Sales Tax

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Johnny O

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Apparently I got a heck of a deal when I bought my Trac after the lease was up. Enough to attract the attention of the PA Dept. Of Revenue, who sent me a letter yesterday asking for further documentation of the sales price because it was far below book retail. The state thinks it's worth $21,500 and I paid $17,400. And actually it's even worse than that because there's $1900 worth of extended warranty in there too. The residual was pretty low (I guess) because of a rebate and other money that I put down. So that's a good deal for Jon. :supercool:
 
I sold a truck to a guy once for less than it was worth. We both got letters. We had to sign to confirm our statement of the value I sold it for...



I have to think it cost more money to have people trace this then it does to get the money back from those that are not honest about the selling price....
 
According to the state I may owe them around $235 unless I can prove otherwise. There are state workers and people on welfare who need their money, dammit! :grin:
 
If you purchased your ST from the dealer at the end of your lease, this should be easily verified.
 
the last used car i bought i knew the guy and we both had the same last name so i pretended to be his son we both had to sign something at the rmv and i didnt pay any tax
 
The state thinks it's worth $21,500 and I paid $17,400.



That's bullsqueeze. It's worth what you paid for it, plain and simple. All you should have to do is provide a copy of the receipt/sales document showing the purchase price of $17,400.



 
JohhnyO,



Show them your bill of sale, which you surely got. That will include the buy-back price. You do need to pay sales tax on the extended warranty, most states require that and PA is one of them (see link):



The real question is this:



Why didn't the dealer add in, charge you and pay the sales tax?



And, if they did, why isn't this an issue for the dealer (the sales tax collecting merchant in this case), not for you, the buyer?



Welcome to PA!



TJR
 
Last edited by a moderator:
The real question is this:



Why didn't the dealer add in, charge you and pay the sales tax?



And, if they did, why isn't this an issue for the dealer (the sales tax collecting merchant in this case), not for you, the buyer?



Very good point. JohnnyO should be going back to the dealer with the letter he received from the state and asking them WTF?
 
Texas use to accept taxes for a car sold for less than value. The seller just gave explanation of condition of vehicle.

No more. When the buyer goes to the tax office. They look up the value of the car and tax from that.

The last 2 cars I sold. I filled out the 130U form for less than value. The tax office looked up the value. Taxed the buyers from that.

I didnt discount it on the 130U form, by any outragous amount either. Bummer for buyers that get a good deal. The true sale price of the 2 cars was less than book. The tax office taxed them at book value, though.
 
Les said:
If you purchased your ST from the dealer at the end of your lease, this should be easily verified.

I did. Faxed the state the Bill Of Sale as per their request, also a copy of the original lease with the buyout price.



TJR said:
The real question is this:



Why didn't the dealer add in, charge you and pay the sales tax?

The proper sales tax was paid on the Trac and the warranty both. Apparently a red flag went up in Harrisburg that I paid some amount far enough below book value to warrant being looked into.



TrainTrac said:
That's bullsqueeze. It's worth what you paid for it, plain and simple. All you should have to do is provide a copy of the receipt/sales document showing the purchase price of $17,400.

The issue is that in PA you pay sales tax (i.e. your registration fee) on the price of the vehicle or if you have a trade-in, the difference. Since I bought it from a licensed dealer, it's probably a slam-dunk and I'll never hear from the state again. However, in a private party sale it's easy and tempting to cheat the state. Let's say, hypothetically, that I agree to buy EddieS04's Trac for $10,000 and the sales tax would be $600. I pay Eddie $10,000. We go to the notary to change the title and agree before we go inside to tell him that I paid Eddie $5000 and that's what goes on the paperwork to the state. Now my sales tax is only $300. Not that I myself would know how such shenanigans are perpetrated. I am only told that this is how it works. Hypothetically.
 
Could be worse... In NY, you pay tax on your new car price, before they deduct the trade in value..:angry::angry::angry::fire::fire::fire::soap::soap:
 
And the state govt wonders why people are leaving NY. You know it's bad in NY and NJ when people move to PA to escape taxes.
 
"In NY, you pay tax on your new car price, before they deduct the trade in value.."



sorry i have to dispute this.



in ny, when trading a car in for a new vehicle, you only pay sales tax on the difference of the new vehicle price and the amount you are given on the traded vehicle.

i.e.: new ride price, 25,000K / trade in price, 15,000.

you pay sales tax on the 10,000 diff.



what is disturbing is that the vehicle is taxed at time of purchase. then tax is paid every time the vehicle changes hands (non-gift). how many times can the same item be taxed? :fire:
 
Eddie,

I have bought and sold a number of vehicles in Texas over the 27 years I have lived here and I never had anyone question the selling price. Of course the law says they have the right to question a price that is way below book value, but on vehicles over about 10 years old, they don't even flinch.



If you give the vehicle to someone as a gift they do require a minimum $10 tax/fee.



It sounds like it may be based on the local county tax assessor as to how picky they want to be on questioning the sales price of a vehicle. Here in Waco, they appear to be a little bit more lax?



...Rich
 
RL, It might be the way Harris county operates. One was a '93 dodge shadow, 9yrs old, 85k miles. Sold it for $1600. Filled out the 130U for $1050. They taxed buyer for $1800. The other my '94 'stang, 14yrs old, 78k miles. Sold for $7000. Filled the 130U for $6100. They taxed buyer for $7800.



Like you said, a picky or greedy county tax accessor...:banghead:
 
What Gary S describes is my experience in both NY and PA. You pay sales tax on the purchase price of the new car LESS the allowance of your trade-in.



Which makes me wonder, does the DEALER pay to the state the sales tax on the trade-in? Essentially, they are buying the trade-in from you. If you were selling it to a third-party, taxes would be paid (or are supposed to be paid).



TJR
 
TJR, when the car is sold to the end-user sales tax is paid. A dealer may sell a car at auction to another dealer for re-sale. No taxes paid then but when the car is sold to a consumer and registered, sales tax is paid.
 
In many states the county and state win over and over again. Buyer one pays tax, sells it, buyer two pays sales tax on purchase price and no refund goes to buyer one. Then buyer three gets to pay tax again. So in the lifetime of a vehicle the state wins over and over plus the license fee, wheel tax, and plates.
 

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