Car buyers in Arizona have a choice: buy from a dealer and pay sales tax or buy from a private seller and don’t pay sales tax. Sales tax in Arizona varies by the county and city, but averages around 9 percent. If you are forced to pay Arizona sales tax on a $15,000 vehicle, it adds $1,350 to the cost of the car, truck, or SUV. Consumers make decisions based on their best economic interest. Many consumers in Arizona buy from private sellers so they don’t have to pay an added tax that provides little benefit to most buyers.
Some Arizona car dealers try to get around the price disparity by selling their cars as if they were a private seller to avoid charging sales tax. This practice is called curbstoning and helps them stay competitive, but it’s illegal. Yet enough dealers are involved in curbstoning that it’s costing the state an estimated $100 million in lost revenue each year.
Lost revenue is not the only issue. Arizona car dealers are mandated by the state to provide a 15-day/500 mile warranty on all used vehicles they sell. If a dealer curbstones a vehicle and sells it as if they were a private citizen--they do not charge tax and do not provide the warranty--the buyer is put at risk. If problems arise, the buyer has little to no recourse and is left to handle problems on their own.
Consumers in Arizona can take steps to determine if they are buying a curbstoned vehicle. Start by checking the vehicle’s title. It should raise a red flag if the person selling the vehicle is not the owner. Also, many private sellers used online classified websites such as Craigslist.org or Backpage.com to sell vehicles. Buyers can perform a search on the seller’s phone number to see how many other cars they are selling. Another red flag should be raised if a particular seller has 10, 20, or 30 or more vehicles for sale online at any given time. That’s the behavior of a dealer and not a private seller.
Dollars and Sense
The problem of curbstoning in Arizona won’t be resolved simply by buyers being more aware. After all, if most car buyers wanted to buy from a dealer--and pay significantly more for their vehicle because of the sales tax issue--they would. In truth, this is a problem created by the state legislature. Creating tax disparities is only asking for problems. Taxes that are seen as unfair, or experienced by state residents as being applied unevenly or inappropriately, only encourage individuals and businesses alike to find creative solutions to counterbalance imbalanced tax laws. This is especially true when such tax disparities drastically affect how its citizens can make a living.
Don’t get me wrong. I’m not encouraging anyone to break the law. I’m not even attempting to justify those dealers in Arizona who are currently engaged in curbstoning their used cars. Illegal is illegal.
However, Arizona legislators just might be able to find ways to make tax laws fair and equitable to those most affected by them, and at the same time restore some $100 million in lost revenue to the State. True, they would probably feel compelled to avoid the dreaded tax increase that would result if they levied a sales tax on private sellers--while avoiding the loss of State revenue that would result if they repealed the sales tax on all used cars. Not an easy dilemma to resolve!