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I'm getting an aftermarket accessory installed on my car by an individual. The person has actually been recommended to me by a big dealership in my area and this person seems to be pretty reputable from my research. The sales tax would be for Wisconsin.

He has given me two options:

  • Pay with a check or card, which includes taxes, and I can get a receipt
  • Pay with cash, no taxes, and no receipt

Will I get in trouble if I agree to have him work on my vehicle, choose the cash option, and he doesn't pay the tax? Should I be worried?

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    Are you assuming he won't, or have you asked and been refused? A lot of businesses that handle cash transactions might not offer a receipt by default, but are happy to write you one upon request. – CactusCake Apr 12 '17 at 15:55
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    Just a note: someone giving you a receipt in no way causes them to have to do their taxes appropriately. They can reverse/delete the transaction in most digital systems, or just throw away their copy for old-fashioned paper systems. The answers are 100% right that it isn't your problem, though, and you have no liability for someone else choosing to lie to the tax enforcers. – BrianH Apr 12 '17 at 17:44
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    @JoeMalpass He told me I could not get a receipt for the work if I paid cash. I specifically asked if I could get one if I paid cash. – Programmer Apr 12 '17 at 20:09
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    @Hooplehead24 in that case you would still owe the state/locality any applicable sales tax (that's on you, whether or not the merchant collects it on your behalf). In reality, lots of people evade these taxes already when buying things online from out of state, there doesn't appear to be much of an enforcement effort going on. My bigger concern would be the lack of proof of payment, should you require any kind of warranty / follow-up work on the vehicle. How much do you trust the guy not to botch up your ride? – CactusCake Apr 12 '17 at 20:26
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    One point of clarification: is this a business? Or is this a person who does this effectively as a hobby? (In particular, is the work done in a (presumably commercial) garage, or is it done at the guy's house or at your house? – Joe Apr 12 '17 at 20:58
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If this is because he wants to avoid paying taxes, will I get in trouble if I agree to have him work on my vehicle?

You should check your state and local sales tax laws to be certain, but in my state you have no liability if he does not pay his taxes. That's his problem, not yours.

The biggest risk for you is if something goes wrong, you have no proof that the work was ever done, so it's possible he could deny that any transaction ever took place and refuse to correct it or refund your money. So at worst you're out what you paid for the service, plus what it would cost you to fix it if you needed to and chose to do so. If you don't want to take that risk, then insist on a receipt or take you business elsewhere, but there's no criminal liability for you if he chooses not to report the income.

EDIT

Be aware, though that state tax is levied at the state and local level, so the laws of your individual state or city may be different.

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    Also, obligatory note, having work done by a non-certified shop may void your manufacturer's warranty. – SnakeDoc Apr 12 '17 at 21:03
  • I don't think that's true if the tax in question is sales tax -- in most states the buyer is required to pay use-tax for transactions where the seller doesn't collect a sales tax. For example. Granted, the chance of getting caught is slim, but you do have a legal obligation to pay the sales tax even if the seller does not invoice you. – Johnny Apr 12 '17 at 22:19
  • @Johnny I believe in most states (including mine) that's only for out-of-state purchases. For services in-state the "seller" should be responsible for the sales tax. I did not realize that about WA, though. I asked the OP to add his/her state to be certain, though. – D Stanley Apr 12 '17 at 22:22
  • @DStanley - check your local tax laws to be sure, but I'd be surprised if that's the case. The most common use-tax situation people find themselves in is with an out-of-state vendor, but the link I posted above includes in-state purchases: The first thing to do if you receive an invoice on a retail purchase from an *in-state business* that does not include retail sales tax is to contact the vendor and ask why...If you cannot contact the vendor or they will not issue a new invoice, you can pay the tax directly to the Department of Revenue – Johnny Apr 12 '17 at 22:25
  • Pedantry: "you're out what you paid for the service, plus what it would cost you to fix it if you needed to". You are only out the smaller of those two. If you had a receipt, the vendor would either fix it or refund your money, not both. – Oddthinking Apr 13 '17 at 13:04
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There are number of reasons why someone doesn't want to give you a receipt for cash payment. Anything ranging from not wanting to pay taxes, to being able to deny you gave them money for service in the event you're not happy with the service and ask for money back. You won't get in trouble for giving him cash, however you should be worried because any "reputable" person providing any type of service/product will provide a receipt regardless of payment type.

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In some states, it is your responsibility to pay the sales tax on a transaction, even if the party your purchase from doesn't collect it. This is common with online purchases across state lines; for example, here in Massachusetts, if I buy something from New Hampshire (where there is no sales tax), I am required to pay MA sales tax on the purchase when I file my income taxes. Buying a service that did not include taxes just shifts the burden of paperwork from the other party to me.

Even if you would end up saving money by paying in cash, as other here have pointed out, you are sacrificing a degree of protection if something goes wrong with the transaction. He could take your money and walk away without doing the work, or do a sloppy job, or even damage your vehicle. Without a receipt, it is your word against his that the transaction ever even took place.

Should you be worried that he is offering a discount for an under the table transaction? Probably not, as long as you don't take him up on it.

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