Basic sales tax on trade in question


J

jaxgt

GT Owner
Mark IV Lifetime
Jul 12, 2006
2,817
Gents,

Quick question, as either I or the dealer I am speaking to is having a small brain lapse, and it may well be me.

Question is If I was hypothetically trading in used car of mine valued at $65k to a dealer for a new car selling at $25k:

Do I simply get the new car plus the $40k back from the dealer, without my paying any sales tax on the $25k car (my thought)?

Do I get difference of $65k - ($25k PLUS 6%sales tax on new vehicle) - Dealer's thought.

If it matters, I am Florida based, though dealer is out of state.

Thanks!
 
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Unless you register the car in a state other than FL, you must follow FL law and pay FL tax on purchase. I would think you pay the 6 percent tax on the new vehicle and pocket the rest.
 
In Arizona, Colorado and Nevada (places I've done it) the sales tax is based on the sales price (negotiated) of the new vehicle minus the value of the trade in. So if you buy a 50K car and have a 30K trade in, you owe sales tax on 20K.

However, yours is the inverse. The trade is worth more than the new one. Logic would say you owe none. I would call your state DMV or county assessor on Monday morning. Don't let the dealer collect it in case it is not due since getting it back may be problematic.

Edit: I re-read, and since your purchase is out of state it is particularly important that you check with the DMV of the state the transaction occurs in. When I lived in CO I bought my truck in NV I paid no sales tax to NV and paid the entire tax to NV. I had a discussion with a guy who bought a Ferrari in AZ and had it delivered to him because if he left with it he would have had to pay AZ sales tax (which because of local taxes would have been more than NV) but shipping resulted in no local (AZ) liability. If he says he has to collect it in the state of sale ask him to show you why because if he was wrong, you'll play with the devil to get it back if your local tax is less.
 
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In CA you would pay new car sales tax on the $25K car & the dealer would pay used car sales tax on the $65K car if he kept it. If the dealer sells it then the buyer would pay the used car sales tax. Every time a car is sold in CA there is sales tax. If the car is sold enough times the state could end up collecting more in taxes than the new car price! LOL - so unfair. This is where Bonehead Ed chimes in :)

Ed
 
I am going through that now. I am thinking you are paying nothing but can let you know how it turns out.
 
I traded my 67 Vette for a 2008 Porsche GT3 RS. Straight across, title for title. We (the dealer and myself) valued both cars the same so there was no sales tax here in TX when I went to register it. I traded out of state with a dealer in NY. Your case is not that much different other than that you're coming away with some cash. The potential taxable event may be cap gains (20% on collectibles) on the car you traded in to the dealer. Say you bought your car for 25k ( that's your basis in the car) and you get 65k on the trade in, you would show a 40k cap gain.
 
In Florida, no sales tax is due when the trade equals or exceeds the new car price. It doesn't matter that you are buying the car out-of-state since it will be registered in Florida.

See "Trade-in Allowances," page 8, second paragraph:

http://dor.myflorida.com/dor/taxes/sigs/motorvehicle_external.pdf
 
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Sinovac said:
In Florida, no sales tax is due when the trade equals or exceeds the new car price. It doesn't matter that you are buying the car out-of-state since it will be registered in Florida.

See "Trade-in Allowances," page 8, second paragraph:

http://dor.myflorida.com/dor/taxes/sigs/motorvehicle_external.pdf
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That would address the buying state. There is still the question of whether the selling state can collect tax on the outbound transaction.
 
twobjshelbys said:
That would address the buying state. There is still the question of whether the selling state can collect tax on the outbound transaction.
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I'm not aware of any state that imposes a sales tax on a vehicle which will be registered in another state. The imposition of the tax should not be confused with the collection of the tax on behalf of the registering state.
 
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I just bought a new 16 Explorer in Kansas. Had to sign form it would leave the state in 10 days.
 
You misread the form. It said you had to leave the state in 10 days.
 
Ed Sims said:
In CA you would pay new car sales tax on the $25K car & the dealer would pay used car sales tax on the $65K car if he kept it. If the dealer sells it then the buyer would pay the used car sales tax. Every time a car is sold in CA there is sales tax. If the car is sold enough times the state could end up collecting more in taxes than the new car price! LOL - so unfair. This is where Bonehead Ed chimes in :)

Ed
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I think the absurdity of that speaks for itself.
 
You are correct Paul. I had to leave the state WITH the car.
 
Sinovac said:
I'm not aware of any state that imposes a sales tax on a vehicle which will be registered in another state. The imposition of the tax should not be confused with the collection of the tax on behalf of the registering state.
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I assume jaxgt got this sorted out, but for future reference there ARE states that impose sales tax on vehicles purchased by nonresidents and titled and registered out of state. I just ran into this looking into the sales tax on Michigan cars. Twobjshelbys correctly stated that the tax requirements of each state must be reviewed. You could run into a situation where the sweet deal you got on an out of state car isn't so sweet when the taxes are factored in.
 
I've seen this where states don't play together, the selling state collects, then you file an abatement to get it back, once you pay your own states tax. Luckily only car I've bought in MI so far was a private sale.
 
Georgia closed the private sales tax loophole luckily after I bought mine.
 
Im MA tax is paid when you register the car, so basically impossible to beat it, and they use a "book" value as a reference, so not possible to buy the car for $10 or something like that . I was only referencing that I had no issues in MI. Took car and title in the trailer and off I went. Dealers are the ones that mess it all up, especially when they are unfamiliar with your home states procedures. Took my dad 2 months to get all the paper work on a Ranger he bought from a dealer in Kentucky. Would have bee waaay easier if they just handed him the title and called it a day.
 
ByeEnzo said:
The potential taxable event may be cap gains (20% on collectibles) on the car you traded in to the dealer. Say you bought your car for 25k ( that's your basis in the car) and you get 65k on the trade in, you would show a 40k cap gain.
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Wow. I never realized that you would have to pay capital gains tax on a car if you sold it for more than the purchase price. That's B.S. considering I wouldn't be able to deduct the loss/depreciation on every other car I've owned.
 
jaxgt, what was your outcome?
 
If you are shipping from another state, make sure you keep all receipts and shipping so that you can prove the car was never operated (by you) in the state you are transporting from. Otherwise it is possible the state will argue that the transaction occurred within their borders or jurisdiction and demand sales tax.

Make no assumptions and carefully read the regulations, possibly for originating and ending states too, better to be safe.

And yes, jaxgt, how did it turn out?
 
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