Chicago-area man buying out-of-state car faced double sales tax due to dealership mistake

CHICAGO (WLS) -- Buying a car in another state can sometimes save you money, but only if the paperwork is done right.

The ABC7 I-Team is finding that one local man learned that the hard way after an out-of-state dealership made a mistake, putting him on the hook to pay double in sales tax.

He contacted Consumer Investigator Jason Knowles and got results.

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Southwest suburban resident Jim Herring says a dealership in Texas made a costly error, charging him the sales tax there. The problem? The state of Illinois says the money should have been paid to the Land of Lincoln.

"It's shiny and new," Herring said. "It's a great vehicle. We are so pleased with the car."

Herring found a deal on an Acura RDX at a dealership in El Paso, Texas. So, he flew down with his wife to make the purchase.

The dealership collected Texas tax, when they should've had him fill out paperwork to pay taxes in Illinois. Instead, the money went to the state of Texas. Eventually, the state of Illinois Department of Revenue came to Herring to collect. With penalties and interest, the amount was almost $3,000.

"You're required to pay state taxes in Illinois because you live in Illinois," Herring said. "And the dealer should have known that, and I said, 'But the dealer paid Texas. Can't you call State of Texas and have them give you the money?' They said, 'No, we're not going to call Texas... They demanded it from us, in fact they seized our state tax return for 2024."

Herring said when he couldn't get answers, he called the I-Team. ABC7 reached out to all of the parties involved.

"The Texas dealership charged that purchaser Texas sales tax. They should not have done that," said David Harris, Illinois Department of Revenue director. "They should have had the purchaser file a tax exemption certificate."

Harris says action was taken after ABC7's inquiries.

"A supervisor in our sales tax sales tax processing division who reached out to the dealership in Texas and said, 'Look, the tax should not have been collected. You really do owe this person a refund,'" Harris said. "And I'm not sure what she said, but the dealer agreed to send a refund to the to the taxpayer."

"And no one would listen to us," Herring said. "But they didn't know that 7 was on our side, and we were going to go to the bullpen, go to the I-Team, called for Jason Knowles. And all of a sudden, as soon as you start making phone calls, everybody wanted to help. Everybody want to resolve the problem only because of your phone call... $2,929 was received from the dealer."

The Texas car dealer told the I-Team it always seeks a resolution for customers, and they're happy this is resolved.

Illinois Department of Revenue said if you are buying a car out of state, make sure you ask the dealer to provide you with the proper forms to get taxed here in Illinois. There are nice states, like Michigan and Indiana, where you must still pay taxes to the state where you buy the car.