Vehicle Sales Tax Questions

gasman10

I've searched this forum and done the google thing and can't get a clear answer.

I live in Florida. For simplicity's sake, let's use these numbers:

I own my car outright and it's trade in value is $25k. I intend to lease a car. MSRP is $35k. It is depreciated to $25k at maturity. Monthly payments are $400. I am paying $2500 to get the car out the door.

1) Does my trade in eliminate all tax on the car ($10k depreciation < $25k trade in value)?
2) Does my trade in count only against the tax on the $2500?

3) If the answer to #2 is correct, does it also count against any payments in this tax year?

Thanks. I can't seem to find a straight answer, and my dealer has little incentive to be honest.

fordfool

> I own my car outright and its trade in value is $25k. I intend to lease a car. MSRP is $35k. It is depreciated to $25k at maturity. Monthly payments are $400. I am paying $2500 to get the car out the door.

You are paying for $10K depreciation on the leased car with your $25K trade plus $2500 cash. So if the dealer pays you $400 per month for four years, that seems about right. I'd hold out for 50 months though.

Seriously though, these numbers don't add up. :confuse:

gasman10

Sorry that my message confused you. Since my trade in is $25k and my down payment is $2500, I will get a check for $22500.

In Florida, you pay sales tax on the depreciation and not on the MSRP. The issue is this: if I were buying a car new for $35k and was trading in a car for $25k, then I'd only pay sales tax on $10k. If I am leasing a car in Florida, does my trade in count against : 1) the whole depreciation cost of $10k (in my example), 2) Only the down payment, or 3) against any sales tax paid in first year?

Other than that, the numbers are irrelevant, but they're not too far off from reality. I'm just rounding things to get a better explanation than what limited information I can find by searching this group and what I can find on the FL DMV and the myflorida websites.

joel0622

I don't have an answer to your question but if you have a $25K free and clear trade why don't you prepay the lease and save a few bucks on the money factor?

stickguy

But in NJ, you do not get the sales tax credit if you lease the new car. I know, I tried!

gasman10

Because the manufacturers are having a hard time moving cars and I can get a good deal on a lease money factor rate and I'm paying far greater interest in other debts. Ie its good for my personal financial situation and cash flow to pay stuff off with the equity in my current car

howardtrumble

I have a customer from Toronto wanting a vehicle of ours in Ohio and he has been told by dealers in other states (NY,PA,MD) they will not charge him local sales tax. My finance dept. says we have to charge him our county sales tax and he must register the vehicle in the U.S. Does anyone know if this is accurate?

volvomax

Taxes vary from state to state.
Your finance dept should know the laws for Ohio.

alabang

I leave in New York, I bought a car in a dealer in New Jersey, because my license
is New York and the car is registered in New York it is obvious I paid New York taxes.

Now, I also have a 2nd house in New Jersey, I get a letter from New Jersey and they claim that the taxes should have been paid in New Jersey. I called them up and explain the situation and I was told that because I have a presence in New Jersey, then I should pay New jersey taxes even if my primary residence is in New York, even if the car is registered in New york. I said that it was unfair for me to pay taxes twice and the person I was talking to said that I will fill up a form so I can get a refund on the taxes I paid in New York.

So I called New york and asked them that question and I was told that there was no way that they would refund the taxes because i live in NY and my license is NY.

Who is correct? what should I do?

tidester

Send NJ a copy of your receipt for the taxes you paid along with a photo of your NY license plates, vehicle registration and driver's license - then let NY and NJ battle it out.

-Tom aka Tidester
edmunds.com

alabang

Hello Tidester, thanks for the advise. I will do as you suggest, however, I was just thinking, what's to stop NJ from initiating collection procedures, asses additional penalties and interest as they have mentioned in the letter.

What should I do to protect myself?

tidester

I think you are protecting yourself if you provide NJ with proof that you've already paid tax (in NY) and proof that you are a resident of NY. Just be polite about it and don't give any mindless bureaucrat an excuse to go berserk.

tidester, host
SUVs and Smart Shopper

delta737h

Here's an unusual question...

