Are you a car enthusiast looking for answers to your motor vehicle sales tax questions? Look no further! In this comprehensive guide, we have compiled frequently asked questions and provided detailed answers to help you navigate the often confusing world of motor vehicle casual sales. From sales tax rates to documentation requirements, we’ve got you covered. So, buckle up and let’s dive in!
FAQs
What is the Sales Tax rate on a motor vehicle?
As of January 1, 2018, the sales tax rate on the purchase price of a new or used vehicle is 6.625%. This rate applies to both new and used vehicles, ensuring a fair and consistent tax across the board.
Why did I receive this notice? I already gave the information to the Motor Vehicle Commission.
By law, the Director of the NJ Division of Taxation must certify that the correct amount of Sales Tax has been paid on the actual purchase price of the vehicle. If a Sales Tax exemption was claimed, the Director must certify that no Sales Tax was due. The notice serves as a reminder to ensure compliance with these regulations.
Do I have to complete the Affidavit at the bottom of the Questionnaire?
Yes, it is required that you complete the Purchaser’s Affidavit when filling out the Questionnaire. Additionally, depending on the type of vehicle transfer, the Seller’s Affidavit may also need to be completed. These affidavits provide essential information for the review process.
What will happen if I do not respond to a notice?
If you fail to respond to a notice, the authorities may charge you tax based on the vehicle’s value. The vehicle values are determined using data provided by the National Automobile Dealers Association (N.A.D.A.). To avoid unnecessary charges, it is crucial to respond to notices promptly.
How do I check the status of the paperwork I mailed in response to the notice?
To check the status of the paperwork you mailed, simply contact the Division of Taxation Casual Sales Unit via email at taxation.casualsales@treas.nj.gov. They will provide you with the necessary updates and information.
Please Note: Emails sent to the above-referenced address are not secure. No confidential information, such as Social Security or Federal Tax Identification numbers, dates of birth, or bank account numbers should be included in your email. Do not attach documents that include confidential information to emails.
Will I be notified that the documents I mailed were sufficient and no further Sales Tax is due?
If the authorities determine that additional documentation is necessary to complete a review of your account, they will mail you a follow-up notice. However, if the documentation is deemed complete, a closed inquiry letter may be issued upon request.
My vehicle was a gift. What do I need to do?
If the vehicle was a gift, you will need to complete the questionnaire and have the donor complete the Seller’s Affidavit. The process may vary depending on whether the vehicle was free and clear of any lien or transferred with a lien. In either case, it is essential to follow the instructions provided in the questionnaire.
If the vehicle given as a gift was free and clear of any lien:
If the vehicle was free and clear of any lien, you should check the appropriate box on the Questionnaire and have the previous owner complete the Seller’s Affidavit. In this case, no Sales Tax is due. However, it’s important to be aware of potential Income Tax liabilities associated with receiving the gift.
If the vehicle given as a gift was transferred with a lien:
If you were a co-owner on the original title, there is no Sales Tax due. Check the appropriate box on the Questionnaire and submit a copy of the original title. However, if you were not a co-owner on the original title, Sales Tax is due on the principal loan amount assumed. For example, if you assumed a $5,000 balance, you must pay 6.625% Sales Tax on the $5,000, resulting in a total Sales Tax due of $331.25.
If you have questions pertaining to federal gift tax, contact the IRS at 1-800-829-1040.
A donor who gave me a vehicle as a gift is now deceased. What documentation should I submit?
If the donor is deceased, you should check the appropriate box on the Questionnaire and complete the Purchaser’s Affidavit. The executor should complete the Seller’s Affidavit on behalf of the deceased donor and provide a copy of their surrogate certificate and the donor’s death certificate. This documentation ensures that the transfer is properly recorded.
A vehicle was left to me in a will. What do I need to send in?
If a vehicle was left to you in a will, you should check the appropriate box on the Questionnaire (Gift) and complete the Purchaser’s Affidavit. Additionally, enclose a copy of the will to validate the transfer. If there is a lien on the vehicle, Sales Tax is due on the principal loan amount assumed.
I traded goods or services for the vehicle but did not make a monetary payment. Do I owe tax?
Yes, if you provided any form of payment, barter, exchange, or service for the vehicle, Sales Tax is applicable. This type of transaction does not qualify as a gift, and you must pay Sales Tax based on the fair market value of the vehicle. It’s essential to note that even without monetary involvement, you may still be required to report the transaction on your individual and/or business tax return(s).
I swapped vehicles with my friend. Is this taxable?
Yes, swapping vehicles between two private parties is considered a taxable transfer. The tax is calculated based on the Fair Market Value of the vehicle. It’s important to remember that trading anything of value for a car is taxable.
