Do you pay taxes when buying a used car from a private party?
- Thread starter her209
- Start date
yes, although it's an area that isn't actually fair taxation, imo. Somebody already paid sales tax on the car once, when it was purchased the first time.
Only time there should be additional sales tax paid is if the car is sold for more than the original purchase price.
Or, the alternative way to make it fair would be to charge sales tax on every transaction for other kinds of stuff, like charging business sales tax on the materials they use to make stuff for resale, and make wholesalers pay sales tax on their inventory when the acquire it from a supplier.
Only time there should be additional sales tax paid is if the car is sold for more than the original purchase price.
Or, the alternative way to make it fair would be to charge sales tax on every transaction for other kinds of stuff, like charging business sales tax on the materials they use to make stuff for resale, and make wholesalers pay sales tax on their inventory when the acquire it from a supplier.
Sell the car for a dollar and pay only a few cents in tax. Then the rest of the money can be handled under the table.
Brainonska511
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Scarpozzi
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When you walk in to register the car, they'll hit you with the bill. If you claim that the car was sold for $1, they'll still tax you a set rate depending on the make/model/year. State to state, a lot of the stuff is slightly different, but in the end...they always get their money.
PowerEngineer
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Brainonska511
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That's true, but it makes it a little easier if one were to try and avoid the taxes. Though, I don't advocate reporting the value of the used car as lower than what it was purchased for in order to avoid taxes.
Some places will make you pay the taxes on the value of the car not what you actually paid for it.
Kelemvor
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Exactly. There's nothing illegal about selling someone a Bic pen for $10,000 and throwing in the car for free. Can even write up a mini-contract stating just that. There's nothing the DMV or IRS can do about it. As long as both parties are in agreement.
The DMV or IRS or whoever will just check with each party to see if you say the same thing.
If you buy the car for $10,000 and the seller leaves that blank empty on the title and you fill it in for $1... Then they will go ask the seller how much you paid for the car and if he says $10,000. you get in trouble and/or go to jail for fraud, tax evasion, etc.
Yep, I just bought a vehicle for $6.6k, blue book was $10k. If I bought from a dealer, tax would be 7%, around $500. If I bought from private party seller, tax would be $90
so where you buy your vehicle from can factor in.
this all depends on the year of the vehicle, as well as which state you are in.
DrPizza
Administrator Elite Member Goat Whisperer
Here in WA I believe there are a limited number of times the car can be gifted. I was given my truck, but apparently it had already been gifted so they made me write down a value for it. I wrote down an arbitrary number, $200, and owed $50 for tax/fees. Seemed silly to me but oh well.
Texas just changed their law, you must pay sales tax on the blue book value. I think it is the private party price but I'm not certain.
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