I'm interested in knowing how each of the 50 states compute sales tax on consumer retail leases. I know how some states do it such as Ohio, Illinois, NY, NJ, North Carolina, and Texas. I found out by going to each state's Department of Revenue website and following up with phone calls. I suppose I could do the same for the remaining states. However, there are a few problems with this approach...

(1) It's never certain whether or not the documentation posted is current and, therefore, may or may not be valid. Consequently, the best way to obtain current information is to call these governing agencies directly.

(2) When you do call, you had better pray that the person at the other end of the line knows what they're talking about and is providing factual information.

Another way to do this is to FAX/email hypothetical lease proposals to a few car dealerships from each state and ask them to FAX or email their lease worksheets. Lease worksheets speak volumes. I certainly wouldn't tell them that this is hypothetical which is down right dishonest. I don't think dealers would be willing to assist me if they knew that my only purpose was to see how sales tax was being calculated and rightly so.

I'm reasonably sure that the only ones that would have this information are the finance captives and, perhaps, a few banks licensed to lease finance in all 50 states (none that I know of). All the fund providers that do business in each of the 50 states know exactly how sales tax in each state is calculated but they're not about to share that with me anytime soon.

Is anyone aware of another source that might be willing to share this information? I would certainly be willing to pay for this information. Would Edmunds have this information??? NADA??? NVLA???

finallyanewcar

Hi there,

I am currently a student in GA. I will graduate in a few weeks and then be going to VA before I start a job later this summer in SC. When I get to VA I am buying a new car. Should I register the car there and pay sales tax for VA since it will be a few months before I move to SC? Or should I try to register the car in SC even though I don't have an address there yet? Thanks for any advice you can give.

volvomax

Given that you don't have an address in SC, I don't see how you could register the car there. I suppose you could geta PO box or something.
It will also depend on the tax relationship between VA and SC.
You may end up paying tax in VA no matter what.

tidester

Either way, you will get a bill from Virginia when you move the car to South Carolina. It's called a "personal property tax" and is levied on property that you remove from the state.

tidester, host
SUVs and Smart Shopper

volvomax

Either way, you will get a bill from Virginia when you move the car to South Carolina. It's called a "personal property tax" and is levied on property that you remove from the state.

VA still has that?
Sheesh!

british_rover

Yup and they are still trying to hunt me down on a car that I don't even own anymore for property tax.

I was living in Richmond City at the time and had paid all my property tax for the City but spent all of two months in Chesterfield County at a relatives house waiting for a job to open up in Connecticut. I sold the car not long after moving to CT and now over two years later VA is still trying to hunt me down for my six weeks of living in Chesterfield County.

wlbrown9

"now over two years later VA is still trying to hunt me down for my six weeks of living in Chesterfield County. "

What is the statute of limitations when you can tell them they are SOL?

volvomax

Nice!

andrea17

A friend is selling me his car, he just bought out his the lease and he paid the taxes (the car is only 6 months old). The dealership company gave him the title but he hasnt registered the car yet. So in the title his name doesnt show up, I'm wondering if I have to pay taxes since my name is the only name that will show up on the title? does anybody know.

Thanks,

Andrea

cccompson

Well, the key issue is the state of the present title. If the seller assigned it without listing your friend's name as the buyer, then you could effectively step into his shoes.

However (as seems far more likely), if his name is listed as the transferee/assignee on the title, he will need to get a new title to transfer owership to you. You would then pay tax on the deal.

andrea17

He bought the lease (ford) 3 weeks ago and he never re-titled the car to himself, so his name is no where on the Title, so basically the title is transfered from "ford coorporation" to me. Is this right? this means I have to pay no taxes I guess? Thanks for your help.

kyfdx

It doesn't matter if he paid the tax or not... Since he doesn't have the title in his name, I'd guess he didn't...

Either way, when you go to register the car in your name, you'll have to pay sales tax.

