Personal Business: Smart Money
IS YOUR LUXURY-TAX REFUND JUST SITTING THERE?
The 10% excise tax on luxury goods caused a lot more excitement when it was enacted in 1990 than when it was repealed, on Aug. 10, 1993, retroactive to the first of the year. Although retailers of yachts, planes, furs, and jewelry say there was near-universal protest at paying the tax, they have had--since it was revoked with the passage of President Clinton's budget bill--hardly an inquiry from the customers now entitled to refunds.
Maybe those people haven't gotten around to applying yet or don't realize money is due them. If you bought a luxury item this year between Jan. 1 and Aug. 10, you can get back any tax you paid on the portion of the price above $250,000 for a plane, $100,000 for a boat, or $10,000 for fur or jewelry. The only luxury items the new law did not exempt from the excise tax are high-priced cars. The threshold is $30,000 in 1993, but it will increase to $32,000 in 1994 to allow for inflation.
You must return to the store or dealer with the receipt to get your money back. Retailers have the option of reimbursing you on the spot or waiting until they receive their refund from the government. It typically takes up to eight weeks for the Internal Revenue Service to part with the dough.
Forcing buyers to go back to the seller is a way to make it tougher for them to get the refund, speculates tax consultant Stuart Becker, president of Becker & Co. in New York. The taxpayer should be able to file a form with the IRS, he says. But only if you imported a luxury item and paid the tax directly by filing a return with the IRS can you go straight to the government for reimbursement. Taxpayers have three years after the due date of the original returns or two years after the tax is paid, whichever is later, to request a refund.
The financial burden on the government from reimbursing taxpayers won't be vast: Uncle Sam collected $305 million from the luxury tax in fiscal 1992 (ended Sept. 30, 1992), but $276 million of that was from cars.
Retailers voice relief that the tax was lifted. "Otherwise, we would have had to close our doors," says Ted Hood, CEO of Hood Enterprises in Portsmouth, R.I., which builds Little Harbor Custom Yachts at $1 million and up. Hood says some customers put off buying, hoping the tax would be repealed. For those of you who took that gamble, congratulations. You won the bet.Amey Stone