Vehicle Sales Tax Exemption

[Dinny]

Situation: My dad bought his 2021 Ram after the lease ended then he leased a new 2024 Ram. I am in the process of buying the 2021 Ram from him. He paid ~$2500 in state sale tax 3 weeks ago. He has rolled all the tax and fees into the price of the truck.

Do I now have to pay state sale tax again when I register it in my name? If so, are there any exemptions that may fit this situation?

I have read that a gift doesn't get taxed because there isn't a selling price to assess the tax from. The problem I see with saying it's a gift is that I borrowed money and the title will need a lien.

Thoughts?

 

[Mij]

Not quite sure if I understand your question but, I believe you still will have to pay an excise tax. Some states refer to it as a wheel tax I believe. My better half does all that financial stuff for the whole farm so I may be mistaken. Call your local DMV if you can ever catch them when they’re open.

 

[mom45]

I'm pretty sure you will be paying sales tax on whatever selling price is documented on the title and/or bill of sale.

 

[JettaKnight]

Situation: My dad bought his 2021 Ram after the lease ended then he leased a new 2024 Ram. I am in the process of buying the 2021 Ram from him. He paid ~$2500 in state sale tax 3 weeks ago. He has rolled all the tax and fees into the price of the truck.

So he got a loan to buy it?

Do I now have to pay state sale tax again when I register it in my name? If so, are there any exemptions that may fit this situation?

I have read that a gift doesn't get taxed because there isn't a selling price to assess the tax from. The problem I see with saying it's a gift is that I borrowed money and the title will need a lien.

Thoughts?

I hate to say it, but I've never been gifted something that required me to get a loan.

 

[Sigblitz]

The problem I see with saying it's a gift is that I borrowed money and the title will need a lien.

Asked and answered.

 

[Hoosierdood]

 

[firecadet613]

I'm pretty sure you'll be paying sales tax on it, technically it was another purchase. He should have let you buy out his lease and put it in your name then.

 

[BehindBlueI's]

I'm pretty sure you'll be paying sales tax on it, technically it was another purchase. He should have let you buy out his lease and put it in your name then.

Good thought, but can someone other than the original lease holder buy it under those circumstances? I'm definitely not sure, but I thought the original lease holder was the only one who had the option to purchase it vs letting the lease company take it back (and then selling it). Maybe a cooperating dealer could have had him sign it over to them then sell it to the OP, since the dealership wouldn't pay taxes on it?

 

[firecadet613]

Good thought, but can someone other than the original lease holder buy it under those circumstances? I'm definitely not sure, but I thought the original lease holder was the only one who had the option to purchase it vs letting the lease company take it back.

That's likely true. I've never leased so I'm not sure, aside from the fact that these are all separate transactions and the state will get their tax cut.

 

[BehindBlueI's]

That's likely true. I've never leased so I'm not sure, aside from the fact that these are all separate transactions and the state will get their tax cut.

Yeah, but businesses don't pay sales tax in this sort of transaction, so it should only be the eventual 'retail' purchaser, the OP paying.

I get it's too late for the OP, but I think if dad buys the lease, trades it to the dealer with a contract that they will then immediately sell to the OP for $x worked out in advance, the only one would pay taxes is the OP. You'd need a cooperating dealer to make it part of the process, though.

I've only leased once, the incentive made it cheaper than paying cash, and I bought it out at 13 months (had to carry the lease 12 months to keep the incentive). IIRC, you only pay sales tax on the lease portion of the price when you lease it, so if you never buy it you never pay the tax on the residual. The dad would have still had to pay the sales tax on the residual, maybe?

Just spitballing.

 

[wingrider1800]

I can't say for sure but I don't think that you will have to pay sales tax again if you are buying it from your dad. This comes from past experience but rules change.

 

[Dinny]

He was the only one able to buy out the lease without running it through the used car dept. I would have likely paid $15-$25K more if he hadn't bought it to sell to me.

Some of you have confirmed my thoughts on finding a loophole or qualified exemption.

Seems wrong that the state will get $5000 in taxes from the sale of the same vehicle within 30 days.

Maybe I can tell them I only borrowed $2000.

 

[wingrider1800]

If the title isn't in your dad's name then you're probably gonna have to pay up.

 

[wingrider1800]

I ask this question at the license branch a couple of years ago and the clerk told me that immediate family was exempt. I was buying from a cousin and had to pay.

 

[firecadet613]

Yeah, but businesses don't pay sales tax in this sort of transaction, so it should only be the eventual 'retail' purchaser, the OP paying.