I'd be very surprised if it turns out differently..

regards,
kyfdx

cccompson

I think you're right and my earlier reply was off base because the tax will have to be paid when the new owner goes in to get the new title.

joel0622

Take your check book with ya.

josephd05

I have another year left on my lease, and a friend of mine wants to buy out the balance, not take over lease. Now is there a way to do this and avoid double taxation? The lease is through Toyota Finance, no early termination penalties exist. I heard I can do this through a car dealership, they would charge somewhere around 100.00 administration fee. I was thinking of asking the dealership I will be purchasing my next car from (Acura). My concern is, by asking them to do this, it affects my leverage/barganing power. Thoughts?

tidester

Now is there a way to do this and avoid double taxation?

I'm not sure I see where double taxation enters the picture. Presumably, you have only paid taxes on your lease payments and your friend would be paying tax on the present value of the vehicle. You won't be taxed for returning the vehicle to Toyota but a sales tax applies to Toyota's customer. Those are two very different things.

tidester, host
SUVs and Smart Shopper

josephd05

Well, the lease has a payoff amount, I'm pretty sure I am the only private party that can pay off the lease, and at that point I would have to pay sales tax, then trun around, sell the vehicle to my friend and HE would have to pay salex tax again. Does this sound right to you?

finallyanewcar

Thanks for your replies. I actually do have an address in SC now, but I cannot move in until July. Does GA have this "personal property tax"? Even if I can claim residence in SC?

volvomax

Does NJ have a sales tax on private party transactions?

What you could do is see if Toyota would let your friend do they buyout instad of you.

dwynne

In most states title can't pass from your lease bank to a 3rd party, only to you or a licensed auto dealer. If it passes to you then sales tax is due and would be due again when you friend purchased it from you. In CA there is a period in which you can re-sell the car and get your taxes back, but that may be the only state that has that.

You can go through a car dealership doing what they used to call a "buy and bye". You bring your buyer in and the dealer buys the car and sells it to your buyer for a fee. Last time I asked a dealer to do this they quoted me nearly $1,000 to handle it. Here they get charge gross receipts tax on every transaction and other fees for stuff that moves through the dealership. Then they have to worry about liability - if the car blows up on paper THEY sold it and not you. If you could find a dealer that would do it for $100 I would be surprised.

Dennis

josephd05

I called a local toyota dealer, they quoted me 550.00. Does this sound correct?

tidester

Does this sound right to you?

Yes, I missed that part in your original post.

tidester, host
SUVs and Smart Shopper

qbrozen

well, its not so much a matter of being correct as being fair.
As dwynne said, the dealer is taking on liability and responsibility to do this transaction, so personally I think $500 is fair.

dwynne

Like tidester said, the dealer needs to make some money to even fool with it and depending on local or state laws may have to pay some taxes on the deal and / or have some liability for handling it. So the choices are don't do the deal, pay the double tax, or pay $550, then I guess $550 is not bad.

A dealer that I have worked with many times in the past, leased from them, etc charges me $300 to do this - but this is "my" price. It includes sales contracts, temp tag (which are cheap here), etc.

So $550 is not that bad, you could try other dealers to find a lower price but it would not be by much I would not think.

Dennis

andrea17

I took my car title and I didn't have to pay any taxes. As i said before his name was nowhere on the title, my name only showed up, so no taxes.

Thanks,

joel0622

Good for you. Its always nice to see some one have a happy ending

dfresh713

I live in Massachussetts, however I do have a very small apartment in New Jersey for when i work down there which about 60-90 days during the coarse of a year. I bought a car in New Jersey.. paid all my sales tax in Massachussetts, registration, insurance.. everything. Now the state of New Jersey says I owe them $1,700 for sales tax too. I do not want to be double taxed. Is there a way to get abide with this??

dwynne

How did NJ find out you had an apartment there? If you purchased the car using your MA ID and address then how would they know? Since you do have a residence in NJ and purchased the car in NJ you may just have to pay the tax. If you had purchased the car in another state and titled and paid tax in MA then maybe you could get by without the NJ tax.

They have rules in place for handling the taxes of those of move from one state to the other, but I would doubt much though is given to folks with residences in more than one state.

