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I am selling my car and have found a potential buyer. After I transfer the vehicle ownership, the buyer will have to transfer the vehicle title to himself, and will also need to pay sales tax on the sale price.

As the buyer is paying me in cash, he asked me to write down a really low amount as sale price, so that he will save a considerable amount of the sales tax.

So, I would get my asking price, but it won't look like that on the paperwork.

Can declaring a lower amount for the sale price get me in trouble later? Or will it be just the buyer at risk because it was the buyer's decision or idea?

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    This is highly illegal. Also if you don't present a good reason why the price is so low they may charge tax based on blue book value anyway. DONT DO THIS. – Andy Jan 25 '15 at 13:56
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    And then the buyer takes you to court claiming that they accidently overpaid you and want the money back. Which isn't unlikely, because you already know that the buyer is a dishonest person. – gnasher729 Jan 25 '15 at 15:30
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    If by trick, you mean fraud, you're on the right track – JoeTaxpayer Jan 25 '15 at 16:49
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    Going along with a bad/criminal idea just because it was not YOUR idea is not a valid defense when the law eventually comes knocking on your door... – Brian Knoblauch Jan 25 '15 at 21:45
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    @gnasher729 well, this doesn't make sense: if he pays cash, he can't prove it. Still a bad idea for all the other reasons, though. – o0'. Jan 26 '15 at 0:49
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Yes you can get in trouble. Here is the quote from the Bill of Sale form from California:

This line is right above where you sign.

I certify (or declare) under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Other states are similar. Virginia uses more words:

In accordance with all applicable statutes, administrative rules and regulations, I certify that the selling price of the above-described motor vehicle was $ ______________, which included all accessories and/or attachments with no trade-in allowance or any other transaction. I further certify and affirm that all information presented in this form is true and correct, that any documents I have presented to DMV are genuine, and that the information included in all supporting documentation is true and accurate. I make this certification and affirmation under penalty of perjury and I understand that knowingly making a false statement or representation on this form is a criminal violation.

  • Can you clarify the Virginia citation? I'm pretty sure that's a statement the buyer is certifying when they title the vehicle, not a certification by the seller; it doesn't appear on any documents I've seen as a seller, and generally when selling vehicles I've just left everything but the signature blank for the seller to fill in as they like (which will clearly be in their ink/handwriting if they decide to commit any fraud). – R.. Jan 26 '15 at 3:11
  • Should have followed the link. It says seller certification, but I've never filled out such a document as a seller, only signed the old title. – R.. Jan 26 '15 at 3:13
  • @R.. I doubt signing first and then letting the other person fill out the form will help. How do the police know that you signed before he filled out the form and not after? Even if they believe you, they may well guess that you did this knowing that the other person was intending to put inaccurate answers, in which case the fact that you didn't know the details is irrelevant. If you're lucky they might conclude that you were just foolish, you were in a hurry or something and blindly believed that the other person would fill in honest answers, and let you off with a warning. But in general ... – Jay Jan 26 '15 at 16:44
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    ... "I signed without knowing what I was signing" is not a defense in court. If it was, no contract would be worth anything. – Jay Jan 26 '15 at 16:45
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    @snakedoc I don't know how much the tax people try to investigate this sort of thing. See this page where someone posted a question on a legal site about it: lawfreefaq.com/law/81-law-62.html A lawyer says that in his state you could theoretically face 6 months in jail, though realistically you'd probably get a fine or probation. Obviously that's "if caught" and "if they bother to prosecute". I have no idea how often people get in trouble for this. Maybe it's never or almost never. Personally, I wouldn't take the chance. – Jay Jan 26 '15 at 21:42
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Can doing this get me in trouble later ? Or will it be just the buyer because its the buyers decision or idea ?

Definitely can, and not just the buyer since you're signing this thing as well. This is what is called "tax fraud".

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    That second sentence of the question had me boggling. When has "He said it was okay so I went along with it" ever been even a remotely credible defense in court? – Shadur Jan 26 '15 at 6:10
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    @Shadur: well, if the alleged crime were theft and "he" who said it's OK is the alleged victim, then having permission would be an absolute defense since there's no crime if that's true. Not so much when the victim is the government and "he" is some shady-looking dude ;-) I suppose it's just about conceivable that the buyer alone might be responsible for reporting the price and paying the tax, but it's fairly obviously not true! – Steve Jessop Jan 26 '15 at 13:40
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When I lived in Ohio, when you went to register a car that you'd bought private sale, they looked up the book value, and if you were some percentage below that, you had a choice of paying tax on the book value, or getting sworn notarized forms that this was the price you really paid, and if you were caught lying, you could go to jail.

