Please, fellow hobbyists, pay your taxes!

[Matt Harwood]

I'm sure this is something many hobbyists do: you buy a car, you ask the seller to fudge the numbers a bit so you don't have to pay full price on your taxes when you go to the DMV to put it in your name. Or worse, maybe you just throw the title (still in the old owner's name) into a file, slap on some YOM plates, and forget about it, keeping it on an open title for years until you sell it to some other poor schulb who will have a nightmare of a time registering the car with a dead guy's 12-year-old signature on it. I know this goes on in the hobby all the time and most folks look at it as a victimless crime. Maybe it is, I don't know.

However, as a broker, it's VERY rare for me to close a deal where the buyer doesn't ask me to alter the numbers to his benefit. I try to let guys down easy when they ask, because there's just no way I'm risking my business to help them cheat on their taxes. Frankly, I'm more than a little tired of it, but I don't complain or give anyone attitude, I just explain that I could lose my license by doing such things and they usually understand. To date, I've only lost two deals because of it, and, honestly, I'm glad that I don't have to deal with those guys anymore. I've paid the taxes on all my personal cars even though I could technically register them in the dealership's name and skip taxes altogether. If you think I'm being unreasonable by asking you to do the same, well, I'd rather not sell you a car anyway.

Anyway, my little rant is not the point. I have just learned that the authorities are taking a closer look at collector car values and transactions, most likely because of the exploding popularity of auctions. Without being too specific, I've had a notable uptick in requests for appraisals for tax purposes and several buyers AND sellers who have used our services have asked for letters justifying the cars' values, why they were sold at a loss (or gain), and other similar things that have nothing to do with HOW the car was sold, but the AMOUNT that was paid. This suggests to me that collectors are getting caught doing title skips or under-reporting sales prices and having to explain their way out of some tricky situations. While I don't know the penalties, I bet they're a lot more expensive and troublesome to fix than simply paying your taxes in the first place. The 15-watt bulbs at the DMV may not know EXACTLY what a 1931 Pierce-Arrow is worth, but they know it's more than $500 and they're going to report it.

So just a friendly heads-up: PLEASE, PAY YOUR TAXES. Yes, I know it's a chunk of change that you'd rather not pay, but that's the cost of living in a civilized society where antique cars are a luxury, not a necessity (like, say, Cuba). If you can afford the car, you can afford the taxes. Or if you're savvy, create an LLC in Montana or get a dealer's license and exploit those loopholes until they're closed (the Montana loophole is already tenuous and on the IRS's radar). I'd sure hate to hear through the grapevine that someone that I knew from this message board had big trouble over something so obvious. You don't cheat on April 15 (do you?), don't cheat at title time, either. The alternative is so much worse.

/Yes something happened to someone I know that scared me today. If you're doing this stuff, you should be scared, too.

Edited March 8, 2013 by Matt Harwood
typo (see edit history)

[Guest bofusmosby]

I guess that I am one of the "rare" ones. I have never asked the seller of a car to funge of the selling price of their car, just to same some $'s on my taxes. I live my life with the belief that "what goes around, comes around".

[Bleach]

Here in the state of Washington it doesn't matter what you actually paid for your car. They have their own inflated guide to car values that has no connection to real world valuations. It doesn't matter if it fudged or not. They come up with their value of the car and you pay the tax on that value.

They do however accept challenges by showing the registration people a copy of a current value guide like NADA, Blue Book and even Old Cars Price Guide.

[Restorer32]

If you sell a car internationally and the buyer fudges the figures you eventually may get a knock on your door from a gun and badge carrying US Customs agent who is there at the request of the buyer's home country and who asks way more questions than you might be prepared to answer. Don't ask me how I know this.

[Guest Skyking]

So just a friendly heads-up: PLEASE, PAY YOUR TAXES.

