....is that when a dealer takes a car "in trade", they are in effect "buying" that car from the customer for a predetermined price. Thus, sales tax would be due to the state for that transaction -- the buying party (the dealer, in this case) is responsible for those taxes.
When the dealer then "sells" that car to another "customer", would not the "sales contract" have a line item for sales tax, which the new "buyer" is responsible for (or, alternatively, rolls into a loan)? Either way, the "buyer" is responsible for those taxes.
What is being described is this ... the customer who "sells" their car to the dealer is asking that the dealer not "book" the sale officially, and instead, "sell" the car to a designated "buyer" for some fixed price (plus a small surcharge).
If I have this right, then the state misses out on sales tax twice -- once when the dealer "buys" the car, and again when they "sell" it to a new owner.
I completely understand the dealers' point on this ... as a business licensed by the state, if they are caught defrauding the state of sales tax due, the penalties could be quite severe.
except that the dealer doesn't pay taxes when the car is taken in, since they are a licensed retailer and holds it in inventory until it's sold.
Taxes then must be charged when it's sold. Essentially what happens is the wrong amount of taxes are charged (because the dealer knows the real story) and is liable. They're liable because they misrepresented the proper taxable amount - it's fraud.
If the original buyer or selling have a big mouth, too, that can spell destruction for the dealer.
It may be unethical, but its not illegal.. If the dealer buys the car and then sells it, and reports it as such, then they have complied. Whether they make money on it, or its all pre-arranged makes no difference.
One reason tax laws are set up that way in certain states, is only to benefit car dealers. Because if the government subsidizes your purchase of a new car, by lowering your tax bill, it gives them a further advantage over buying the car from a private individual. Say hello to your friendly neighborhood political lobbyist.
The tax law is set-up to encourage dealer trades over private party sales.... Thats why you receive a credit if trading, but nothing if you sell private party.
I'm not saying its in dealer's interest to do an in-and-out sale, but its not illegal, either.
it's been illegal in two states that I've worked in, and "grey" in another.
I guess it's just a matter of whether you're caught. I'd rather not do it so I don't have to worry - plenty of other things to worry about.
I can't really figure why someone, in most states, shouldn't be able to get a tax credit when selling a vehicle privately, provided you buy another one within a certain time frame. How else would you apply a credit?
you're speaking in broad generalizations. Most state's tax laws differ from one another in many ways. Many states don't allow the tax credit on a trade. Only some do.
Retailers don't pay sales tax on merch bought for resale (in most states, anyhow).
The new buyer pays sales tax, whether to the dealer (on an in-out) or to the DMV (when he registers the car after a private transaction).
If the dealer won't do the in-out, the dif between the trade-in and the new car prices becomes sales taxed (where it wouldn't be taxed if it were a straight trade, in most states).
Nothing illegal at all. Just because it's legal, however, doesn't mean the dealer will be interested or willing.
Looking back at these posts this originally started as using the dealer as not even a flow thru entity ( started with doing paperwork on a private party sale and then using the difference to reduce tax owed). It then evolved into an in and out which is close but not the same thing. Speaking strictly on the tax issue if dealers were doing a lot of in & outs it would tend to get attention from taxing authorities. As for posts 5976 & 5983 there are ways for the dealers to get hooked on this and/or come under closer scrutiny if certain things are done and/or not reported correctly. Now back to human behavior 101.... :-)
What do you mean "...all know how the transaction occured but it's not written down anywhere"? I was under the assumption that the paper trail exists for an in-out. If that's true, I still don't see the difference, liability wise to the dealer, between a transaction where he does an in-1hour-out and an in-1month-out kind of deal. Assume the vehicle has been looked over to the extent that any auction car has been before they get involved.
i think i got lost with all the ins-and-outs. i'd like to use an example so i get easier explanation. example: i have a car i want to sell for $10,000. i talk dealer into an in/out. i buy a $30,000 car and pay taxes on only $20,000. at 8% sales tax i just saved $800. the dealer owns the car now and sells it for $10,000. doesn't he have to add 8% sales tax? then the out price is really $10,800. seems to me the only guy that makes out is the original owner of the $10,000 car. the dealer is liable for for the warranty and the buyer pays $800 more than the owners asking price. be a lot easier to sell the car for $10,800 and make your best deal with the dealer... did i get this right or am i still confused?
right on the money - the only party that benefits is the original owner of the trade in, and he's absolved, by law, of any recourse for problems with the car.
