Ep. 142 | Hidden Taxes Exposed
Download MP3Welcome back to the podcast, everybody, here from the teaching tax flow team. So we are gonna get into today, we're gonna uncover those hidden taxes. That's right. We're uncovering hidden taxes just for you, the listener of this show. But before we get into it, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody, and welcome back to the teaching tax flow podcast. One thing that you probably don't hear on this show, especially at the beginning is you might not even know who I am. So my name is okay. I like the I like the pause.
John Tripolsky:You don't need to know who I am. Who gives a crap? We're here. Chris Picciurro Welcome back, sir.
John Tripolsky:How
Chris Picciurro, CPA:are Watch us trick. What am I? I'm hidden. We're talking about hidden taxes today. And if you're not watching the YouTube channel, you should be.
Chris Picciurro, CPA:If you're listening to this, thank you. Thanks for hitting us on Spotify, Apple, iTunes. Give us a great five star review, but we're talking about hidden taxes today. We're gonna jump right into it because when we talk about legally and ethically reducing tax you're paying your lifetime, most people think about income tax. Some people think about a state tax.
Chris Picciurro, CPA:We've had a lot of great content on that. But, man, there are a lot of what I call hidden taxes out there. If you recently went to a restaurant or looked at your bill on anything, you will see, dang. You know, I'm not seeing that. So a lot of times, hidden tax is something that you don't file a tax return for.
Chris Picciurro, CPA:So it's something you're just paying as you go along. We know the tax agencies are involuntary business partner, and we wanted to take those little cockroach cockroach taxes that usually hide in the dark and shine a little light on them today.
John Tripolsky:Let's do it. And if you're not watching this and you're only listening to it, you're missing out on Chris' little, magic tricks here. He's an illusionist now. He's getting ready for taxposia here that we're going to in Vegas here, pretty soon. So he's he's practicing for his, you know, moment to shine or
Chris Picciurro, CPA:Yes. Or hop again. See, you know, I like I like to jump in and jump out.
John Tripolsky:So Tax happens.
Chris Picciurro, CPA:Probably yeah. Exactly. Probably the number one hidden tax that we see. So remember, defining what is a hidden tax? A non income based tax has nothing to do if you make $20,000,000 a year or no million dollars a year, you're still paying these taxes.
Chris Picciurro, CPA:They have nothing to do with your income. The largest hidden tax is absolutely sales tax. And here, many of the states that have higher sales tax had no interestingly, no state income tax are the states that are growing and thriving. But a sales tax is quite simply a sale tax imposed on the retail sales of tangible personal property or certain services depending on what state you're in. So in which we go and buy something, like television, a whatever, a lot of times you're going to see a sales tax.
Chris Picciurro, CPA:And 45 states plus DC impose a impose a sales tax according to our friends over at the Tax Foundation. Now some things are exempt from it. It's a state by state basis, sometimes food, digital goods, medicine services. But ultimately, sales taxes are number one hidden tax. And, I mean, yeah, we see it.
Chris Picciurro, CPA:Yo. Kinda like John, and then we're gonna talk about this in a a bit a couple more men in a couple minutes. Travel has probably the industry with the biggest hidden tax. You ever book something on either Airbnb, VRBO? You book your room, and you see literally 40% additional in taxes and fees.
John Tripolsky:That's gotta be like a marketer's dream. Right? It's like, you have this client. You're like, hey. We can totally put out there that it's $99 a night.
John Tripolsky:Like, that's you know, it gives you context to market off of. But then, yeah, you're right. You go you go to check out, and you're like, what in the world? You're like, your your head is already calculated. It's alright.
John Tripolsky:Well, I got this. It's 99 a night. I'm sitting there for three nights. It's probably $3.03 54. You get there, you're like, now how in the heck is it $685?
Chris Picciurro, CPA:I mean, those think about, like, Ticketmaster, StubHub, SeatGeek. Those guys snake those are guys that are weasels sometimes. They're weasels, and they sneak in a 25 to 35% convenience fee. Convenience fee means a hidden tax. So sales tax and commonly you commonly pay that on a lot of different things.
Chris Picciurro, CPA:And sometimes it affects travel and entertainment and that sort of stuff. So next one's something called franchise and excise tax. Not every state assesses a franchise and excise tax. The state of Tennessee is notorious for for slapping that on businesses because we don't have an individual personal tax return. But a franchise and excise tax could could play a role if you and this is gonna play a role if you have a business.