About the best you can hope for is show NJ what you paid in taxes to MA and hope they will discount the taxes paid against your NJ taxes and let you pay the difference.

Dennis

alabang

This happened to me, as a matter of fact i posted a similar topic here in edmunds.
In my case, I have a house here in NJ but I live in NY. I bought a car in NJ but registered it in NY, paid the NY taxes. I get a letter from NJ saying i need to pay
taxes. apparently, NJ has a law where any one who has a presence here in NJ must pay NJ sales tax. If you own a house in NJ, you pay real estate taxes the have you on record and they do a comparison. If you do not pay, they will start collection proceedings and the interest/fine will start to pile up. I paid for it and now i will send a request to NY to get some sort of credit back. Otherwise, I think I can add this in my income tax as deduction. Moral of the story, buy a car in the state where you will register it or a state wgere you have no precense at all.

macno0b

I have question regarding the Tax Rate in Chicago Illinois:

taxandtags.com states 8.25%

the dealer told me the tax rate was 9.25%,

Edmunds says 8.75%, huh? Which one should I use?

volvomax

The dealer.
They are the ones that have to collect the money for the state.

dwynne

Like user volvomax says, the dealer has the right number - as long as that is what is listed as sales tax on your paperwork.

BTW, you need to hurry up and buy soon - come November the Chicago sales tax will rise to 10.25%.

Dennis

foodporncess

I live in Texas and am trading in my car. I am being offered 20,000 for my trade. The car I want to purchase is being offered at 16,500. Tax in Texas is 6.25%. I was told I'd be given a tax credit of 1250.

Where will I see my tax credit? Is this an amount of money I will get back from the State? From the dealer? Is it just rolled into my trade-in value? I just don't get it and I can't find any information about this online. I don't want to ask the dealer because I don't want them to know I don't understand this and figure out a way to get me for this 1250.

cccompson

All this just means that you won't pay any sales tax when you buy the car. The value of your trade shows up as a credit on the sales tax line of the contract. You won't get anything back from the state.

joel0622

Dont know if this is the case in this particular instance but her in TN you pay 7% sales tax, plus 2.25% on the first $1600 and 2.75% on the second $1600 as a local tax and then you pay .003% business tax. When people call me and ask me the tax rate I usually just tell them that 8.25% will get them real close. It is easier then trying to explain all 3 taxes over the phone.

mds2400

I have a Jeep Grand Cherokee and live in CO. My father-in-law has a Ford Expedition and lives in MN. We are trading so that Ford will be ours and my father-in-law plans to trade our Jeep in for a new car. Both cars are being financed. Is there a way to avoid paying sales tax on all three transactions? For example, can he sell me the Ford for $0? Or, can we simply just transfer ownership? Thanks.

kyfdx

On the Grand Cherokee? Just give him a power of attorney and the title, and let him give it to the dealership... They should take care of paying it off and crediting him with the balance against his new car.. In other words, the car's ownership should never pass to him.. Worst case.. they cut a check to you for the difference between trade-in and payoff, and you sign it over to him.. He may lose out on any sales tax credit on the trade-in (assuming that applies in MN).
(disclaimer: If any of this is illegal, don't do it).

On the Expedition? He can probably give it to his daughter (your wife) tax-free.. and get her a Minnesota title (it works that way in my state). Whether she can take that Minnesota title and re-register it in Colorado without paying sales tax is another matter... You'd have to ask your local DMV..

Giving cars to family members can usually be done without incurring sales tax.. Selling them usually is a taxable event, no matter the relationship.. That's something to keep in mind..

regards,
kyfdx
(visiting host, and not a tax expert)

samiam10

I'm an Oregon resident (no sales tax) who wants to buy a new car in Arizona (sales tax) during a visit next month.

The AZ dealer I talked to suggested that I pay the tax and then ask OR for a refund. That seems a difficult approach.

Is it possible to purchase a new AZ car with no sales tax, drive immediately to OR, and then title/register the car in that state?

Thanks,