The dealer is left holding the bag, because to be nice, they wouldn't run up a shop bill to make the car perfect - they're just doing a customer a favor, right?
Then you have to trust the customer not to hang you out to dry, as in "I didn't sell you the car, the dealer did"....
"the only guy that makes out is the original owner of the $10,000 car". Well the dealership sold a new car so they did okay (excluding the liability issue which I've got to believe is HUGE). It seems to me that whoever you hook into doing the purchase side of the in and out on the old vehicle in your example is the loser. What a way to treat a friend/relative.... :-)
The dealer buys the car at $10K (or a bit less to cover in-out costs, lets say $9.8K). You pay taxes on $20.2K, saving $784 in taxes. The new buyer pays $10K + $800 sales tax, just like he would in a private sale.
The dealer makes $200, you save $584, the used car buyer pays the same.
If the dealer wants $400: You pay taxes on $20.4K, saving $364; the dealer makes $400; the used car buyer pays the same.
It seems to me that it works real well for everybody, especially if the used car is still under warranty. Two satisfied customers and some extra bread. Voila: Be-backs & Greenbacks
Actually, the buyer of the "in and out trade" might only be paying $10,000 plus tax but he is probably getting the car cheaper than it would be if it was sitting on the lot at a dealership. Most likely saving $2,000 or more. So, the new car buyer and the trade buyer win in this situation. It's the dealer that could lose as driftracer stated.
Again, I had no idea that an "in and out" was a shady thing to do. To me, it just made sense to do an "in and out" to save on tax. That way, the new car buyer is not double taxed (he paid full tax on the trade when he bought it).
Mark
2010 Land Rover LR4, 2013 Honda CR-V, 2009 Bentley GTC, 1990 MB 500SL, 2001 MB S500, 2007 Lincoln TC, 1964 RR Silver Cloud III, 1995 MB E320 Cab., 2015 Prevost Liberty Coach
i never sold or bought a car privately... so my following thoughts may not be accurate. i never heard of any private seller charging tax on a sale. if i'm right, you're numbers are wrong. i was under the impression that you have to be a licensed business owner to collect tax.
A private seller does not collect tax, the buyer pays the tax when they go license their vehicle. When a dealer sells a vehicle & collects tax it's a wash as they remit the tax to the county or state. Trade-in credit varies greatly, in Kentucky there is no credit on a new vehicle , only on a used vehicle.
Forget the liability angle for a moment ... The reason is: the title has to be "Flipped" into the dealers name, then show on the contract that ABC was a trade-in with the model, Vin#, color, options, miles, etc .. when the trade get's handed back to the "real seller" (who isn't really trading the vehicle) then He has to pay taxes AGAIN on his own vehicle ...
The only time this is *Really* done, is when the dealer has made ALOT more money then what the taxes will be ... remember, in 5/11/22 months, whatever, when the state goes over the books, or it's shown as a loss the dealer will be paying the "real" taxes again ~~ unless, he can make a phone call to that particular buyer/seller and IF, he hasn't come down with that really horrible disease called AMNESIA, then, have him pay the monies ... by this time the deal can be 1/2/3 years old, and of course he won't be coughing up any money, because he can't remember, or Denies it ......... Get it ....!!
that's why any dealer with any brains and an IQ over 75, Won't do it .....!
For the states that don't have any tax savings on the difference, it means Zippo anyway ..... uuugh.
"What do you mean "...all know how the transaction occured but it's not written down anywhere"? I was under the assumption that the paper trail exists for an in-out."
Yes, there is a paper trail of the trade and sale. But, I'm sure there is nothing written down that says "ABC Motors hereby does an in and out for Trader Joe in order to save him sales tax and we're not liable for a warranty." Tax auditors love documents like that.
"If that's true, I still don't see the difference, liability wise to the dealer, between a transaction where he does an in-1hour-out and an in-1month-out kind of deal. Assume the vehicle has been looked over to the extent that any auction car has been before they get involved."
The liability is the same. But the potential loss for the dealer is greater on an in and out. My take on this is the requirement that the dealer has to provide a basic warranty. Here in MA, look at the warranty/lemon law sticker on the window of any used car. Every dealer use the same one. There are certain warranty periods that are offered based on mileage when sold. Whether it's an auction car or an in and out, they have to offer that warranty.
