[TrendyBull]

Im flying down to LA next week to buy a car from a private party. Im getting a loan from my credit union up here and taking down a check for $21,000 to purchase the car. Now the seller has the title to the car (no lien on it), can he still gift me the car/title even though i will have a lien on the car? Id like to save on the tax end of it obviously... or will it be hard or impossible to accomplish that without me paying cash for it??

My other option is that i can write a "convenience check" from my credit card. the terms are 3% of the total amount and 0% for 8 months (my plan is to have it completely paid off in the next 6 months). so if i did this "cash deal" with the seller, would it be eisier to have the title gifted and avoid the taxes when i get back here to washington to register it?

Anyone who KNOWS or has encountered this situation is encouraged to chime up, your expertise is appreciated. Thanks

[EZ_TUR90]

PM Sent

[anthoj]

I'm interested in knowing this as well. Potentially getting a car from IN to WA. In my case, it would truly be a gift since no money would be exchanged at all, at least not within the USA.

[TrendyBull]

Finding out that YOU as the owner have to take posession of the title, the the bank or credit union (lien holder) cant take the title and let you bypass paying the taxes on it. Now a cash transaction between people for the title allows this (just as long as the person you are purchasing the vehicle from can prove that they paid taxes on the car when they bought it), you can register and title the car at the dept of licensing without getting questioned and charged tax.

[BMW003E]

I'm not sure it's that easy. Sales tax will be collected by the DOL every time the vehicle changes ownership (except between family). The state wants its money, so either you provide a receipt of the transaction for them to calculate sales tax OR they will figure it out based on their assessed value of the car (which may not work in your favor). Every time I've sold cars privately, the buyers had to pay the sales tax at the DOL. The only time that I know that taxes aren't collected is when the title is being transferred to a family member (ie, gifted).

[anthoj]

Originally Posted by BMW003E

I'm not sure it's that easy. Sales tax will be collected by the DOL every time the vehicle changes ownership (except between family). The state wants its money, so either you provide a receipt of the transaction for them to calculate sales tax OR they will figure it out based on their assessed value of the car (which may not work in your favor). Every time I've sold cars privately, the buyers had to pay the sales tax at the DOL. The only time that I know that taxes aren't collected is when the title is being transferred to a family member (ie, gifted).

So what you are saying is that I cannot give a gift of car to anyone but members of my family even though I fully own it? How does that make sense? What if it were inheritance? Do I have to pay tax if a hypothetical rich friend decides to give me his luxury cars as inheritance on his deathbed?

Also if I donate my car to goodwill let's say, they have to pay tax?

Can I just set the value to $1, aka 10 cents tax? Why can't I sell my car for $1 if I want to?

[TrendyBull]

what about a trade of a comparable valued car that you owned, but was not registered in your name?...

[BMW003E]

That's been my experience with the DOL. When we transferred my wife's car into my name (it was registered under her maiden name) so I could refinance it, we had to bring our marriage certificate to the DOL to prove we're related to avoid paying taxes.

As for reporting a lower value to the DOL, they're smart enough to see through that. I've seen it numerous times where friends have tried that trick. Unless the car is being transferred between relatives, the DOL doesn't accept it. Instead, the DOL calculates the value of the car then the tax.

I'm not sure how charities deal with donations. But, it is a tax write-up for the donor.

If you don't believe me, give the DOL a call and ask them. Remember, there are only two certainties in life - death and taxes.

[BMW003E]

Originally Posted by TrendyBull

what about a trade of a comparable valued car that you owned, but was not registered in your name?...

This scenario is a little different than buying someone else's car and having to register it under your name. If you're trading one car you paid for for another of equal or lesser value, you won't have to pay taxes since the state already got their money on the original purchase. The new buyer will end up having to pay tax on the difference in values. Whenever you trade in a car, you get a tax credit towards the newer car.

[anthoj]

Alright, I was really curious so I went to WA DOL site. Here's what I found (see last FAQ):


Use tax

Use tax is a tax on items used in Washington when sales tax hasn’t been paid. When you purchase a vehicle or vessel from a private party, you’re required by law to pay use tax when the vehicle or vessel title is transferred.