In 2004 I bought my 2000 Dodge Ram pickup from a friend who sold it to me for $6500.00 When I went to the DMV they opened their books and told me I had to pay the tax on $9500.00, the amount the truck was worth. I argued with them that I had an honest bill of sale (which it was) for the amount of $6500.00. They told me that I was lucky and to consider myself as getting a good deal. As a resident of Rhode Island, I and 90% of the residents here feel we are over taxed in this state to begin with, so if I do or do not want to fudge numbers on an old car that's been taxed over and over and over for years, that's my business.

[1937hd45]

Is this Barrett-Jackson related?

[West Peterson]

Loop hole, I think, for cars priced under $14,000.... or even $28,000.

Since you are allowed to receive tax-free gifts of $14,000, would this work?:

John gives his new friend Ted $14,000 (or however much he wants as long as it's not over that amount).

Just by coincidence, Ted, the owner of a car valued at less than $14,000, decides to up and give it to his new friend John... even signs a letter stating so.

When John goes to DOT to get title transferred, he writes down $0 on the line "price paid" and says to the clerk that it was a gift. No tax. (This might not work in states like Washington, but maybe....)

Spouses can give just as much to the same person, which would double the amount.

Edited March 8, 2013 by Vertigo (see edit history)

[Bleach]

No this won't work in WA unless the transfer is to immediate family members.

[CarFreak]

And then there are the international Ebay buyers who ask a seller to falsify the selling price when sending a part overseas. Also not a good idea. Can't count how many times I've refused that request. One guy even left me bad feedback because I ignored his request and declared full selling price. In this instance Ebay removed the feedback because it violated their policies along with general principals.

[junkyardjeff]

I can see being somewhat honest if you are a business but the way I look at it is those old cars have been taxed many times so if the state does not get the whole amount it will not hurt them as they would probably waste the money,if the governments did not waste money and were honest to the people then I would have no problem paying the correct amount.

[DAVES89]

I sold a car to a guy who bought it for his daughter. He reported a lower purchase price to the DMV. Then his daughter promptly puts it in a ditch and totals it. He then tries to collect full purchase price on an under reported car from his insurance company. HIS insurance company checks with the DMV for purchase price. Then as he continues to press for his money they turn him in. I found this all out because his insurance company called me to verify what he paid. I did not want to get in trouble so I quoted the price he paid me.

Taught me never to under report to the DMV again...

[Curti]

I wonder how long the DMV keeps the purchase price record?

[stock_steve]

I believe in the power of "karma," and try not to upset it when, buying, selling, and registering old cars.

'Nuff said from me for now.

[plymouthcranbrook]

Illinois uses a flat rate for private sales. Any car less than $15000 is at one rate and a price window for others above that. You could still fudge on the price but the amount saved is relatively small. For my 1952 Plymouth and my 1980 Volare I paid $25 for each and was free and clear. This link is to the table of taxes if anyone wants to see it.

http://tax.illinois.gov/taxforms/Sales/VehicleUseTax/RUT-5.pdf

[ted sweet]

in ny its 8% or more depending on the counrt you live in.

[Bhigdog]

Don't forget to self report and pay state sales tax on any internet purchases made. Oh yeah, don't forget those flea market cash buys you scored. Self report and pay up.................Bob

[51dyno]

It actually started with dealers giving you a inflated price for your car on paper! Asking price $39900.00 sale price $35900.00 trade car value $6000.00 on paper dealer gave $10000.00 for the car now dealer lost $4000.00 ,so who is cheating the most ?????

[junkyardjeff]

I did have the DMV send me a letter asking what I sold a car for and told then I could not remember since it was a few years before I got the letter,somebody was honest down the line or the car went through a dealer but that was the only time in over 30 years of owning cars that the state has sent me anything.

[John_Maine]

I have been contacted in the past by the Maine DMV on cars I financed at the bank. They do follow up. On one in particular I did the loan as an unsecured personal loan, so I did not need any documentation on the vehicle and told them I was unable to confirm the purchase price. In some cases, we used to finance the purchase price with additional money for repairs, taxes or whatever so the loan amount did not reflect the purchase price.

