Taxes in a Private vs. Dealer Sale??

Nope -- you have to pay sales tax no matter where you buy the car from. And you don't pay to the person (or dealer) from whom you buy -- you pay directly to the DMV when you register the car (that's how they make sure to getcha when you buy private-party).

I think that's how it works in almost every state...

 

The one sales tax advantage with a dealer is on a trade in. I believe that you pay sales tax only on the difference between the trade-in value and the purchase price of the new car. This can partially offset the hit you take by trading in at wholesale instead of trying to sell the car on your own, hopefully at retail.

Also, you avoid paying the whole sales tax upfront if you lease the car. You still pay a sales tax, but on the monthly payment amount. Even though you are paying the sales tax on the payment (which is made up of depreciation plus interest costs), you can multiply the monthly sales tax amount by the number of payments to see how much you will pay in total.

John Ashburne

 

'course, down here in PA, they add an additional 3% tax to the lease. Their argument is they don't get full sales tax up front, so they collect a higher "lease tax" to make up the reveune shortfall.

Oh, and if you want to try and get the seller to lie about the price of the car, do it at your own risk. The state regularly audits these transactions, and will send you a bill if they think the sale price was too low. Actually, they make you produce a bill of sale for the claimed price, and sign an affidavit along with seller as to actual price.

 

wow , great thread! a question;
since the state gets the apllicable taxes, and there is now a record of this transaction taking place, how is the income tax liability figured on the car you sold?
do you only have to pay federal taxes if you made a ton of money on the car? it seems a deposit in the 40k range would raise a few eyebrows. sorry for the hijack , but the questions seemed germain to the topic! thanks, michael

 

Many years ago my boss at the time got in tax trouble after selling two cars at a profit. He bought 3 run down Lotus Europas as a package deal, fixed them up and then sold 2 of them. He got hit for tax on the money he received above HIS purchase price (per car, as declared when he bought the cars). He had all the receipts for what he put into the car(s) and argued that the tax should only be on profit above his "investment". WRONG, without a business license it's considered a "hobby" and any money above HIS original buying price was considered taxable income. To top it off, the tax investigation reveiled that the remaining car, the one he kept, had been stolen about 15 years before and it was confiscated by the police.

As a friend who is a city manager once told me, "the three most important things in government are revenue, revenue and revenue". Without it there are no "public service" careers.

 

wow! it seems the statue of limitations would have been up on the stolen car by then and he would have legal claim.... geeze. thanks for the answer!

 

In NYS, on dealer transactions, you pay sales tax on the sale price of the vehicle. However, if a trade is involved, you only pay sales tax on the difference amount.
With a private party transaction, you need motor vehicle forms( I think ST-170-?)signed by the seller regarding the sale price of the transaction. This is in addition to title, and standard bill of sale. At the time you register, an apply for the new title(if '72 or newer), the state will collect the sales tax. You will pay sales tax on the full purchase price.
Out of state purchases from a private party are handled similar to in state from private party.

The only sticky situation would be if you purchased a vehicle out of state, and paid an out of state sales tax. You will still pay NYS tax on full amount! You would have to screw around and try to get a refund from the tax department of state in which it was purchased. Very important on interstate transactions with dealers to have this straight,ie: delivery to out of state, etc.

As far as saving tax on dealer transaction vs a retail sale, it all depends on the numbers.

 

Wow, that's kind of scary. I've sold a few cars in the past where I've saved the buyer some sales tax. I'll be sure to be more cautious in the future.