Example #1:
A person swaps a $25,000 boat for a 2015 Honda CR-V. This transaction is taxable, and the tax is based on the Fair Market Value of the Honda, which, in this case, is $25,000. Therefore, the Sales Tax due would be $1,656.25.
Example #2:
A person swaps a 2014 Jeep Grand Cherokee for a 2013 Ford F-150. In addition to the Grand Cherokee, the taxpayer gives $1,000 in cash to obtain the Ford F-150. In this scenario, tax is due on both the Fair Market Value of the 2014 Jeep Grand Cherokee and the $1,000 in cash.
A vehicle was in poor condition when I bought it, so I paid an amount less than the National Automobile Dealers Association (N.A.D.A.) value. What should I send as proof?
If you purchased a vehicle in poor condition for an amount lower than the N.A.D.A. value, you can submit proof such as repair bills, estimates for repairs, accident reports, or photographs. Complete the Questionnaire and Purchaser’s Affidavit, and, if possible, have the seller complete the Seller’s Affidavit confirming the purchase price. These documents will serve as evidence during the review process.
I did not report the correct purchase price when I registered a vehicle, but I paid less than the National Automobile Dealers Association (N.A.D.A.) value listed on the notice. What should I do?
If you did not report the correct purchase price when registering the vehicle but paid less than the N.A.D.A. value, you should have the seller complete a Seller’s Affidavit. If the seller is not available, you can submit a letter stating the correct purchase price and provide any supporting information that verifies the purchase price. Along with the completed Questionnaire and Purchaser’s Affidavit, this information will be reviewed. If the authorities determine that additional tax is due, you will receive a Notice of Adjustment.
I paid cash for a vehicle and do not have a receipt. How can I prove the purchase price?
To prove the purchase price when paying cash without a receipt, you can attach a copy of your bank statement that shows the cash withdrawal. Additionally, if possible, have the seller complete the Seller’s Affidavit and return it with the completed Questionnaire and Purchaser’s Certification. However, without proper proof of the vehicle purchase price, you may be assessed Sales Tax based on the National Automobile Dealers Association (N.A.D.A.).
I cannot locate the seller to have them fill out the Seller’s Affidavit. What should I do?
If you are unable to locate the seller to have them fill out the Seller’s Affidavit, you should enclose a copy of the cash receipt, canceled check, or money order as proof of payment. In a detailed letter, provide information regarding the transaction and the seller’s name and contact information, if available. Your information will be reviewed; however, if acceptable proof of the vehicle purchase price cannot be provided, you may be assessed Sales Tax based on the National Automobile Dealers Association (N.A.D.A.).
I am a sole proprietor, and I transferred a vehicle from my name to my business name. Is Sales Tax due on that transfer?
No, as a sole proprietor, you do not have to pay any additional tax on the transfer of a vehicle from your name to your business name. Complete the Questionnaire and Affidavit, and attach any supporting documentation of the transfer to ensure proper recording.
A vehicle was purchased from a leasing company at the end of the lease period. What documents should I submit?
If you purchased a vehicle from a leasing company at the end of the lease period, submit a copy of the lease purchase agreement that indicates the buyout figure and the amount of tax paid by the lessee. This documentation ensures that the appropriate taxes have been accounted for.
I transferred a vehicle from my corporation to myself. Is this taxable?
Yes, if any payment, barter, exchange, or service was involved in the transfer from a corporation to an individual, Sales Tax is applicable. This type of transaction does not qualify as a gift, and Sales Tax must be paid based on the fair market value of the vehicle. If a lien was present on the vehicle, Sales Tax is due on the loan amount assumed. However, no tax is due if the corporation was dissolved before the transfer, and the vehicle was transferred to a stockholder as a liquidating dividend. In this case, submit a copy of the tax clearance certificate.
Note: You may be required to report the transaction on your individual and/or business tax return(s) for Income Tax purposes, whether or not any consideration is involved. For questions regarding federal gift tax, contact the IRS at 1-800-829-1040.
How can I obtain proof of Sales Tax paid to the dealer when the vehicle was purchased?
To obtain proof of Sales Tax paid to the dealer when purchasing a vehicle, refer to the documents you received from the dealer at the time of purchase. These documents should contain all the necessary information. If you are unable to locate them, you may complete a Title Search (Form DO-22) with the New Jersey Motor Vehicle Commission. The Title Search will provide you with the required proof of Sales Tax payment, along with other valuable information about the vehicle. To request Form DO-22, call (609) 292-6500 or print a copy from our Car news website.
Conclusion
We hope this comprehensive guide has answered all your questions regarding motor vehicle casual sales and sales tax in the state of New Jersey. It’s crucial to stay informed and comply with the regulations to ensure a smooth and hassle-free process. Remember, always consult the appropriate authorities or seek professional advice if you require further assistance. Happy driving!
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as legal or financial advice. Please consult with the relevant authorities or seek professional guidance for specific concerns or questions.