[Luv2Wrench]

I can see being somewhat honest if you are a business but the way I look at it is those old cars have been taxed many times so if the state does not get the whole amount it will not hurt them as they would probably waste the money,if the governments did not waste money and were honest to the people then I would have no problem paying the correct amount.

I pay what is due because that is how I roll, but Iabsolutely feel like junkyardjeff says. I can't stand that government is so wasteful and it ends up me, buying a fifth car, that carries the load. Yes I am successful. Yes I have more. But no I shouldn't be offsetting the waste of our government. Sorry for the rant... back to talk of old cars.

[stock_steve]

Don't forget to self report and pay state sales tax on any internet purchases made. Oh yeah, don't forget those flea market cash buys you scored. Self report and pay up.................Bob

Let's not get carried away here, Bob!

Actually, Connecticut just announced an agreement with Amazon where they're going to collect sales taxes now, and I guess Amazon also agreed to build a distribution center in the state.

The politicians are like junkies--always looking for ways to get more, more, more, more...

[charlier]

Let's not get carried away here, Bob!

Actually, Connecticut just announced an agreement with Amazon where they're going to collect sales taxes now, and I guess Amazon also agreed to build a distribution center in the state.

The politicians are like junkies--always looking for ways to get more, more, more, more...

Funny you mention this Steve. Yesterday I was considering a purchase on amazon.com. It seems that the state of Pennsylvania has finally caught up with amazon regarding sales tax for on line purchases. For a few years now amazon has had a distribution warehouse near Allentown, PA. so it is no surprise that they are now charging sales tax on purchases. I do have to wonder if they base the tax on the address shipped or the address on the amazon account. Guess I will find out next time I buy a gift for my nephew and ship it to him out of state.

Given the budget crunch that most states face, I have no doubt that states will be taking a closer look at collecting what their laws allow on all forms of taxes relating to purchases (cars, on-line, etc). I am glad that the last car I purchased was just a few weeks before Pennsylvania started checking car value to assess sales tax against what a new owner "said" they paid without question. Hard to believe that was over 15+ years ago now.

[huptoy]

In OHIO, when you purchase any vehicle you are expected to pay the full sales tax each time it is sold.

The exception is when you purchase a vehicle and trade in your current vehicle.

Then the tax formula is calculated by subtracting the the value of the trade in from the purchase price and pay the tax on the difference. The buyer of the trade then pays the tax on his purchase price less any trade in deduction.

The effect is to encourage people to deal with a dealer to save sales tax.

(12,000 trade in on a 20,000 purchase gives 8,000 difference times the tax rate of 7% = (20,000-12,000)*7%=$560

So when you go to a dealer, you pay on the lower value. However, when you sell you car the buyer pays the full tax and you pay the full tax on your purchase. (20,000+12,000)*7% =$2,240.00.

[Guest billybird]

Well; I have read this interesting thread and refrained from comment. Mainly because if I said all I wanted to say, my post would be a kin to War and Peace. However, I have a sign in my garage that pretty well sums up my feelings. The sign says: "Don't steal, the government hates the competition".

[john2dameron]

I have only had DMV question me twice. When I married my wife had a car titlled in WV and I lived in VA. We went to get the car titled in VA and they were going to charge her several dollars for titleing the car in VA but they told us if she would give the car to me and let me title it in my name, it would be an untaxable gift so we did.A few years ago I was looking hard for a van and finally found one in Roanoke, VA at a decent price. It had a minor ding or two and they apparently sold the van to me well below book value because when I went to WV DMV to title it, they would not accept the price I told them I paid for it. They called the dealer in Roanoke and he confirmed the price I told them and they went ahead and processed it. I guess I got a better deal than I realized. Guess the dealer was anxious to move it.

[Guest Rob McDonald]

Interesting thread. I'm a little fuzzy on this, though. Is this tax you're talking about essentially a sales tax, payable by the purchaser when he goes to register the car with the state? Or, do you have to pay a state tax every year, effectively as your registration fee? In the amounts noted elsewhere, that would be really onerous.

