a lower sales tax rate, like Oregon with zero, and you bring that product back to CA for use, you owe the sales tax. It’s just called something different – use tax. In CA you pay it on your income tax form. It’s the same for buying something from an online vendor, like ebay or amazon. If it would have been taxable if you bought it from a local vendor, then you owe the use tax. Every state with sales tax has these laws, since the 1940’s, so your eccentric millionaire should have know this. There are exceptions, but you’d have to check with the state to find out what they are.

  5. steve tengood

    The article is only partially right which means it is also WRONG; i live in Pennsylvania but if i buy a vehicle, like a car, in Delaware, it still has to be titled where i live, and then i would still have to pay the SALES TAX

  6. Jack

    I find this article extremely disrespectful. This “old coot” as you call him, taught this guy Mark a whole bunch of stuff that you now discount. You also associate you readers with the 99%. This moniker is an invention of the “class warfare” leftists and I resent any inference to it. If this is the style of “The League of Power” the I want nothing to do with you. It simply means your methods are on track with all other failed leftist policies and that’s not where I want to be. Shame on you

  7. Hollis

    Great article, Nancy! You have provided a valuable service to your readers by alerting them to legitimate tax-avoidance opportunities. However, in some locales, purchasers have to ante up city and local taxes in addition to the state tax. In New York City, sales tax will actually set you back 8.875%. This includes the 4 1/2% local tax, 4% state tax and 3/8% Metropolitan Commuter Transportation District tax. On the other hand, in “high tax” New Jersey, there is no sales tax on clothing in most places. New York women travel in busloads to take advantage of New Jersey’s tax bonus. The lucky ones with friends or family in New Jersey can buy locally and ship outstate (as long as the shipping cost is less than the sales tax we avoided.) That said, NYC has just re-instituted its tax holiday on clothing purchases under $110 – this time, it’s supposed to be permanent (just like the last time) Thought this might be a helpful addition to your tax summary.

  8. Mark

    This may work in some areas but it is not without it’s consequences in others. I live in California, close to the Oregon boarder. Any big ticket item you purchase in Oregon better be paid for with CASH ONLY. If the state (aka Peoples Republik) of California suspects you of not paying sales tax on items intended for use within the state you will be audited and any incriminating paper trail, ie. credit card receipt, will land your butt in some serious hot water. Also, anything that needs to be registered within the state (cars, motorcycles, boats, airplanes) will immediately trigger a sales tax consequence if purchased out of state. Then there’s the issue of actually getting the item into the state. All major points of entry have an “agricultrual” inspection station where you leave yourself wide open for being targeted. Not supposed to be what it’s used for, but when the state is running at a massive deficit…well…you’re playing a bad game with your own financial well being in dear Nancy Pelosi’s state.

    I would suggest that anyone contemplating your tax dodging strategies do their due diligence as to the potential ramifications of such behavior as it applies to the state they live in. Blindly following your advice can easily get someone into a seriously uncomfortable financial and legal situation.

    Your article has the potential to do major harm to any number of your readers’ well-being. Your intent may be good but your method is very dangerous.

    Do your “Due Diligence”.

  9. Nancy Patterson

    Hi Everyone, Thanks for all the feedback. Yes, I am aware of the ‘use tax’ I’m not going to tell you not to pay it, but let’s be serious…

    How many people are actually out there doing this?

    Yes, this strategy can be harder to do with automobiles or boats because of registration. Perhaps I should have covered this more in the article. Though it can and is being done in states like Montana:
    http://www.montanacorporate.com/learn.asp

    In hindsight, my effort to keep this concise and useful led to me leaving out some important points. Thanks for continuing this discussion on the blog with me to help clarify.

    And @Jack, I make a 99% comment and all of a sudden I’m a leftist.
    It’s funny how people interpret my articles as having some political affiliation. On this blog I’ve been labeled a ‘conservative teabagger’ and now a ‘lefist’. So according to some readers I am too liberal and too conservative. What am I? Who knows? Maybe just a person. I know there are several ‘League of Power’ readers who are very wealthy. Though most are not millionaires. This was not meant to be a political comment more a statement of most of us not being multi-millionaires.


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