Use tax rates

Use tax is calculated at the same rate as the sales tax at the purchaser’s address. In addition to the general use tax rate, vehicles are charged an additional 0.3% motor vehicle sales/use tax.

Frequently asked questions

What’s the difference between sales tax and use tax?

Unlike sales tax, use tax is based on the average fair market value of the vehicle or vessel rather than the purchase price.

Why use average fair market value and not actual sale price?

Fair market value reflects the value of a vehicle according to the retail selling price at the place of use, compared to similar vehicles of like quality or character. The actual selling price may or may not be the same as the average fair market value in cases when an individual sells a used vehicle or vessel.

How is the fair market value determined?

We get average fair market values from Price Digests, an industry standard source.

What if a vehicle or vessel is worth less than the average fair market value?

To establish that a vehicle or vessel is worth less than the average fair market value, the buyer may provide:

• An estimate of repairs prepared by a registered mechanic.
• An appraisal prepared by a registered dealer.
• Documentation from another value source, such as National Auto Dealers Association (NADA) or Kelley Blue Book that cites a lower average fair market value for the vehicle or vessel. The purchase price will be accepted if it is within $2,000 of the value cited by the alternate source. Either photocopies of printed materials or a printout from the Internet are acceptable.
• A completed Department of Revenue Declaration of Buyer and Seller Regarding Value of Use Vehicle Sold form stating the selling price and condition of the vehicle. Both the buyer and the seller must sign the form. These are subject to review.

Does the Department of Revenue use the same valuing system?

Yes, the Department of Revenue uses exactly the same values as the Department of Licensing. Since 1999, both agencies use an automated valuing system that receives data from Price Digests.

What if I receive a vehicle or vessel as a gift?

• If you can provide proof that the person who gave you the vehicle or vessel paid sales or use tax on the vehicle or vessel, no use tax is due.
• If the person who gave you the gift owned the vehicle for 7 years or more and is from a state or province with sales tax, it will be assumed that tax was paid and no proof is needed.
• If the vehicle or vessel is coming from a state or province without sales or use tax, use tax is due.

Basically, as long as you an provide proof that the previous owner paid tax (even from a different state, my understanding) you don't have to pay tax, unless of course he/she owned it for more than 7 years, which is unlikely for our cars.

[BMW003E]

That's really interesting. If I read this right, since I paid sales tax on the vehicles I later sold, the new owners shouldn't have paid sales/use tax. If true, the DOL screwed them.

[anthoj]

Originally Posted by BMW003E

That's really interesting. If I read this right, since I paid sales tax on the vehicles I later sold, the new owners shouldn't have paid sales/use tax. If true, the DOL screwed them.

Yea I agree with you. Based the site I referenced, only every other transaction requires paying use tax, except for the first guy who bought the car from the dealership (assuming private party sales of course).

[yogi]

you pay sales tax, if you trade in your car u can get a tax credit based on the trade in price. as for you buying the car in cali for cash, you will have to pay washington sales tax based on a legitimate sales price, or current market value. gifting wont work, they will see through it and nail your ass

[anthoj]

Originally Posted by yogi

you pay sales tax, if you trade in your car u can get a tax credit based on the trade in price. as for you buying the car in cali for cash, you will have to pay washington sales tax based on a legitimate sales price, or current market value. gifting wont work, they will see through it and nail your ass

Oh really? And you know this from where? You did see what we just talked about from WA DOL site right?

[TrendyBull]

I got a hold of a friend of mine that buys a lot of cars and "trades" them too. The dol employee will more than likely question you, but you can just tell them it was a certain vehicle of comparable value. When they look in the system to see what is registered to you, he has told them that the vehicle that was trade was owned by him but registered to "uncle joe". its work in his favor a couple times before, but he has also been questioned about it pretty good.

[yogi]

Originally Posted by anthoj

Oh really? And you know this from where? You did see what we just talked about from WA DOL site right?

easy buddy. i didn't read anything about the DOL site, just speaking to my experience. between my family and i, we are buying and selling several cars a year.

also, washington is nazi-ish about their taxes.