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Smart Shopper Smart Shopper-Archives Any Questions for a Car Dealer? 
16377 messages, Last post on Feb 11, 2006 at 4:59 AM
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Replying to: squirreljam (Jan 19, 2006 12:49 pm) This can end up being a "sticky" tax situation down the road for the dealer .. that's why few do it and most don't ... Terry.
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Replying to: rroyce10 (Jan 20, 2006 4:10 am) Ehhhhh no we all enjoy our jobs and don't want to get fired and/or have the state come after us.
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Replying to: british_rover (Jan 20, 2006 6:25 am) i'm sure there's a a logical reason, but i don't understand.
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Replying to: 719b (Jan 20, 2006 8:19 am) i'm sure there's a a logical reason, but i don't understand. It depends on the state I guess. For instance, here in MA you pay a 5% sales tax on both new and used vehicles but you also get the tax credit when you trade. If you buy your vehicle for $30K you pay $1,500 in taxes. You sell your current ride to a friend for $10K and he pays $500 in taxes for a total of $2,000 Now let's assume the dealer lets you do an in and out. Your net purchase is $20K ($30K-$10K) and you pay $1,000 in taxes. Your friend nows buys from the dealer at the $10K and pays the same $500 in taxes for a total of: $1,500 You save $500 and your friend's situation is improved by the warranty the dealer is obligated to provide. Some people see it as tax avoidance - others as tax evasion.
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I bet it would hold up if it went to court, assuming the dealer did all the correct paperwork. I just look at it as the dealer taking in a trade in, and having a buyer already lined up. No different than if the seller never heard of the person buying the car, since the dealer still takes possession of the title before selling it to a new owner. Of course the intent is to avoid saying one set of sales tax, but thee are plenty of people whose only job is exactly that! |
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Replying to: robr2 (Jan 20, 2006 8:49 am) My guess as to why dealerships don't like to do this is that there is no profit in it. Actually seeing that they will do the paperwork and such it would be a loss to them. Not to mention any liability they may take on from handling the transaction. |
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the only reason it is even an issue is becuase the dealers lobby used their influence to get special consideration in the tax code, since it really makes no logical sense to allow dealers to give a credit when private sellers can't. And why should I pay more tax if I sell my old car to my BIL instead of a car dealer? Call me cynical, but I am from NJ, where the art of "pay for play" was perfected. |
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Replying to: british_rover (Jan 20, 2006 6:25 am) Ehhhhh no we all enjoy our jobs and don't want to get fired and/or have the state come after us. You could have very well done a "courtesy trade." Nothing illegal about it. The dealer will usually charge a fee to do it, but many dealers do it all the time. Some posts from here on Edmunds: Courtesy Trade 1 Courtesy Trade 2 Courtesy Trade 3
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Replying to: bdr127 (Jan 20, 2006 9:02 am) |
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Replying to: snakeweasel (Jan 20, 2006 9:00 am) I'm not a tax expert but I do believe a court would look at the intent of a 3 party transaction. IMHO, I think a court would consider it tax evasion as the originating party and destination parties are related. The only reason for the trade and sale was to avoid the tax. I can't see how a court would accept any other reason for 2 related parties to conduct a transaction through a third party other than to avoid the tax. Adding the dealer complicates the transaction - the only benefit is avoidance of the tax.
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