When selling a car through their normal course of business, they take on a financial risk they have more control of. An in an out for a couple of hundred bucks creates carries greater risk and less reward. If the normal sale blows a tranny, they might be able to cover the cost from the profit. On an in and out, there's no profit. Further, how much would it cost the dealer to inspect that in an out? I doubt that $200 would cover it.
in some states. Defrauding the state of taxes through a business transaction, I would think, would be illegal in any state that gives trade-in tax credit.
........ How many pairs of Rose colored glasses do you have .. ?
>>"Doesn't make it illegal"<<
It IS illegal .. ! what part of that word don't you understand.? the beginning, the middle or the end of it ... your doing a "pass through", your trying to Defraud the state of taxes, it's as illegal as hell in any State that collects taxes on the trade difference .. !
I may be dumb as a box of rocks, but I have read the past posts on this in and out thing and I am just not getting the part where it is illegal or defrauding the state out of tax money.
The inequality in the system lies in how the state treats the buyer with a trade in vs the buyer that sells privately. I think it was brought up that this is to encourage trade ins and was more than likely supported by the states dealership lobby groups.
Again, putting aside the liability issues, If the dealer gives a new car buyer 10K for a trade in and then sells the car to someone else in a day, a week, a month for 10K, how is the state defrauded out of tax money? The new car buyer paid tax on the difference and the used car buyer either paid tax to the dealership or when they register the car.
Yes the state would have made more tax money if the new car buyer had sold the used car privately, but I do not see where trading the car in and then the dealer selling to another buyer is illegal or fraudulent. It happens everyday at every dealership in the country.
I think the finger of blame needs to be pointed at the state tax rules in this case. Why is a trade in tax advantagous over a private sale?
i must be missing something. how does the state lose any tax revenue? if i sell privately, i pay full tax when i purchase a car. if i do an in/out, i save on the difference between the trade in and the purchase price... but the dealer re sells the trade in and collects the balance from the resale. i can't see anything illegal here. the same process is used when any buyer trades in his vehicle for a new one. if there's anything illegal, it's in the quick turn around without inspecting the trade in before resale.
In 1994, I traded a '91 Acura Legend in on a '94 Legend. They had to DT in a unit so I could have my color choice. They send me home in a used car from their lot. When I returned 36 hours later, I learned that they sold my car the day before. (Left lot at 7:00 PM, and it sold the next morning). I've always suspected that they gave what I belived to be a decent deal because they had a buyer for my trade.
The $64K question is how does an auditor know this transaction is not an In/Out?
Just allow the dealer to make their average mark-up on the car. I am sure on used cars this would be two, three, or four thousand dollars. Then there would be no question as to the legality of the transaction. And the dealer would be able to stand behind the state mandated warranty issue.
As to how the state looses money, it is so obvious.... normally they collect sales tax on the full price of the new car, and ALSO on the full selling price of the used car. (Plus they collected tax when the trade was initially purchased. Ain't taxes wonderful?)
the dealers that do these don't charge a dime - it's a "favor". Why would anyone shuffle their car through the dealer where A) the original owner gets a tax benefit and the buyer of his old car pays $2-4K more than if he bought it off the guy's driveway?
Ain't happening.
To be perfectly clear - if a dealer charged a fee to a consumer for helping the consumer defraud the state of taxes, I'm sure the attorney general could start stacking charges like building blocks.
You folks who still think this is legal and you should lobby your dealer to play this game should get a clue.
By helping you sell your car and defrauding the state (by allowing you to pay less taxes than you should, plus charging taxes on a car that really isn't in their inventory), they're wrong.
dealers and salespeople get pounded here daily about people in their business doing unethical and illegal things, lying to consumers and cheating them.
No less than 8 dealership/car business people have chimed in to say that this process is illegal and unethical, yet 2-3 people are giving them flak about it.
These car biz folks, me included, want to see the car business cleaned up of people who do unethical and illegal things.
I would think consumers would applaud dealership folks wanting to do things the right way. That is, I guess, unless it's a several hundred dollar tax benefit to the consumer...
Drift - Anybody who's been around here awhile can tell you that I've never sold cars professionally. No, I haven't done an in-out. I've always sold my trade with a want ad, once it has reached true 'beater' condition. As far as substantiation for opinion goes, it seems like you could offer some yourself and settle the difference of opinion.
As it stands, the truth is that some dealers do pass-through's (yourself included) and others don't, giving various reasons. Some of those reasons sound like hooey, to me. 'Tain't profitable (enough) seems the most reasonable, to me. There's liability seems reasonable but handleable, to me. It's illegal sounds like real hooey, IMO.
