Tax on private used car sale

[the_yellow_dart]

Don't know why it took me so long to post about this, but here goes.

When I bought my Cruze, I was going to trade in my Cobalt. With 225,000 km on it, it wasn't worth much - similar ones online were going for $3-4k, but of course that's cleaned up and safetied. So I was hoping to get somewhere around $2k trade in. I was only able to argue them up to $1750 (first offer was $1k). Wasn't extremely happy with that, but it was acceptable.

When I told my friends about the deal, my friend spoke up that his father wanted to buy the car. So I offered him the trade price plus the tax, to compensate me for the loss of the tax savings gained from a tradein. He'd also pay to safety it, fix if necessary, etc.

The trade worked out, and there were no problems there. He ended up having to replace the rear drums, but that was no big deal.

Anyways, the real reason I am posting this is to complain about the tax that was levied against him. First of all, why are we taxing private used car sales? Does the US do this too? He had to pay the normal 13% sales tax. Secondly, I was baffled by the stupidity of the car valuation that the tax was based on. Mileage is not considered - they just go by average book value, which for a 5-6 year old car is probably around 100,000 km. So the valuated price was around $5k. Paying around $650 in tax on a car bought for just over $2k is kind of government rape, if you ask me. I can buy any other used item other than a house or car with no tax.... so how is this fair?

[Drew Dowdell]

US does it too.

You pay tax on the sale price unless the sale price is drastically outside of "reasonable book value". It leaves a lot of leeway but also prevents your grandmother from selling you her barely used Impala for $100.

[the_yellow_dart]

That still sounds more fair than what we have here. To quote the Ministry of Transportation of Ontario's website:

The amount of tax is on either the purchase price or the vehicle's wholesale value, whichever is more.

[Camino LS6]

Governments are money-grubbing entities by nature, moreso now than they used to be.

PA used to just accept that the reported price of a used car would be low, now they insist on book value unless buyer and seller can explain the price and swear to it on a separate form.

[balthazar]

>>"The amount of tax is on either the purchase price or the vehicle's wholesale value, whichever is more."<<

This just renders me incredulous. Tax on goods by definition is supposed to be a percentage of the sale price.

The Gov't, with absolutely no evidence, cannot charge a tax on some other value. There's just zero basis for it.

It borders on being a scam, IMO.

I've been thru this process more than once with friends, where they paid the sales tax on a used car, then later got a letter stating they owed 3 times more because a book on a shelf somewhere assumed the car the book never inspected was in Condition A. I wrote a letter on their behalf and the matter was closed.

I've bought more than 1 used car for $5 and less, and paid the appropriate tax (on purchase price).

[GMTruckGuy74]

Thank God NJ isn't that way (at least yet)!! When I bought the '96 Fleetwood in '09, I was able to pay sales tax on the amount the seller reported the sale price "as" on the title

Edited August 18, 2011 by GMTruckGuy74

[balthazar]

^ I would have to believe the sale price was close enough to 'book value' not to have been flagged, because NJ absolutely has pulled this sh!t, and years back, too.

[GMTruckGuy74]

^ I would have to believe the sale price was close enough to 'book value' not to have been flagged, because NJ absolutely has pulled this sh!t, and years back, too.

No, no where near book value. However, I will heed your advice and keep an eye out for a letter from the governor

[regfootball]

your government loves it when people trade vehicles often.....if a vehicle changes hands 3 to 4 times in its lifetime, think of all the sales tax they make off it.....

[balthazar]

^ if you trade at the dealer. Trading privately, I would still believe that a signed receipt would trump a state blue book claim attempt.

[Blake Noble]

I only paid $450 for the Cherokee, but when I went to do a title-only transfer on it at the DMV I still had to pay 6 percent sales tax on half of the KBB value, which came to somewhere around $1,500. So now I have to pay something like $80 bucks a year on tax.

It wasn't like that about two years ago. I'll say this: it's one way I managed to pull off paying to get a few things done to the Cutlass when I had it.

[balthazar]

^ Wait- what do you mean "$80 a year" ?

This whole thing of paying sales tax on a dollar amount you didn't pay is beneath contempt and complete bullsh!t.

[Blake Noble]

Yep, I have to pay annual sales tax in this state on whatever vehicles I own.

I don't agree with it either. I also don't understand why we don't just follow what TN does. Sure, they have to pay 9.25 percent sales tax, but there isn't any income tax or annual sales tax charged on whatever the hell you own to drive (although I do understand there is an annual renewal fee; still, though, it's nothing like paying sales tax every year on something you didn't buy that year and especially on something you didn't buy for that price to begin with).

In regards as to why the law changed here, well ... plenty of people were buying cars in private party transactions and providing bills of sale with amounts that shown figures well below what had been paid to reduce how much tax they were being charged every year, i.e. what I did with the Olds.

[balthazar]

Holy S. Even Jersey isn't that draconian yet. Then again- registration fees aren't all that cheap, either.

[jwbouch]

I just acquired a 96 ford escort, for the sale price of $100 (it didn't run, needed the head rebuilt - I don't know, my cousin fixed it for me). I asked the seller for a bill of sale to prove to motor vehicle I only paid $100 for it. The lady at motor vehicle never looked at the bill of sale, just looked at the back of the title I was flipping for the sale price and never asked a question, I paid $7 sales tax. Kbb value in "poor condition" is still $1400-$1600. No questions asked, and this was in NJ

[balthazar]

^ Whew.

As an aside, I can't believe a 15-yr old Escort would be worth $1500.

[GMTruckGuy74]

Holy S. Even Jersey isn't that draconian yet. Then again- registration fees aren't all that cheap, either.

That reminds me, I owe the NJMVC $71.50 before the end of this month to renew the Envoy's registration

[balthazar]

Reg. on the 2500HD is $98, IIRC.

[Drew Dowdell]

$36 here for the Toronado

[balthazar]

Pass car is $46 here.

[SAmadei]

Pass car is $46 here.

Only at the light end. Most of my pass car regs are higher... usually for no apparently good reason.

In my currently due pile...

'99 Grand Prix GTP $46

'99 Bonneville $46

'04 Grand Prix GTP $71

IIRC, my '81 Bonne was slightly more... $80-something... but the '83 Impala, which is slightly heavier, was $46. Go figure.

[riviera74]

Four years ago, my Florida car registration was about $36. Now it is about $72 for 2010 and probably 2011 too. Normally, this is an anti-tax state, but when did Tallahassee decide to raise fees like this..... especially when Republicans have run the state legislature for at least a decade straight?

[jwbouch]

^ Whew.

As an aside, I can't believe a 15-yr old Escort would be worth $1500.

That's what I thought! I would never pay that much for it!