I get it's too late for the OP, but I think if dad buys the lease, trades it to the dealer with a contract that they will then immediately sell to the OP for $x worked out in advance, the only one would pay taxes is the OP. You'd need a cooperating dealer to make it part of the process, though.

I've only leased once, the incentive made it cheaper than paying cash, and I bought it out at 13 months (had to carry the lease 12 months to keep the incentive). IIRC, you only pay sales tax on the lease portion of the price when you lease it, so if you never buy it you never pay the tax on the residual. The dad would have still had to pay the sales tax on the residual, maybe?

Just spitballing.

Yes and no. The dad was the end retail purchaser when he bought out his lease. If he sold it to his son, the OP, the state will view that as a separate sale, and taxes are due accordingly.

Sounds like the OP got a hell of a deal on the truck though, so what's a few grand in taxes.

 

[WebSnyper]

Yeah, but businesses don't pay sales tax in this sort of transaction, so it should only be the eventual 'retail' purchaser, the OP paying.

I get it's too late for the OP, but I think if dad buys the lease, trades it to the dealer with a contract that they will then immediately sell to the OP for $x worked out in advance, the only one would pay taxes is the OP. You'd need a cooperating dealer to make it part of the process, though.

I've only leased once, the incentive made it cheaper than paying cash, and I bought it out at 13 months (had to carry the lease 12 months to keep the incentive). IIRC, you only pay sales tax on the lease portion of the price when you lease it, so if you never buy it you never pay the tax on the residual. The dad would have still had to pay the sales tax on the residual, maybe?

Just spitballing.

Just because dad bought it though I'd think it could have been titled to the son at that time (?). I'd think the titling of it in dad's name then the retire to son with accompanying sale is the sales tax trigger.

And to the OP'S point, I'm not sure the lender/lienholder and the state really exchange any info on the loan vs purchase amount unless there would be a default on the loan, but I could be wrong.

 

[Cameramonkey]

The state loves double dipping.

I bought a boat from another INGOer. I went to register it with well over 6 months left on the watercraft tags. No credit available to either of us, I had to pay the tag fee in full again even though it had already been paid by him. And they wouldnt have refunded him since he didnt use the tag the whole year. And dont get me started on the separate state waterways tag they require AFTER I pay the state for the right to put it in the public waters. (just not ALL the public waters, apparently.) So there is a double dip too.

Sorry OP. The only way you could have weaseled out of the tax and claimed a gift is if you were able to pay him cash under the table, or he would be willing to accept payments under the table and act as the bank. (or you pay his loan payments he had when he bought it out)

 

[ditcherman]

OP, it certainly does seem like double dipping.
You could go to one license branch and ask all the questions, immediate family, just taxed two weeks ago, etc, and figure out what lies to tell figure out what really happened and go to a different license branch to do the deal.

I don’t think they have to see lien paperwork, IIRC. It’s just yes or no and contact info. So the loan amount should be irrelevant. But I think they have you on value, since they just taxed it two weeks ago or whatever. It didn’t depreciate that much.
Look into the gift thing.

 

[Cameramonkey]

OP, it certainly does seem like double dipping.
You could go to one license branch and ask all the questions, immediate family, just taxed two weeks ago, etc, and figure out what lies to tell figure out what really happened and go to a different license branch to do the deal.

I don’t think they have to see lien paperwork, IIRC. It’s just yes or no and contact info. So the loan amount should be irrelevant. But I think they have you on value, since they just taxed it two weeks ago or whatever. It didn’t depreciate that much.
Look into the gift thing.

wont the lender require him to put them on the title as the lienholder?

 

[ditcherman]

The state loves double dipping.

I bought a boat from another INGOer. I went to register it with well over 6 months left on the watercraft tags. No credit available to either of us, I had to pay the tag fee in full again even though it had already been paid by him. And they wouldnt have refunded him since he didnt use the tag the whole year. And dont get me started on the separate state waterways tag they require AFTER I pay the state for the right to put it in the public waters. (just not ALL the public waters, apparently.) So there is a double dip too.

It’s ok, everyone that owns boats is rich!

Sorry OP. The only way you could have weaseled out of the tax and claimed a gift is if you were able to pay him cash under the table, or he would be willing to accept payments under the table and act as the bank. (or you pay his loan payments he had when he bought it out)

And to this point, if it’s not a done deal yet (loan and title transfer, maybe it’s not too late to make a deal between dad and son.
There’s all kinds of creative financing. But then again, is it worth the hassle for a couple grand in taxes?