International Sales Tax and The Mile High Club: A Flight Attendant's Observations

The interview below is the fifth and final portion of a conversation with my friend, who's a flight attendant. (Check out parts one, two, three, and four if you haven't already!)

So let's move to the tax section, specifically tax evasion [both laughing].

 I wouldn't call it tax evasion.

Well, I mean, what do you call it when you're avoiding taxes [both laughing]? 

Um, saving money.

Fair enough. I can't argue that.

Yeah.

A lot of people go to Europe because of attractions and checking stuff out. But it's also well known that a lot of items are cheaper there, especially if it's something I suppose made there. Maybe a Barbour jacket from England as opposed to buying it from America, perfumes, et cetera. What do people do wrong? What should people be doing?

Uh, if you are getting the VAT tax, if you're getting your money back in Europe with your taxes and then you come to America and you do not declare anything, you're already in the system of having that. At that point, I believe they're just building a case. You have to ask customs, border… you know, the customs border and protection agents. But from my understanding, they already have you in the system, and they're just building a case. So when you go to renew your global entry or you go and apply for it, and you're wondering "why am I being denied?" Maybe that has a hand in it.

But also you coming back with all these Louis Vuitton bags because people love to show off on social media. Yeah, they can also see that. Like, don't put all that stuff out there like, "oh, I just bought this." And then you're just like not even declaring it when you're coming through customs and borders.

Once again, they can build cases on you. It's kind of like using your HSA money. For like…I don't know… ATM. You use it to get $20 and, you know, "oh, they're not going to look; they're not going to notice that." Then you use it for this, and you use it for that. Sooner or later, they're going to catch on to you, and they're going to have a case against you, and they're going to bring it up. So it just doesn't make sense to even hide it or even lie about it. You don't get your taxes back. I don't see nothing wrong with it.

I would just cut off the labels, throw away the boxes, throw away the bags, carry your bag just like a regular one or check it. At that point, I mean… unless they do also look at… I mean… they could investigate even deeper and ask your bank for statements. But at that point, it's going a little too far with the tax, with you reclaiming your money back from taxes from the European government with your own passport that has an identity passport number connected to your identity. [Both laughing] Maybe we'll just use our brain here. So, yeah.

And also don't go to Customs, Border and Protection. Don't go through Border Patrol with your Louis Vuitton and Gucci bags because you just want to show off that you went shopping because at that point, yeah, you save money with that. You got your taxes back. But also right then and there, you would be paying a hefty price on taxes coming back in.

So people don't declare it afterwards because…

They think that they're saving… I don't… I don't really know. I just go ahead and declare what I purchased. And I think there's a limit. I think it's $800 or $700 for passengers. So if it's already under that amount, technically you don't have to pay taxes on it. I want to research that, actually.

So that's how much money is spent or how much savings tax money spent?

Okay… [Looking it up] What do I pay… So for goods valued over $800, you may be required to pay duty, which typically range ranges from 2.5% to 6.6%. So it's $800.

So if you buy like a bracelet that's €650 and with conversion rate, it's like $690, you don't have to pay that duty tax. As opposed to, you go on a shopping spree, like you buy $12,000 dollars worth of like 20 different items from Louis Vuitton and Chanel. That $10,000 or $12,000 of whatever I just said, 6.5… I mean, 6%. That's a lot of money.

So people try to do the VAT tax or like try to get the tax back or get the tax off.

So when you go shopping in Europe, the taxes are already included. So when you spend over €100, you can go at the store you're buying from. They will ask for your passport, and they will fill out the paperwork for you. You go to the airport, you turn it in, and they will put it in the system and they will give you back either cash if you paid cash or it'll go back on the card, I believe, that you used to pay and it'll be linked to that card. And from then on, you're getting the taxes back. So whatever the tax percentage was for Rome, Italy, you get that percentage back in dollars amounts for what you spent.

And that's up to 800.

So coming back into the U.S., it's $800. That's the limit. So let's say like I bought something that's €300. I'm still getting my taxes back from the European Union, but I don't have to pay that duty because it's under the $800 limit in America. Does that make sense?

I see. So where people get hit…

… is when they spend they go and buy a Louis Vuitton bag that's worth or Chanel or Dior bag that's worth $5,000, but they're saving a thousand by buying it over there. $4,000. Okay, let's say the tax on the taxes on that was $300 of the $4,000. You get the $300 back. All right. When you come to the U.S. okay, it's a $4,000 purse. Conversion rate probably is… I don't know… 4,200 times 0.06. You're paying $250 on the duty.

On the duty.

Yeah.

Gotcha. So there's the VAT or the tax and then there's the duty.

So the VAT is Europe and then the duty is America.

Gotcha. So some people will try to buy stuff. Get the VAT back. Then they don't claim it and hoping they don't have to pay the duty.

Mm-hmm. Cause they just think, "oh, I just bought this bag. This, that, and a third." And when you're over there, you're spending money.

Right.

So let's be honest, when you come back from a vacation, you're basically broke. You're not trying to spend $300 on a bag of that. Pay a duty tax for a bag that you bought over in Europe. You know?

So speaking of it being linked to the person—okay, I go to Paris. I buy a Cartier watch, 10 grand. I get the VAT off at in Paris. Then I land in America and I don't have it in a box. I don't have anything fancy. I have it on my wrist. I pretend, "Oh, yeah, that's my daily watch." But I try to go through customs. But do they have it connected already to me? I think that's what you're saying.

I believe they do, because I've heard from people where they're like, "oh, you've had that watch. You're going to come with us." And that's when they bring you and then you go into the little side room. And at that point, they most likely will bring it up. "Okay, did you or did you not apply for this VAT tax?" Because it's connected to your passport, which is connected to your identity! Your social security number!

Like, come on [laughter]. I'm like, how stupid can you be? How stupid can you be?

So the rule of thumb is: don't.

Don't. And see, that's when… oh, off the record for this, but just letting you know…