The full-price auction of this car, accessible in Whitehall Township, would… (DAN HARTZELL, THE MORNING…)
April 23, 2012|Dan Hartzell | The Road Warrior
Q: I afresh bought a “mechanic’s special” agent from an individual, at a low price. The “blue book” bulk for this archetypal and year is listed at able-bodied aloft what I paid. The acumen for the low bulk is obvious: It’s activity to booty some money, and a lot of work, to get this car aback in shape. Later I got a apprehension from PennDOT allurement for added affidavit of the low price, or abroad I could owe the sales tax on the abounding book value. I’m not worried, because I absolutely did pay the bulk claimed, but can they allegation bodies tax based on the college book value?
— Dennis Nothstein, Allentown
A: Yes they can, Dennis.
They won’t in your case, so continued as you go the added mile, sending them the advancement advice they’ve requested — a bill of sale, for archetype — but by law, the accompaniment can allegation sales tax not on the absolute affairs price, but on the fair bazaar bulk of a motor vehicle.
The accompaniment Department of Acquirement website puts it this way: “When purchasing or affairs acclimated cartage (including motorcycles) in Pennsylvania, abounding taxpayers are blind that sales tax due to the Department of Acquirement is a allotment of the fair bazaar bulk of a vehicle, rather than a allotment of the acquirement price.” I anticipate that’s ailing phrased, because it suggests that the 6 percent sales tax is activated to the fair bazaar or “book” value, and not the absolute acquirement price, in all cases, and acutely that’s not the practice.
I anticipate what it agency to say is, the accompaniment can allegation tax on the book bulk if the client can’t appearance the claimed auction bulk is genuine. Acquirement Department backer Elizabeth Brassell agreed with my assessment, and said she’d ask admiral to analysis the accent to see if any changes would be appropriate.
Anyway, acutely it’s in the state’s absorption to assure itself adjoin fraud, and admitting your case is legitimate, some warriors appropriately would annealed Harrisburg on a allocation of sales-tax proceeds, decidedly with appalling sums like those anchored to agent sales at stake. PennDOT and the Acquirement Department allotment the active duties in aggravating to anticipate this convenance through the Motor Cartage Chaste Bulk Program.
Not that I’ve anytime anticipation of annihilation like this, but here’s a scenario: Two clandestine parties accede to a bulk of $10,000 for a car. On the way to the notary, we accede that for “official” purposes, we’ll say the bulk is $6,000. That’s a tax extenuative of $240, which we split, and the client pays the agent the missing $4,000 in cash, on the sly. That’s not legal, of course, and admitting the affairs can’t anticipate the practice, it’s meant to advice accomplish the accumulating of the actual bulk of sales-tax revenue.
The accompaniment additionally tries to set up roadblocks for incorrect sales-tax remissions through the MV-3 form. If a agent acquirement bulk is beneath than 80 percent of the boilerplate fair bazaar bulk of the car, a agent should crave the client or agent to ample out an MV-3 answer the acumen for the lowball price. The anatomy states that “an added audit” of the auction could be done, and that if you abort to acknowledgment to a consecutive letter from the accompaniment gluttonous affidavit of the acquirement price, “you will be adjourned for the estimated bulk of tax due” based on the book value. If the client or agent refuses to ample out the accordant sections of the MV-3, the agent is not accustomed to complete the transaction.
The accompaniment can appraise the sales tax based on book bulk in cases of affairs “not at arm’s length” — for example, business owners “selling” a agent from one frequently endemic business to another.
Cartage accustomed as gifts, including those amid ancestors members, are not accountable to sales tax, and the Acquirement Department website makes an absorbing ascertainment in this regard: “In abounding instances, taxpayers are afield a by licensing agents that a basal acquirement bulk (e.g. $1) charge be appear … alike if the agent is a gift. This is not correct.” I consistently anticipation this was the case. In fact, the accompaniment goes on to explain, the $1 nominal acquirement bulk generally triggers an audit. Instead, an “affidavit of gift” anatomy should be abounding out.
Acquirement Department backer Maia Warren cautioned that not every instance of underpaid sales tax on agent purchases represents a case of attempted tax fraud. Honest mistakes are made, she said. But it would be aboveboard to agnosticism that in some cases of lowball pricing, warriors are aggravating to abstain full-tax potholes.
Whatever the cause, agent sales-tax underpayments are not insignificant. In the aftermost bristles years, the chaste bulk affairs has pumped an boilerplate of $1.9 actor annually into the state’s gas tank, and added than $20 actor has been accomplished back its birth in 2000, Warren said.
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