Sales Tax on Title Transfer.

[glanga]

I've heard a ton of rumors about how the state will charge you for sales tax on a car.

Firstly I have heard that if you buy a car for say....$20,000 through a private sale, and put that you paid $200 for it on the title transfer, that the DMV will send all of this information to the state tax collection agency. That this year/make/model car with this many miles is not worth $200 but actually $20,000.

Also in NJ you can put "Gift" in the sales tax box to indicate you got the car for free and therefore don't have to pay any sales tax. This is a fact, but does anyone know if there are certain terms and/or ramifications from doing this? Why wouldn't everyone just do this then?

A lot of the info is here, I just didn't know if this was to good to be true.
http://www.dmv.org/nj-new-jersey/title-transfers.php

 

[glanga]

Or actually, would I be able to put that I really did pay like $200 for it and say that I gave him my car + $200. So technically I only paid $200 for it and traded him my car. Same for him, would he not have to pay any tax on it?

I know at a dealership when you do a trade-in, if you trade in a $13,000 car for a $20,000 you only pay taxes on that $7000. Does this work the same through private sales?

 

[ketyokeinnor]

I think it depends on the state. I know some states do taxes it by book value (if you buy some rusted out, junker pickup for $200 and the book value is $1500, you pay taxes on $1500) . In pa its whatever stated purchase price upon transfer. (your buying a 20,000 car for 200 would work i think, but i dunno anyone who's tried that much of a difference. The guy that sold me my conti for $2500 said on the transfer form it was $500, and then we did a signed receipt thing if i ever need to prove i payed $2500)

IIRC on the PA title form there was a provision for trades(including private party) (like a breakdown of how the car was paid for [amount of cash, trade value, amount financed, etc.]), and I don't think you get taxed on the trade portion.

 

[Sal329]

I said I got my car for $200. I had to fill out a form with my info, sellers info and why I got it cheap. I put the car was in need of major repair. Just got out of the DMV (had car 5 months just now registered it) total for new tags and tax was $54.

 

[glanga]

That's what I was going to do, say I traded him my car and I'll only pay tax on the difference. If you read the website I put in my first post at the very bottom there is a provision for if you received the car as a gift. It simply says put gift in the sales tax box and you are exempt from sales tax. I didn't know if there was a catch to this.