Chris Picciurro, CPA:You know, if you form an LLC, you're a corporation, you're typically going to pay a franchise and excise tax. It doesn't matter many times, or you're gonna have to pay the secretary of state an annual fee. Doesn't it's not always based on your income. Sometimes it's based on the assets that you have, and and it's kind of a sneaky hidden tax. So that's our franchise.
Chris Picciurro, CPA:Now I did say, a hidden tax is a tax you pay when you don't file a tax return. That one's kind of a hybrid. But but if you you know, some states, if you just simply I know in cal our friends in California, we haven't thrown them under the bus in a while. They they spank you with an $800 per entity tax. If your LLC made a dime or a million dimes, it's an $800 annual fee just to have the privilege of being an LLC or a corporation in that beautiful state of California.
John Tripolsky:And, Chris, this is for, you know, some of the people that have listened to us now for a 140 plus episodes and watched us now for 40 plus of those. You know, it's you're right. I feel like we haven't razzed on on our friends out west in a long time there. Ironically enough, we have met a handful of people in person who are from California that have listened, and they actually like when we get them shit. So I'll beat that one out, but it is what it is.
John Tripolsky:And it kinda makes it fun because, I mean, I know people that have moved from California that are self employed. One of our neighbors behind us, at our house has. And he he's like, man, this is like winning the lottery on a small level just leaving the state for as much as they get taxed on stuff. So, you know, there we go. There's our there's our dig at at the state here for a while.
John Tripolsky:We'll leave you alone Californians for a little bit. Not too long.
Chris Picciurro, CPA:But Well, hey. You know what? I have made friends with. I can't I'm serious. Very close friends with tons of Californians that have moved here too.
Chris Picciurro, CPA:As you know, I like to say, and you guys you and our buddy Jim Ingersoll like to like to like to razz me a little when I when I was kicked off that podcast, beautiful and historic Franklin, Tennessee. It was
John Tripolsky:a good episode. If anybody missed that one, go back and listen to it. We give Chris a hard time.
Chris Picciurro, CPA:Another big one, real estate transfer tax. So if you transfer property from one party to another property, a lot of times, there's a transfer tax. I've been subject to it with properties in Florida. Some states, it's very small. Some states, it's large.
Chris Picciurro, CPA:In New York state, it's like point 4% of transfers over a half a million dollars, which is and New York City has an additional tax, which is most properties in New York state, really. In Florida, it's 70ยข per $100 of consideration. That's significant. That's point 7%. So even if you sell a property at a loss, John, and pay no income tax on that, you are paying a state transfer tax.
John Tripolsky:I didn't know that. Yes. Wow. Talk about it. That's a bite, man.
Chris Picciurro, CPA:That's a betta that's a that's more than a nibble. That's a bite.
John Tripolsky:Wow. I I had no idea.
Chris Picciurro, CPA:Some states actually charge a transfer tax if you transfer property from your your name into an LLC. So you've gotta really be careful about that.
John Tripolsky:And with the transfer tax there, I'm I mean, I won't dig into too much, but I'm I'm sure a lot of people don't know either. So that's very similar. I mean, I think of just off the top of my head is, you know, you go to sell a car or buy a car even if you don't pay anything for it, you're still paying that. Like, our so, I forget what it is here.
Chris Picciurro, CPA:Michigan. Yeah. It's like the
John Tripolsky:same thing. Right? Right. Oh, that's an operating tax.
Chris Picciurro, CPA:You actually had a good comment. Congratulations. We're proud of you. No. No.
Chris Picciurro, CPA:That's a great point. That vehicle tab. Sometimes you gotta pay transfer tax on vehicles. Sometime some states like, Michigan actually has a pretty modest it's called the ad valorem or or tax on your vehicle tabs because in theory, it that that tax is based on the value of the vehicle, and it goes down over time. Where some states, it's very expensive to own a vehicle.
John Tripolsky:Like, I remember in South Carolina I'm gonna get it wrong to the point somebody again, please correct me if I am. When I lived in Charleston County in South Carolina, bought a new vehicle. I think the vehicle was, like, 41,000 or something out the door a while ago. The sales tax was capped at 500.
Chris Picciurro, CPA:Mhmm.
John Tripolsky:But the registration fee was, like, 8 or $900 or something a year, and then it was bay it went down by the mileage, which I looked at it like, what in the world? Like, way way to complicate a system, but you know? And then he had people out there getting fake oil change saying their brand new car is 65,000 miles on it because there's a high mileage vehicle tax deduction or something out there. But it's an interesting spec.
