If an Illinois resident purchases a car, plane, boat, etc. in another state, once Illinois finds out about it, they will charge the Illinois “use” tax, which is essentially the same as a sales tax. It is not a defense that you paid tax to the jurisdiction in which you purchased the vehicle. The same occurs with county taxes. I used to live in one of only a few dozen homes in Roselle, Illinois that were in DuPage County. I purchased a car from a Cook County dealer who charged me the DuPage County tax based on my residence. Cook County then attempted, based on my residence in Roselle, not the location of the dealer, to collect the Cook County sales tax, and I had to prove that although I lived in Roselle, my residence was in DuPage County.
I don’t know about your state, but in Illinois you pay sales tax on virtually all transactions of goods. It does seem unfair that tax would be paid on the same item twice, but the short answer to your question, chris, is that it raises revenue. This is not the only way the government “double dips.” As an example, lets say your grandfather dies, with an estate large enough that it triggers estate tax, and leaves his house to you. He paid income taxes on the money used to purchase the house, paid sales tax on the purchase, paid property taxes every year on it, and now they are going to tax it again when it is transferred to you, you will pay the tax with income on which you’ve already paid taxes, and you will continue to pay property taxes on it, with income that’s already been taxed. Millions of dollars are spent on lawyers, like myself, to exercise legal options to not have to pay duplicate taxes. I am a big fan of simplifying the tax code so only a few taxes are paid, in an easy to calculate manner, without special exemptions, many of which only benefit those able to pay the professionals to find the exemptions. I would keep an exemption for the support of dependents, homeownership, a partial rebate of property taxes for those without a dependent using the public school system, and for charitable donations, and that’s about it. In the alternative, a straight consumption tax is another alternative.
Our own Illinois Gov. Blagojevich, who gives politicians a bad name, tried to pass a “Value Added” tax, which would tax at every point of production on gross sales, not profit. Thus, even if a business was failing and not making any income, it would have to pay taxes, plus the taxes would accumulate at every step of production. As an example, a mine would pay taxes on the sale of ore, the refiner would pay taxes on the sale of steel, the stamper would pay taxes on the sale of pressed steel, the tool and die company would pay taxes on the sale of parts, the alternator company would pay taxes on the sale of alternators, the car manufacturer would pay taxes on the sale of cars to dealers, and the dealers would pay taxes on the sale of the car to the limo company. They were also going to tax services for the first time, so the limo company would pay taxes on the sale of the ride to you, and the limo driver would pay taxes on your tip, while you had already paid income taxes on the money used to pay for the ride. All of these taxes would be paid, REGARDLESS if any of these businesses made any profits. Home builders estimated a 10% increase in the cost of a new home as a result of this new state tax, given the plummeting real estate market, it would have been the death knell for real estate in Illinois. The tax was killed by most business in Illinois announcing they would simply either move their business across the state line, or cease doing business in Illinois.
You will pay for the state you live in. I had bought a car from Alabama before & I lived in TN. I end up paying TN taxes. Hope that help.
Before President-elect Donald Trump proposed it at the federal level, Alabama passed a law exempting overtime wages from taxes back in November 2023. Act 2023-421 (H.B. 217) excluded any amounts received by a full-time, hourly wage employee as compensation for work performed above 40 hours a week from state income taxes, starting January 1, 2024.
