Letters : California Sales Taxes and ‘Gray Market’ Autos

I read Jube Shiver Jr.’s informative article (Dec. 30), “Auto ‘Gray Market’ Takes Off.” There was one major cost area that Shiver did not discuss. That area is the California use tax, 6% or 6 1/2%, on the full purchase price.

The purchase price would include the European purchase price, cost of transportation, U.S. Customs duty, all conversion work and whatever profit the gray market “dealer” adds to the selling price. The $48,000 Mercedes could have an additional $3,120 due in use tax. If the U.S. price of $56,700 had been paid, the sales tax would have been $3,686 at 6 1/2%.

Additionally, the article state the gray market vehicle must be “used” (have over 7,500 miles) in order to be registered in California. If the vehicle enters California with less than 7,500 miles, but shows excess of 7,500 miles at the time it is sold, the importer could be liable for a 6% or 6 1/2% use tax on their use in the interim of the vehicle. In that case, the total tax burden would be higher on the gray market vehicle than the vehicle purchased through an authorized dealer.

Also, the importer regularly selling vehicles may be required to hold a seller’s permit with the Board of Equalization and a dealer’s permit with the Department of Motor Vehicles. A purchase might not be as good a “deal” as indicated.

RICHARD NEVINS

Member

State Board of Equalization

Arcadia