My son owns a Mazda, that was grand total $16K with repairs and such.
He wants to trade it for a Honda Civic to a private party. They are considering trade value for his Mazda of $13K; the other vehicle is valued at $8.5K and the other vehicle owner is willing to add cash on top of that.
Basically, it's $13K Mazda traded for $8.5K Civic with $4.5K cash add on.
Question is, does my son pay sales tax anywhere in this deal?
Also, we live in WA state, which is one of the 12 states that does not honor exempt on trade ins. But that's on trade ins, not trades like this.
Thank you
Sat Feb 16, 2013 11:15 pm
ukrkoz Contributing Member
Cash: $ 10.20
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Location: seattle
I think I got it
So they can run those cars trade as gifts and pay no tax, as far as tax was previously paid on each or one of the cars is more than 7 yo, which is the case for that Civic.
Use tax
Use tax is a tax on items used in Washington when sales tax hasn’t been paid. When you purchase a vehicle or vessel from a private party, you’re required by law to pay use tax when the vehicle or vessel title is transferred.
Use tax rates
Use tax is calculated at the same rate as the sales tax at the purchaser’s address. In addition to the general use tax rate, vehicles are charged an additional 0.3% motor vehicle sales/use tax.
Vehicles received as gifts
If you can provide proof that the person who gave you the vehicle or vessel paid sales or use tax on the vehicle or vessel, no use tax is due.
If the person who gave you the gift owned the vehicle for 7 years or more and is from a state or province with sales tax, it will be assumed that tax was paid and no proof is needed.
If the vehicle or vessel is coming from a state or province without sales or use tax, use tax is due.
Frequently asked questions
What’s the difference between sales tax and use tax?
Unlike sales tax, use tax is based on the average fair market value of the vehicle or vessel rather than the purchase price.
Why use average fair market value and not actual sale price?
Fair market value reflects the value of a vehicle according to the retail selling price at the place of use, compared to similar vehicles of like quality or character. The actual selling price may or may not be the same as the average fair market value in cases when an individual sells a used vehicle or vessel.
How is the fair market value determined?
We get average fair market values from Price Digests, an industry standard source.
What if a vehicle or vessel is worth less than the average fair market value?
To establish that a vehicle or vessel is worth less than the average fair market value, the buyer may provide:
An estimate of repairs prepared by a registered mechanic.
An appraisal prepared by a registered dealer.
Documentation from another value source, such as National Auto Dealers Association (NADA) or Kelley Blue Book that cites a lower average fair market value for the vehicle or vessel. The purchase price will be accepted if it is within $2,000 of the value cited by the alternate source. Either photocopies of printed materials or a printout from the Internet are acceptable.
A completed Department of Revenue Declaration of Buyer and Seller Regarding Value of Use Vehicle Sold form stating the selling price and condition of the vehicle. Both the buyer and the seller must sign the form. These are subject to review.
Sat Feb 16, 2013 11:45 pm
coaster Senior Advisor
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Location: Wisconsin
Thanks for posting the info.
Reminds me of one vehicle I sold privately. The buyer was offering to pay cash (an attractive offer when there's always the risk of a buyer passing a bad check), but he wanted me to lie about the selling price on the paperwork so he'd have to pay less sales tax. I didn't want to lie, and I didn't want to lose a cash sale, so we agreed to split the difference: I reduced the price by one-half of the sales tax, and reported the correct price; what he did after that was his own business.