FWIW, I agree with you that the call about doing an in-out is entirely the dealer's. Me, I wouldn't even ask for the service unless the trade-in is worth a big chunk of change and, thus, a late model with low miles and, thus, still under warranty. If the dealer can't or won't handle the in-out, no prob. If he can and will, great; there's more money in the deal for everybody.
On this topic, all the people who are in the car business seem to be saying that doing an in/out transaction is not a smart decision.
On the other hand, all of the "experts" who are NOT in the business say that the dealerships should be more than willing to help customers (or are they customers?) dodge paying the sales tax on their transaction.
Umm, who should I believe?
On average, my business is audited by at least ten states each year. You get the auditors from Illinois (those b@#$%%^) done, and the folks from Ohio come in, then California, etc. In other words, as our controller likes to say, one rectal exam after another.
These guys are looking for money. They are looking for any slight deviations from state law so that they can assess additional tax. The Illinois guy spent three weeks here and assessed $85 in additional taxes plus penalties.
They will spot the "in/out" transaction fairly quickly. There are going to question as to whether it was truly an arm's length transaction. And when they realize it isn't, guess who will be assessed the taxes and penalties? The dealer.
I don't know much about the car business. But as a CPA, I have a pretty good idea of how state tax auditors think.
but this discussion of the "pass through" is really getting old. Can we move on to something else?
On legality or ethics: It was stated that the dealers would be crucified for making the arguement of "well, it is legal" even though its not ethical. Isn't the lying that goes on from both sides of the table unethical?
You have to go by the standard of legality. That's the only one people are made to adhere to.
Comments
When the dealer then "sells" that car to another "customer", would not the "sales contract" have a line item for sales tax, which the new "buyer" is responsible for (or, alternatively, rolls into a loan)? Either way, the "buyer" is responsible for those taxes.
What is being described is this ... the customer who "sells" their car to the dealer is asking that the dealer not "book" the sale officially, and instead, "sell" the car to a designated "buyer" for some fixed price (plus a small surcharge).
If I have this right, then the state misses out on sales tax twice -- once when the dealer "buys" the car, and again when they "sell" it to a new owner.
I completely understand the dealers' point on this ... as a business licensed by the state, if they are caught defrauding the state of sales tax due, the penalties could be quite severe.
Do I have this right?
Taxes then must be charged when it's sold. Essentially what happens is the wrong amount of taxes are charged (because the dealer knows the real story) and is liable. They're liable because they misrepresented the proper taxable amount - it's fraud.
If the original buyer or selling have a big mouth, too, that can spell destruction for the dealer.
Too much trust, too much risk, not any benefit.
One reason tax laws are set up that way in certain states, is only to benefit car dealers. Because if the government subsidizes your purchase of a new car, by lowering your tax bill, it gives them a further advantage over buying the car from a private individual. Say hello to your friendly neighborhood political lobbyist.
regards,
kyfdx
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Is that why 99% of the dealer principals and GMs I know won't allow an "in and out"?
If it were beneficial, they'd be smart about it and they'd all be doing it.
I'm not saying its in dealer's interest to do an in-and-out sale, but its not illegal, either.
regards,
kyfdx
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I guess it's just a matter of whether you're caught. I'd rather not do it so I don't have to worry - plenty of other things to worry about.
I can't really figure why someone, in most states, shouldn't be able to get a tax credit when selling a vehicle privately, provided you buy another one within a certain time frame. How else would you apply a credit?
regards,
kyfdx
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The new buyer pays sales tax, whether to the dealer (on an in-out) or to the DMV (when he registers the car after a private transaction).
If the dealer won't do the in-out, the dif between the trade-in and the new car prices becomes sales taxed (where it wouldn't be taxed if it were a straight trade, in most states).
Nothing illegal at all. Just because it's legal, however, doesn't mean the dealer will be interested or willing.
As for posts 5976 & 5983 there are ways for the dealers to get hooked on this and/or come under closer scrutiny if certain things are done and/or not reported correctly.
Now back to human behavior 101.... :-)
Duncan
example: i have a car i want to sell for $10,000. i talk dealer into an in/out. i buy a $30,000 car and pay taxes on only $20,000. at 8% sales tax i just saved $800. the dealer owns the car now and sells it for $10,000. doesn't he have to add 8% sales tax? then the out price is really $10,800.
seems to me the only guy that makes out is the original owner of the $10,000 car.
the dealer is liable for for the warranty and the buyer pays $800 more than the owners asking price.
be a lot easier to sell the car for $10,800 and make your best deal with the dealer...
did i get this right or am i still confused?