Chris Picciurro, CPA:Yeah. There's always there's always something going on. So so, yeah, so a lot of times, transferring that real estate, it's it sometimes sometimes it's called a tax stamp or something. It it can be expensive, and you gotta look at first, say, but Florida's a doozy, man. In some states exempt, like, transfers from you to an LLC that you own, but, you know Right.
Chris Picciurro, CPA:Like, flow again, Florida's a Florida's a tricky one, and we have a lot of growth down there.
John Tripolsky:And that's a good thing too, Chris. I mean, you you know, we talk about tax planning. I mean, that's something that I unless you really know somebody that knows that market very well. Right? I mean, might not even think to think of that.
John Tripolsky:Right? Because you might go in, you're like, hey. You know, my margins are kinda short. Say it's a fix and flip or something along those lines, and you don't know that's there. I mean, that's up.
Chris Picciurro, CPA:I mean, I yeah. And that's why you wanna work with, you know, professionals. I mean, we've had Park Barofsky of Movement Mortgage is a great resource when it comes to mortgages, and we've had Crystal Ball on from Panama City Beach, a phenomenal realtor. So but my point is is when you're buying that that that property, if down the road, you think you're either gonna transfer it in and out of an LLC due to financing or various things, you've gotta think about that, especially in Florida in that short term rental market. So it's a team approach.
Chris Picciurro, CPA:Of just be, you know, just be aware of those transfer taxes on real estate in the jurisdictions.
John Tripolsky:Makes sense. And I know the next one we're gonna talk about. I won't say what it is. I'll let you do that. But you would definitely pay this tax extremely high because you would be getting a lot of this if you didn't know about that that, that tax that we just spoke about in real estate drowning your service.
Chris Picciurro, CPA:So the next tax is called a, quote, unquote, sin tax. And, you know, that's not my term for it. But a sin tax is an is an additional tax beyond your normal sales tax on certain items that the government calls a quote unquote sin to consume. Again, we're not we're not the church. We're not the state.
Chris Picciurro, CPA:But in general, like alcohol and cigarettes are the largest types of product that are subject to both federal and state, quote unquote, syntax. So it's just it's it's basically the they're discouraging consumption, so they wanna raise revenue to fund public health by hitting people with with a large tax. And and, actually, not you know, some some states have quite a bit of sales tax on gas purchasing too if they really are trying to be green.
John Tripolsky:Yeah. And there Chris, I mean, there's we could take this and expand out it, you know, very far. You know, a lot of states I mean, I'm not gonna say what side of the fence I am on with that specifically. But, you know, Michigan has a lot of consumable products now than a lot of other states do not, and they text the crap out of them. And I believe that there has been some studies done that very minimal people will stop purchasing it even if the taxes went up on it.
John Tripolsky:So maybe that's why they were I just think of, like, the Syntax name. Right? Like, maybe that's just kinda where it came from is, you know, they could tax the crap out of it, you know, as high as they want to, really, in a sense, and people still consume it. Right? So who knows?
Chris Picciurro, CPA:I mean, think about we I know we we work in our in in the defeating taxes private Facebook group. We we do a lot of education, and a lot of that comes from the tax foundation, and they break down all types of different taxes. And they did a big article on cigarette tax. So the federal cigarette tax is about a dollar a pack, but states vary. New York, it's like $40 and $4.35 per pack.
Chris Picciurro, CPA:California is a little under $3 per pack. That's a significant tax if you're if you let's let's say you smoke a pack of cigarettes a day. That's 5 New York, that's $5 a day times 365 days. That's a couple thousand dollars just in the tax, not even the cigarettes.
John Tripolsky:Well, there's people there. Right? I mean, there's it's a legit problem from what I understand. People like smuggling in cigarettes from New Jersey or somewhere into New York and making a business out of it. I mean, it's a legitimate business, but you know?
Chris Picciurro, CPA:Yeah. No. I mean, that that's Wild. That's that's happening. Can you
John Tripolsky:imagine that joining, like, NYPD and be like, you know what? You're on the anti smuggling tobacco whatever test for us.
Chris Picciurro, CPA:I mean, it's legit. I mean, it's it's definitely something that that's out there.
John Tripolsky:Sure.
Chris Picciurro, CPA:So speaking of so we'll move away from cigarettes, and let's talk about alcohol tax. You know, sometimes they go hand in hand. No pun intended. I actually pun intended. Right?
Chris Picciurro, CPA:You could have one in one hand, one in the other.
John Tripolsky:That's very true.
