Evading Tax—Legally – Frugal Confessions

Evading Tax—Legally

It’s not just a coincidence that it is called the Tax Code. Embedded in federal and state regulation books (the printing of which have probably killed more trees than any wildfire) are thousands of complicated, far-reaching, and sometimes sneaky ways in which to tax your money. There’s the gasoline tax, hotel occupancy tax, dog license tax, airplane ticket tax…and the list of buzz kills goes on and on.

evade taxes, save money, pay less taxes

In scope and size, the sales tax stands below the two big ones: federal and state income tax. Compared with seeing the chunk of money taken out of your paycheck each month, sales tax might only be a blip on your money radar. After all, your tax bill for everyday items like clothes and toiletries doesn’t seem like it could really amount to much.

Or could it?

How Much Sales Tax Eats into Your Monthly Cash Flow

In March of 2009 I kept all of my receipts and added up the various taxes paid. The types of taxes I encountered (aside from payroll taxes or property taxes) were the following:

  • Gasoline Tax: $0.20 per gallon
  • Hotel Occupancy Tax: 9% for the city of Austin, and 6% for the state of Texas
  • Regular Sales Tax: 8.25% (remember there is no sales tax on many groceries, over-the-counter medicines, etc.)

I managed to make it out of the month with a spending tax bill of ‘only’ $31.90, most of which came from the Hotel Occupancy Tax (in all honesty I was reimbursed for this expense from my employer, but we’ll include it in my total).

I say ‘only’ because according to the Tax Foundation, in 2008 Texans paid an annual average of $1,125 per capita in sales tax (check out the per capita data from your state here). That is approximately $93.75 per month coming out of money that has all ready been taxed once by the federal government, and that figure only includes sales tax.

So how did we manage to get our monthly sales tax bill to be so much lower than the average Texan household (without ending up in jail)?

How to {Legally} Evade Your Sales Tax Bill

I coupon my way out of paying sales tax.

Let’s see if you can, too.

In the state of Texasand many other states—it turns out that when you use retail discounts or manufacturer’s coupons, sales tax is calculated on the purchase price after the discounts have been taken (click here to find out which way your state taxes when coupons are used). This is important; in many states around the US, you are taxed according to the purchase price before the discounts have been taken.

In several states using coupons has a compounded savings effect: it not only lowers your overall purchase amount, but it also lowers your overall sales tax bill for the year.

Tip: Not in a state where they charge sales tax after discounts from coupons taken off the total? You can still lower your overall sales tax bill and save lots of money by shopping sales and clearance racks.

To give you an example, if I had not used coupons as well as not shopped sales/clearances during the month of March, then my total tax bill would have been approximately $52.00. That’s an extra approximately $241.20 per year back into my wallet! 

Are coupons looking a little more enticing to you now?

By using coupons in each purchase you make, you can keep extra money in your pocket that equals the amount of sales tax that you pay each year. For me, this would be using approximately $32 in coupons each month. How much is your sales tax bill each month?

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3 comments… add one

  • Suzann

    When using coupons, you need to watch the cashier to make sure your coupons
    for taxable items go in with the taxable code— many cashiers are not well
    trained and they mindlessly enter every coupon as food. I am a real stickler
    and I do not care how long the line gets behind me– I want it right and after all
    it is my money.

  • Yet another reason why we use coupons! I never knew this, I will have to look up the Virginia Tax Code and see how it applies.

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