The dealer is left holding the bag, because to be nice, they wouldn't run up a shop bill to make the car perfect - they're just doing a customer a favor, right?
Then you have to trust the customer not to hang you out to dry, as in "I didn't sell you the car, the dealer did"....
Then the courts get to figure out who really sold the car!
The dealer buys the car at $10K (or a bit less to cover in-out costs, lets say $9.8K).
You pay taxes on $20.2K, saving $784 in taxes.
The new buyer pays $10K + $800 sales tax, just like he would in a private sale.
The dealer makes $200, you save $584, the used car buyer pays the same.
If the dealer wants $400: You pay taxes on $20.4K, saving $364; the dealer makes $400; the used car buyer pays the same.
It seems to me that it works real well for everybody, especially if the used car is still under warranty.
Two satisfied customers and some extra bread. Voila: Be-backs & Greenbacks
Again, I had no idea that an "in and out" was a shady thing to do. To me, it just made sense to do an "in and out" to save on tax. That way, the new car buyer is not double taxed (he paid full tax on the trade when he bought it).
Mark
i was under the impression that you have to be a licensed business owner to collect tax.
Forget the liability angle for a moment ... The reason is: the title has to be "Flipped" into the dealers name, then show on the contract that ABC was a trade-in with the model, Vin#, color, options, miles, etc .. when the trade get's handed back to the "real seller" (who isn't really trading the vehicle) then He has to pay taxes AGAIN on his own vehicle ...
The only time this is *Really* done, is when the dealer has made ALOT more money then what the taxes will be ... remember, in 5/11/22 months, whatever, when the state goes over the books, or it's shown as a loss the dealer will be paying the "real" taxes again ~~ unless, he can make a phone call to that particular buyer/seller and IF, he hasn't come down with that really horrible disease called AMNESIA, then, have him pay the monies ... by this time the deal can be 1/2/3 years old, and of course he won't be coughing up any money, because he can't remember, or Denies it ......... Get it ....!!
that's why any dealer with any brains and an IQ over 75, Won't do it .....!
For the states that don't have any tax savings on the difference, it means Zippo anyway ..... uuugh.
Your friend and mine ..
Terry ;-))
Yes, there is a paper trail of the trade and sale. But, I'm sure there is nothing written down that says "ABC Motors hereby does an in and out for Trader Joe in order to save him sales tax and we're not liable for a warranty." Tax auditors love documents like that.
"If that's true, I still don't see the difference, liability wise to the dealer, between a transaction where he does an in-1hour-out and an in-1month-out kind of deal. Assume the vehicle has been looked over to the extent that any auction car has been before they get involved."
The liability is the same. But the potential loss for the dealer is greater on an in and out. My take on this is the requirement that the dealer has to provide a basic warranty. Here in MA, look at the warranty/lemon law sticker on the window of any used car. Every dealer use the same one. There are certain warranty periods that are offered based on mileage when sold. Whether it's an auction car or an in and out, they have to offer that warranty.
When selling a car through their normal course of business, they take on a financial risk they have more control of. An in an out for a couple of hundred bucks creates carries greater risk and less reward. If the normal sale blows a tranny, they might be able to cover the cost from the profit. On an in and out, there's no profit. Further, how much would it cost the dealer to inspect that in an out? I doubt that $200 would cover it.
IMHO, it's a bad business decision.
Well, at least we got cleared up that it's not illegal.
(Unless you're a car dealer comparing it to the typical $2-3K profit on a used car sale.)
I'll send you cookies when they lock you up. (Don't worry, they ain't gonna lock you up. I'm kidding you.)
(The cookie promise is good as gold if there's law reading this and they come for you [which they won't].)
>>"Doesn't make it illegal"<<
It IS illegal .. ! what part of that word don't you understand.? the beginning, the middle or the end of it ... your doing a "pass through", your trying to Defraud the state of taxes, it's as illegal as hell in any State that collects taxes on the trade difference .. !
Terry.
The inequality in the system lies in how the state treats the buyer with a trade in vs the buyer that sells privately. I think it was brought up that this is to encourage trade ins and was more than likely supported by the states dealership lobby groups.