Chris Picciurro, CPA:But there's a federal excise tax per gallon of alcohol, about $13.50 for for spirits. Wines, about buck to $3 a gallon. So that but that'll last you till noon, John, the way you operate. See, that's I I'm an alcoholic. We we know you're not a wine drinker, John.
Chris Picciurro, CPA:You're much more sophisticated than that.
John Tripolsky:I tried it, and I think I embarrassed you, your wife, and mine at a wine bar. So
Chris Picciurro, CPA:I would know. I'm never embarrassed, John. I was encouraging you. I was proud of you. You're right.
Chris Picciurro, CPA:And then beers, you know, between $3 and $18 a barrel on the federal side of things on top of state potential potential taxes on those. So, again, a lot of times, you know, you're paying more for these products because of the, quote, unquote, sin taxes or hidden taxes. You can't I can't tax plan around the cigarette tax. I get tax planning around a lot a lot of other things, but there's no other than telling you not to smoke as much and and and not to remember, we do legally and ethically reduce the tax you pay in your lifetime, so smuggling cigarettes across borders is is not a legal or an ethical practice.
John Tripolsky:Ironically enough, here we are talking about alcohol and cigarette tax. It mean you both grew up very close to the Canadian American border where bootlegger was, like, the fame during the prohibition. Right? So maybe we should do a bootlegging and tax episode. That'd be good.
Chris Picciurro, CPA:We could dig out. We could I
John Tripolsky:don't know who would get on and talk about it, but
Chris Picciurro, CPA:I'm sure. Well, my grandfather told me some interesting stories about people coming out through swimming across the Detroit River and and all these other cool things. But, anyway, let's wrap it up by a couple other hidden taxes. I touched on them a little bit, but let's put some numbers to it. Hospitality and lodging.
Chris Picciurro, CPA:So hotel occupancy tax. Now, John, fortunately for you, when you come to the beautiful and historic Franklin, you get you have your own suite here at the at our household. But if you didn't, you'd be slapped with a 19 to 15% state and local hospitality and lodging tax. So that's you know? So a lot of times when you go on to a certain hotel, you know, a a big hotel brand's booking site, you might say, hey, you know, $150 a night.
Chris Picciurro, CPA:That's pretty good and then it ends up being like 180 a night. Right? That's why where that free breakfast comes in and maybe free parking,
John Tripolsky:you feel a little better.
Chris Picciurro, CPA:Anyway, or rental vehicles and stuff. So hospitality and lodging taxes. In in expanding on that, you know, travel related taxes. Rental car taxes. John, another attack tolls.
Chris Picciurro, CPA:Another hidden tax.
John Tripolsky:I didn't think of that one at all. You are right.
Chris Picciurro, CPA:Are right. We talked about gasoline taxes. So a bunch of, you know, these type of consumption taxes that, every, you that that can eat away at things. So those are just those are probably the most popular hidden taxes. And I would say if you're listening to this, if you if there's a hidden tax that we didn't mention, put it in the comments.
Chris Picciurro, CPA:Put it in the comments of this YouTube video or in the defeating taxes Facebook group. I would love to know about it. Maybe we'll actually create some content. So we're challenging the listeners and the watchers on this episode.
John Tripolsky:That'd be awesome. And and, Chris, that's a great place to wrap this one up. Right? And, yep, to to echo what Chris said there, let's find out what you guys excuse me, in your areas because some municipalities even have them that, you know, they're not as low or I was just gonna say they're not more, geographically widespread. Right?
John Tripolsky:Like, I can think of some here in in our little town outside of Ann Arbor, and it's not the University of Michigan fan base tax. And that's extremely high because they're such a good team. We know how that goes. That's how we get Chris all fired up. He might be able to, make his video disappear, but I can mute him if he says anything about U of M.
John Tripolsky:So we're we're all good here. We're even. But, yes, let's do that. Everybody post some stuff. Share it with us.
John Tripolsky:Share us the community. Let's get it out there. Let's figure out what's there. Now this is not a, you know, bash your local city on specific stuff conversation, but put them in. Let's see what's there.
John Tripolsky:Let's have a discussion around it. And who knows? Might be helping out your neighbor that doesn't know anything's there. So as always, I am not gonna let Chris say anything now because he's gonna say something about U of M. We'll leave him on the side right in the pine, but we will see everybody back here again next week.
John Tripolsky:Completely different topic. Same day of the week. A little bit of a change in the time potentially. Just like I like to change the outro every show. So see everybody later.
John Tripolsky:Have a great week. Remember, tax planning is your friend. See you soon.
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