The one exception was that if you bought a car from a relative, they accepted that you might really have paid a below-market price.

I don't know how vigorously they investigated, maybe it's an easy crime to get away with. If they really cared, then if you paid with a check they could surely easily subpoena records from the bank to get the amount of the check. Even if you paid with cash, if they see that the buyer withdrew $X from the bank the day before the sale and the seller deposited $X the day after the sale, that would be strong evidence that that was the sale price. All things considered, I've never thought that saving a hundred bucks or whatever on the sales tax was worth risking going to jail.

And as to "will I get in trouble as it was the buyer's idea?" ... think about that for a few minutes. "My buddy Frank suggested that he and I rob a bank, so I went along, I shot the guard and drove the getaway car while Frank was the one who grabbed the money. If we get caught, will I get in trouble given that it was all Frank's idea?" Yes, you will.

13

You can point out the following to the buyer when talking him out of trying to cheat on his taxes:

As the buyer, the reward from the crime is so small and the penalties so high, it's simply not worth it. If you buy a $10,000 car for $1000, the DMV is going to immediately notice that fair market value wasn't paid and you'll get caught. If you try to wiggle within the FMV numbers and and buy a $10,000 car for $9000 with $1k under the table, great, you've saved $40-80 in sales tax and risk getting caught with far greater penalties over an insignificant amount of money.

Your buyer shouldn't be bothered to even consider such a scam.

  • Many enthusiast favored cars trade at significantly above FMV. So, the write down to FMV can be a significant savings itself. – iheanyi Mar 15 '17 at 23:48
1

This topic has been covered well but another consideration that hasn't been mentioned is your liability for capital gains tax in the US. Typically, used cars sell for less than they were purchased, so capital gains doesn't apply to the proceeds.

If you were to purchase for $5,000 but sell for $6,000, you would need to consider the $1,000 subject to capital gains taxes.

Another scenario would be if you buy a car for $1,000 but actually pay $5,000. Later, if you sold, for $4,000 you would be responsible for paying capital gains taxes on the $3,000 appreciation. At least, according to the paper trail. Capital gains is typically going to be much higher than sales tax.

Ultimately, consider your paper trail and the future scenarios. It's generally best to be above board and follow the law with things like this.

0

As others have mentioned, you potentially could get in trouble since it is ultimately a form of tax fraud. If offered while making such an offer, I would also be somewhat wary of a potential sting operation given that I suspect that a number of private sales do in fact take place at a lower than actual transaction value.

On the other hand, depending on the state where you are making the transaction, by declaring a lower transaction value, the buyer is potentially exposing himself to lower-protection from the used car lemon law. Certain states (MA for instance) require the transaction to be reversed if the car turns out to be a lemon and the buyer would have difficulty proving the correct transaction value in court.

Finally, assuming you choose to continue your cash transaction (regardless of stated value) with the implied low morality buyer, I would recommend buying a counterfeit-bill detector pen to bring with you to the sale.

-Frequent private sales individual

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    Counterfeit-bill pens will not work for money that has been washed and reprinted. Being aware of the actual security protections built into the money is the best way to be sure you are getting authentic money. – Nathan L Jan 13 '17 at 16:42
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    That's correct, thanks for pointing it out. Very good counterfeiters would likely pass the counterfeit-bill pen test by bleaching their bills. However, I would expect a private auto sales buyer to generally be of lower sophistication given the potential scale of fraud is magnitudes smaller than someone who is a better counterfeiter would likely consider. Examining other security protections of (sampled) bills is a must, but a quick scratch of a pen over all of the bills is better than not checking. – palffy Jan 13 '17 at 17:03
  • Please provide a source for the epidemic counterfeiting among high-school students taking place in the United States. A 2014 Secret Service report claims 2191 total arrests for all counterfeiting currency in the United States that year. – palffy Jan 13 '17 at 17:42
  • 2 to 3 instances last year nationwide. Nope, about what I suspected. Keep trolling. – palffy Jan 13 '17 at 18:41
  • Let us continue this discussion in chat. – Nathan L Jan 13 '17 at 18:46

protected by Community Aug 28 '15 at 16:40

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