Buying and Selling a Vehicle
Many teens are always on the go and require their own
method of transportation. Buying a car or any other
motor vehicle is a taxable transaction. If you are buying or
selling a car for the first time, you may be unaware of how
taxes are paid for this type of transaction.
Buying a car may be done through a car dealer or from a
private seller. These are two different types of transactions
when it comes to paying the sales tax. When buying from a car
dealer, the transaction is fairly simple. The car dealer will
calculate the taxes and title fees into a total amount that
you will pay for the vehicle, and the title work will be
completed for you.
This changes when purchasing a vehicle from a private seller.
You would come to an agreement for the purchase price of the
vehicle with the private seller, and when the payment is
made, the seller will sign the title of the vehicle into your
name. Sales tax is charged every time a vehicle is bought or
sold regardless of sales tax paid by a previous buyer.
Selling a car can be done through a couple of different
routes. If you are selling your vehicle to a car dealer, just
as in purchasing from one, all of the taxes and title fees
will be taken care of by the dealer. If you are selling to
another individual, then you would agree to a purchase price
and transfer the vehicle into that individual’s name at the
local county title office. Taxes would be the responsibility
of the purchaser and are based on the agreed upon purchase
price. It may be wise to create a bill of sale, or a purchase
agreement that you and the purchaser can each keep for your
records.
|
Sometimes an individual may not pay for a vehicle with
money, but rather trade for another vehicle, other
personal property, or services. Regardless of the
method of payment, these are still considered taxable
transactions.
Example 1:
Joe trades his car for another car of his friend, Matt.
When Joe has the title transferred into his name, he
will pay sales tax on the value of the car he gave Matt
in trade. Likewise, when Matt transfers Joe’s old car
into his name, he will pay sales tax on the value of
the car he gave Joe.
Example 2:
Betty needs to have a new porch put on her house. She
offers her car that she no longer uses to her neighbor,
Sam in trade for him to build a new porch for her.
Since Sam used to work in construction he accepts the
offer and builds her a porch in exchange for the car.
When Sam has the title transferred into his name, he
would pay sales tax on the value of the porch he built
for the trade.
Example 3:
Jane is going away to college and needs a laptop. Her
younger brother, Colin just got his driver’s license
and needs a car. Since Jane lives on campus she won’t
need her car anymore, so she makes him a deal. She
trades her car for his laptop. When he has the title
transferred into his name, Colin will pay sales tax on
the value of the laptop.
|