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Post by Deleted on Jan 29, 2021 17:50:45 GMT -5
I threw this up on the Tax board but didn't get an answer. If I sell my car through a service like CarMax, is the amount I receive taxable? DH wants me to find out before making the choice of outright sale vs. trade-in.
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Post by Deleted on Jan 29, 2021 17:54:39 GMT -5
I am not a tax professional, but we have sold cars before. It isn't taxable on your end unless you somehow made a profit. The buyer will have to pay sales tax when he/she registers the car..
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Post by The Walk of the Penguin Mich on Jan 29, 2021 18:17:10 GMT -5
I am not a tax professional, but we have sold cars before. It isn't taxable on your end unless you somehow made a profit. The buyer will have to pay sales tax when he/she registers the car.. This is how it works here too, but I think it can differ between states. When TD sold his car, he didn’t charge sales tax. The new owner paid sales tax on the FMV of car in registration.
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TheOtherMe
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Post by TheOtherMe on Jan 29, 2021 18:20:50 GMT -5
If the car was used in business, there could be a profit on the sale.
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tskeeter
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Post by tskeeter on Jan 29, 2021 21:02:55 GMT -5
I threw this up on the Tax board but didn't get an answer. If I sell my car through a service like CarMax, is the amount I receive taxable? DH wants me to find out before making the choice of outright sale vs. trade-in. In general, there is no income tax on the proceeds from the sale of a car. Why? Because, I assume, you sold the car for less than you paid for it when you bought it. (I also assume that you never claimed depreciation on the car as a business expense.) The only time you might have to pay income taxes on the proceeds from the sale of a personal vehicle is if you sold it for more than you paid for it. As might happen if you were selling a collector car. In some states, if you are trading in a car, you might get a credit on the sales tax on the new car based on the trade in value of the old car. That is, if your new car cost $30K and you get $10K trade in on your old car, you would pay sales tax on the $20K difference. This would save you several hundred dollars in sales taxes. Based on my experience, you can expect CarMax to offer you the Kelley Blue Book trade-in value for your car. This value will be based on your car’s mileage and condition. (Very, very few cars are in better than good condition.)
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Post by Deleted on Jan 30, 2021 13:57:07 GMT -5
Thanks, everyone, y'all told me what I need to know. Now I need to win the lottery to get the car I want
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countrygirl2
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Post by countrygirl2 on Jan 30, 2021 16:12:32 GMT -5
I can tell you if you gift a car in Indiana, the recipient does not pay sales tax on the vehicle.
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schildi
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Post by schildi on Feb 3, 2021 22:22:12 GMT -5
I never understood how there can be sales tax on a used car, but it seems to be like that in most states that have a sales tax. The tax was already paid, when the car was sold first time. Technically, over the lifetime of a car, there could be sales tax collected that exceeds the car's initial value. Again, this makes no sense to me. At least I don't think you owe income tax on a private car's sale. That would be even worse, lol.
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tskeeter
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Post by tskeeter on Feb 5, 2021 1:09:46 GMT -5
I never understood how there can be sales tax on a used car, but it seems to be like that in most states that have a sales tax. The tax was already paid, when the car was sold first time. Technically, over the lifetime of a car, there could be sales tax collected that exceeds the car's initial value. Again, this makes no sense to me. At least I don't think you owe income tax on a private car's sale. That would be even worse, lol. The simple answer to your question is because they can. Politicians always have more ways to spend your money than there is revenue to fund their spending. So they invent new ways to generate more revenue. Sales taxes on used vehicles was one of the ways to get more revenue. Let’s face it, collecting sales taxes on used cars is a lot easier than collecting taxes on other things. All of the transactions pass through a single collection point, the DMV. Much easier than having thousands of retailers collecting the taxes. The amount of taxes collected on each transaction is significantly more than most other transactions, making taxing used car sales an attractive target. Think a $10K or $20K used car vs. $60 worth of hardware at Home Depot or a $10 user fee at a state park.
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schildi
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Post by schildi on Feb 5, 2021 12:08:22 GMT -5
I never understood how there can be sales tax on a used car, but it seems to be like that in most states that have a sales tax. The tax was already paid, when the car was sold first time. Technically, over the lifetime of a car, there could be sales tax collected that exceeds the car's initial value. Again, this makes no sense to me. At least I don't think you owe income tax on a private car's sale. That would be even worse, lol. The simple answer to your question is because they can. Politicians always have more ways to spend your money than there is revenue to fund their spending. So they invent new ways to generate more revenue. Sales taxes on used vehicles was one of the ways to get more revenue. Let’s face it, collecting sales taxes on used cars is a lot easier than collecting taxes on other things. All of the transactions pass through a single collection point, the DMV. Much easier than having thousands of retailers collecting the taxes. The amount of taxes collected on each transaction is significantly more than most other transactions, making taxing used car sales an attractive target. Think a $10K or $20K used car vs. $60 worth of hardware at Home Depot or a $10 user fee at a state park. Yeah, I know. It just doesn't seem right.
