We recently came across an article that contains the following statements: “If you wish to purchase a car and pay absolutely no sales tax, you would have to purchase the vehicle in one of the ‘no sales tax states’ and register it in that very state. It is against the law to use an incorrect or invalid address in order to avoid sales tax and complete the registration process.”
Attempting this in Illinois could cost you plenty if you are spotted by the Illinois License Plate Readers. Aside from using false addresses, the Illinois Sales Tax and related Use Tax system would result in tax nevertheless. A motor vehicle used in Illinois regardless of what State it is registered is subject to Illinois Use Tax if no sales tax was paid at the time of registration in the State where it was registered.
By now, you are probably saying to yourself, “how would anyone know”? That is where the Illinois License Plate Readers takeover. In our tax practice in Illinois we are aware the Illinois License Plate Readers scour the State looking for out of State registered vehicles in no sales tax states. Once they have the license plate numbers and using other databases they are able to determine if there is a reasonable probability the owner is in fact an Illinois resident where there is liability for either Sales Tax or Use Tax.
If the Illinois License Plate Readers trace your vehicle and it turns out you do in fact owe Illinois Sales Tax or Illinois Use Tax then the penalties could be substantial. It is quite possible; if the maximum penalties were applied then those penalties could add sixty percent (60%) or more beyond the tax otherwise due. That can be hefty.
For more information on Illinois sales tax, Illinois use tax, motor vehicle tax issues, or other tax law concerns, please contact Horowitz & Weinstein.