Again, putting aside the liability issues, If the dealer gives a new car buyer 10K for a trade in and then sells the car to someone else in a day, a week, a month for 10K, how is the state defrauded out of tax money? The new car buyer paid tax on the difference and the used car buyer either paid tax to the dealership or when they register the car.
Yes the state would have made more tax money if the new car buyer had sold the used car privately, but I do not see where trading the car in and then the dealer selling to another buyer is illegal or fraudulent. It happens everyday at every dealership in the country.
I think the finger of blame needs to be pointed at the state tax rules in this case. Why is a trade in tax advantagous over a private sale?
if i sell privately, i pay full tax when i purchase a car. if i do an in/out, i save on the difference between the trade in and the purchase price... but the dealer re sells the trade in and collects the balance from the resale.
i can't see anything illegal here. the same process is used when any buyer trades in his vehicle for a new one.
if there's anything illegal, it's in the quick turn around without inspecting the trade in before resale.
The $64K question is how does an auditor know this transaction is not an In/Out?
Jack
We even have people here who think it's legal to do these.
A lot of "experts" who aren't even in the business.
You're speaking with certainty on the legality of an in and out. How do you know it's legal? Have you done them?
As to how the state looses money, it is so obvious.... normally they collect sales tax on the full price of the new car, and ALSO on the full selling price of the used car. (Plus they collected tax when the trade was initially purchased. Ain't taxes wonderful?)
Ain't happening.
To be perfectly clear - if a dealer charged a fee to a consumer for helping the consumer defraud the state of taxes, I'm sure the attorney general could start stacking charges like building blocks.
You folks who still think this is legal and you should lobby your dealer to play this game should get a clue.
IF you have a buyer waiting for my used car and turn my trade-in around the next day, everything is fine.
Is this correct?
By helping you sell your car and defrauding the state (by allowing you to pay less taxes than you should, plus charging taxes on a car that really isn't in their inventory), they're wrong.
No less than 8 dealership/car business people have chimed in to say that this process is illegal and unethical, yet 2-3 people are giving them flak about it.
These car biz folks, me included, want to see the car business cleaned up of people who do unethical and illegal things.
I would think consumers would applaud dealership folks wanting to do things the right way. That is, I guess, unless it's a several hundred dollar tax benefit to the consumer...
The question is: Now who is doing things wrong?
Anybody who's been around here awhile can tell you that I've never sold cars professionally.
No, I haven't done an in-out. I've always sold my trade with a want ad, once it has reached true 'beater' condition.
As far as substantiation for opinion goes, it seems like you could offer some yourself and settle the difference of opinion.
As it stands,
the truth is that some dealers do pass-through's (yourself included) and others don't,
giving various reasons.
Some of those reasons sound like hooey, to me.
'Tain't profitable (enough) seems the most reasonable, to me.
There's liability seems reasonable but handleable, to me.
It's illegal sounds like real hooey, IMO.
FWIW, I agree with you that the call about doing an in-out is entirely the dealer's. Me, I wouldn't even ask for the service unless the trade-in is worth a big chunk of change and, thus, a late model with low miles and, thus, still under warranty. If the dealer can't or won't handle the in-out, no prob. If he can and will, great; there's more money in the deal for everybody.
No offense intended, truly.
The dealer has to misrepresent to the state what really happened.
Believe what you like - it's easier for me since I know the truth.
On the other hand, all of the "experts" who are NOT in the business say that the dealerships should be more than willing to help customers (or are they customers?) dodge paying the sales tax on their transaction.
Umm, who should I believe?
On average, my business is audited by at least ten states each year. You get the auditors from Illinois (those b@#$%%^) done, and the folks from Ohio come in, then California, etc. In other words, as our controller likes to say, one rectal exam after another.
These guys are looking for money. They are looking for any slight deviations from state law so that they can assess additional tax. The Illinois guy spent three weeks here and assessed $85 in additional taxes plus penalties.
They will spot the "in/out" transaction fairly quickly. There are going to question as to whether it was truly an arm's length transaction. And when they realize it isn't, guess who will be assessed the taxes and penalties? The dealer.
I don't know much about the car business. But as a CPA, I have a pretty good idea of how state tax auditors think.
For many of us, it's a career to be taken seriously.
On legality or ethics: It was stated that the dealers would be crucified for making the arguement of "well, it is legal" even though its not ethical. Isn't the lying that goes on from both sides of the table unethical?
You have to go by the standard of legality. That's the only one people are made to adhere to.