I thought Canada was Ground Zero for tax collection but, oddly, we don't pay sales tax on privately purchased vehicles. You can bet the automotive sales industry is constantly lobbying for a level playing field on that but they haven't succeeded so far. When we buy a new or used car from a dealer, he collects the 5% federal Goods and Services Tax (GST) and the provincial sales tax (the percentage varies and there is none in Alberta) and forwards the amounts to the respective level of government. However, when we buy a car from a private individual, or even a non-licensed curber, the transaction is tax-free.

We do pay an annual flat fee of $75 to the province for vehicle registration. For antique vehicles (over 25 years of age), we pay a one-time registration fee of about $60 and the car remains on the provincial books for as long as we own it. The antique plate on my Buick is over 25 years old, so I guess it has become an antique in its own right, according to the province.

The one time I've had a Revenooer come knockin' (well, he phoned actually) was regarding a '56 Coronet I bought from an friend in Portland, OR. He'd neglected to hand over a bill of sale and I couldn't get a hold of him before I had to head back to Canada. So I just wrote up a receipt in his name and presented it at the border crossing, where I did the importation thing. All the information was accurate, just not the seller's signature.

Couple of weeks later, I got a call from my friend. He'd been visited at his home by an IRS agent, who asked him to confirm that it was his signature on a photocopy of my forged bill of sale. Dick put on his grandfather's best Okie accent and said, "No, sir, that's not my signature because I'm ashamed to say, I never learned to read or write." The agent smiled and let him get away with it. The car was only worth 800 bucks, for heaven's sake. I got another call shortly afterward from Her Majesty's Customs and Revenue Service, who asked me what really happened. I explained the whole caper, freely admitting my wrongdoing. The agent said Thank you, that will be all. And it was.

Edited March 11, 2013 by Rob McDonald (see edit history)

[Bhigdog]

In the USA it varies from state to state but typically sales tax is due on a car any time it changes hands. It's enforced when the title is registered in the buyers name. Some states are picky by insisting on using book value as the bench mark price, others not so much. In most states the sales tax is paid once upon each and every sale. Yearly registration fee is charged yearly to renew your plates but is not overly onerous.

Here in Pennsylvania the sales tax is 6%, the yearly registration varies by weight but is about $50 average. If the car is over 25 years old the antique plate fee is $75 once and done and there is no annual inspection required. ..............Bob

[Guest Rob McDonald]

BOB, title is the other big difference across the border. There is no vehicle title system in Canada. Presenting a bill of sale gets a car registered and thereafter, the registration stands as proof of ownership. There is a line on the registration card that allows you to identify a new owner but it's not essential to fill out when you sell a car. Again, the bill of sale - which can be written on the back of an envelope - is all the buyer needs to get the car registered in his own name.

[Guest UniqueCollector]

I had an issue with the DMV. I had bought a 1962 Buick Skylark in the worst shape ever but still driveable. Picked it up for $1100 and once I got to get the title switched it went fine. Tell they sent me a notice saying that the car value is more then what I bought it for. I then had to pull out pictures and anything else to show them that the car was in that state of the value. It was the first time I had to fight with them proving the price and state of the car. Minnesota is getting kinda odd

[Bhigdog]

BOB, title is the other big difference across the border. There is no vehicle title system in Canada. Presenting a bill of sale gets a car registered and thereafter, the registration stands as proof of ownership. There is a line on the registration card that allows you to identify a new owner but it's not essential to fill out when you sell a car. Again, the bill of sale - which can be written on the back of an envelope - is all the buyer needs to get the car registered in his own name.

It varies all over the map here between what different states do title wise. I bought my 55 in Conn. and they purge all titles from the system after 10 years. To title it in PA, which tracks titles forever, they accepted a notary signed bill of sale from the seller to me along with a tracing of the VIN number. A few other states are also purging older titles and a number of states no longer require yearly inspections................Bob

Edited March 13, 2013 by Bhigdog (see edit history)