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MI vehicle sales tax

R

RBoots

Well-known Member
Any of you MI guys recently buy a used vehicle and get a letter saying you owed more tax on it? 2 guys from work both got a letter from the Secretary of State saying they underpaid for their vehicle and owed the tax that was still due on it. I don't know the exact details, but it has the contacts for a state lawyer that will answer your questions about your specific case. In the case of one guy, he bought a 2013 Ford F350 diesel from his uncle, it was a company truck his uncle had. It has 170,000 miles on it and he paid 25,500 for it. He bought it around 4 months ago. Just last week he got the letter stating he owed this much for the extra taxes based on NADA values, I think he said it was like 8-900 bucks. So he called the number on the letter, and the fellow told him he owes the state whatever the certain amount was because he paid 25,500 for the truck when the NADA value is 36,000 with 50,000 miles. He told the guy that the truck clearly had 170,000 miles written on the title and the guy said that would adjust it a little, but that they base their mileage amounts on 10,000 miles per year X the age of the vehicle. The guy said it does not matter what you pay for the vehicle, it will be based on the NADA price for that vehicle in good or excellent condition and the mileage calculator they use. He was also told that the tax adjustment does not apply if the vehicle was purchased between siblings or a parent and child.
The other guy guy at work had bought a 2005 Ford F150 for around 2,500, it was VERY rusty and beat up, with 250,000 miles, a winter beater essentially. This guy got the same letter saying it was worth X amount based on NADA,and he owed extra taxes on it. This all happened with him probably 6 months ago. He took it to a body shop for a written estimate to fix all of the body issues, rust, dents, etc, and got a 7,000 or so quite. He sent that quote to the contact on the letter, and said he hadn't heard anything back. He did sell the vehicle a month ago, so wonder how that's gonna work out? The other guy with the newer Ford said he's gonna try to do the same thing to fix scratches and stone pecks, try to get it's value down by having a body shop quote. He said you can pay the extra tax at the right at the Secretary of State, or send it in. Sounds ridiculous to me, a vehicle is only worth what someone wants to pay for it. Not too long ago there was an auction an hour or so away that had a 2000 Ford F250 Super Duty 4wd, ext cab short box, with a 7.3 diesel and 50,000 miles. It was immaculate, and brought 28,000 dollars. At least whoever bought that probably won't get a letter stating he owes more taxes on it.

Ross
 
Federal, state, county or city. They are all trying to find new or enhance existing revenue streams. Sometimes its not called a tax, but a transfer fee. I'm sure Michigan thought new owners were manipulating the buying cost to reduce their tax burden so went to the NADA book to base the tax. Just another scheme to take money out of our pockets and spend the way they see fit. Then proclaim it was for your good. Oh well death and taxes can't avoid either, of course they tax you after your dead so can't even avoid them by dying. gobble
 
Sounds like our tax system in Ontario. If you buy a vehicle privately and not from a dealer, the seller must provide a used vehicle information package for 25 bucks from the ministry of transportation. This package provide details of the vehicle since new...owners, origin, money owed against it as well as the average selling price of similar vehicles, on which the tax of 13 percent is determined...regardless if it sold for less. Interfamily transfers are not taxed.
Ben
 
That sounds pretty crummy to me.
Reminds me of a car I bought from my sister once for $100. About a 1973? Pinto.
Went to the DMV to transfer title and pay the tax.
Lady there said it was worth $700.
Said if there was a reason I bought it so cheap here's a form to list everythinhg wrong with it.
I was going to list everything - smokes, rust, no heat, etc, etc but said to heck with that and wrote: Car is 'effed' up.
The lady looked at it laughed out loud and said she hadn't seen that one before.
Then she stamped the form approved and charged me for declared amount.
 
That is SOOO not right! So, if someone wanted to sell a vehicle for $100, just to get rid of it, the state would come back and force the buyer to pay taxes on NADA prices? Even though every vehicle is in different condition??

Sounds to me like someone is trying to bail out the city of Detroit. *lol*
 
Other states have done something similar in the past. They just made you pay the sales tax based on the Book value when you went to get your license. Actual Sales price did not make any difference.
 
You would probably have to get a professional appraisers estimate on the actual value
of the vehicle.....more$$$$
Ben
 
Maybe we should get a bill introduced in the legislature that if they claim it is worth $xx,xxx and you dispute it, that they have to cut you a check right then for what they claim it is worth. I can see it now, drive into Flint or Detroit and buy up burned hulks for scrap price and make them give you NADA price for it. How much do you want to bet they don't go by NADA blue book for your 1970 Plymouth sedan (Hemi GTX that you just bought for a mere $70,000). It must really hurt those guys (oops not politically correct, should be "persons") in Lansing when they suck out their brains right before they get sworn in.
 