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Post by Deleted on Feb 5, 2021 12:20:35 GMT -5
I never understood how there can be sales tax on a used car, but it seems to be like that in most states that have a sales tax. The tax was already paid, when the car was sold first time. Technically, over the lifetime of a car, there could be sales tax collected that exceeds the car's initial value. Again, this makes no sense to me. At least I don't think you owe income tax on a private car's sale. That would be even worse, lol. The simple answer to your question is because they can. Politicians always have more ways to spend your money than there is revenue to fund their spending. So they invent new ways to generate more revenue. Sales taxes on used vehicles was one of the ways to get more revenue. Let’s face it, collecting sales taxes on used cars is a lot easier than collecting taxes on other things. All of the transactions pass through a single collection point, the DMV. Much easier than having thousands of retailers collecting the taxes. The amount of taxes collected on each transaction is significantly more than most other transactions, making taxing used car sales an attractive target. Think a $10K or $20K used car vs. $60 worth of hardware at Home Depot or a $10 user fee at a state park.It's not either/or here. Alabama taxes used cars and the hardware at HD and charges a user fee. If you buy from a used car place, they collect the sales tax and not the DMV. It is only on private sales that you pay at the DMV. Again, this is Alabama. All used merchandise is taxable here, not just cars. If you shop at the thrift store, you pay taxes. You pay sales tax on Ebay purchases; Ebay collects it. I think the only used merchandise that isn't taxed is at garage sales, and that is just because they haven't figured out how. We have a 10% sales tax, but there is a different (lower) tax rate on cars, used or new.
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Post by The Walk of the Penguin Mich on Feb 5, 2021 12:23:30 GMT -5
The simple answer to your question is because they can. Politicians always have more ways to spend your money than there is revenue to fund their spending. So they invent new ways to generate more revenue. Sales taxes on used vehicles was one of the ways to get more revenue. Let’s face it, collecting sales taxes on used cars is a lot easier than collecting taxes on other things. All of the transactions pass through a single collection point, the DMV. Much easier than having thousands of retailers collecting the taxes. The amount of taxes collected on each transaction is significantly more than most other transactions, making taxing used car sales an attractive target. Think a $10K or $20K used car vs. $60 worth of hardware at Home Depot or a $10 user fee at a state park. Yeah, I know. It just doesn't seem right. I agree with you there. When TD bought his STi, he bought it used. Owner 1 paid sales tax on the full price when he bought it new. 3 years later, TD paid sales tax on the used car in order to register it. So the $35k car has now had sales tax equivalent of $60k paid on it. It just doesn’t seem right.
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tskeeter
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Post by tskeeter on Feb 5, 2021 15:13:24 GMT -5
The simple answer to your question is because they can. Politicians always have more ways to spend your money than there is revenue to fund their spending. So they invent new ways to generate more revenue. Sales taxes on used vehicles was one of the ways to get more revenue. Let’s face it, collecting sales taxes on used cars is a lot easier than collecting taxes on other things. All of the transactions pass through a single collection point, the DMV. Much easier than having thousands of retailers collecting the taxes. The amount of taxes collected on each transaction is significantly more than most other transactions, making taxing used car sales an attractive target. Think a $10K or $20K used car vs. $60 worth of hardware at Home Depot or a $10 user fee at a state park. Yeah, I know. It just doesn't seem right. Yes, it doesn’t seem right. But, if the politicians don’t get revenue from one place, such as sales taxes on used cars, they will get it from another place. Higher real estate taxes, more user fees, taxes on the value of your savings and investment accounts (known as ad valorem tax), high business license fees, etc. Taxes are a zero sum game. The total of government taxes and fees will always be roughly the “same”. Only the means of collecting that revenue will change.
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schildi
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Post by schildi on Feb 5, 2021 16:34:45 GMT -5
Yeah, I know. It just doesn't seem right. Yes, it doesn’t seem right. But, if the politicians don’t get revenue from one place, such as sales taxes on used cars, they will get it from another place. Higher real estate taxes, more user fees, taxes on the value of your savings and investment accounts (known as ad valorem tax), high business license fees, etc. Taxes are a zero sum game. The total of government taxes and fees will always be roughly the “same”. Only the means of collecting that revenue will change. Good point! And since we don't really buy used cars anymore, I guess this is a really good tax then. (as it reduces other taxes that I may have to pay)
But wait - I live in a state with no sales tax, so this is all moot anyways.
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