That hurts. Most guys I know routinely under-report the price they pay on privately sold vehicles, so the state probably looses 25 percent or more of those revenues. It's hard to blame the states for trying to recover some of that, they have to follow the money. Can you think of a more fair way to do that or should they just raise property taxes or reduce the ag tax exemptions to pay for new roads? This week's proposal for $200 Billion of new infrastructure has the states paying about 70 percent of the total ($140 Billion). The state's new contributions will have to come from somewhere.
 
The same thing happens in the Peoples Republic of Maryland when you go to the DMV to title and tag a used vehicle. If the sale price is less than the NADA value you're taxed on the NADA value unless you can provide a notarized bill of sale.
 
This is the end result of all those guys who bought cars back in the day and walked into the SOS with a receipt claiming they paid $100 for it when they really paid $10,000 for it. I remember the day when you never bought a used car in Michigan without getting two receipts. One for SOS and one that was real. Now the pendulum has swung the other way and this way is no better than the other was.

Years ago a case came across my desk. A young man started a landscaping business and bought himself a fancy dually pickup. A month later, for reasons of his own, he decided he wanted his truck in the name of the business. So he dropped by SOS and asked the clerk about it and she handled it right there for a modest fee. A few weeks later he got a bill for over $3000 in unpaid sales tax. This was sales tax he had already paid when he first bought the truck but, because he transferred it into his business they charged him again. Michigan never did relent in his case. I think it is time to go to a flat licensing fee for passenger autos and light trucks. Too much abuse from the state.
 
Here in MI they already got us for infrastructure money by raising our gas and fuel taxes, and licensing fees last year or the year before. By a lot.
 
Yeah, you're right Dave, heard of a lot of people that have done that on expensive vehicles. Or ones I would consider expensive anyway. At least it didn't work this way back when I was in High School, do you know many free, or 50-100-250 dollar cars I bought, drove, or just beat the heck out of? If they charged me NADA for every one of them pieces of crap, I'd be so poor still I couldn't afford to pay attention. lol
 
NADA is a political organization representing dealers.
Not truly an authoritative source, even though they've
been around for 100 years or so. I see lawsuits coming.
Money makes the world go 'round I guess.
 
I live in TN. I bought a new 2500 Chevy truck in 87. Later set up an LLC for my electrical business and transferred the truck to the LLC. Later on I dissolved the LLC and wanted to transfer it back to my name. The state wanted to charge me sales tax again just like I had bought the truck from someone. I balked nd left it in the LLC name. Finally gave it to my son. No taxes paid on that deal. Last August I bought a drag face car. This is a car that will never see the street again. I wanted the title in my name. Only way to do hat in Tn is to put plates on it, pay wheel tax and sales tax. They uses the NADA book to calculate the sales tax. What I did to avoid paying for new plates was to transfer plates from a truck to the race car on Friday and then went back on Monday and transferred them back to the truck. Saved about $40 but it was the principle of the deal to me. I actually paid a lot more for the car than the NADA number.
 
First I've heard of it, but doesn't surprise me. Anything to nickel and dime....no, dollar and many more dollaring us to death here.
 
I think it's been SoS policy for a long time to go with the NADA price, since it's a fact that for most private sales the seller will leave the price blank on the title and the buyer will fill in a fictitious amount.
 
Geez,if I get a bill for the one we had for a week then got totaled,that's really gonna be rubbing salt in the wound.
 

Been that way here long as I can remember. A deal between kin folk can be a get around if it was gave to you are sold between kin for something like a dollar, few know about this and take a big hit. Yes they use retail value :evil:
 
State of Michigan has done that for years. Letter saying the guy owed more sounds odd though. Michigan randomly selects a few cases our of thousands and asks for further verification.

Tax Exemption Between Relatives

If you purchase a vehicle from another person, 6% tax is due of the full purchase price or fair market value, whichever is greater. No tax is due if you purchase a vehicle from an immediate family member. An immediate family member is defined as:
? Spouse
? Parent (natural or adoptive)
? Brother or sister (includes half-brother and half-sister)
? Child (natural or adopted)
? Father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, grandparent-in-law, grandchild-in-law
? Stepparent, stepbrother, stepsister, or stepchild*
? Grandparent or grandchild
? Legal ward, or legally appointed guardian with a certified letter of guardianship
Supporting Your Claim

The Michigan Department of Treasury administers the collection of tax, and reviews tax exemption claims filed with title applications processed at Secretary of State branch offices.
If you claim a tax exemption based on a family relationship, the Department of Treasury may contact you to prove the relationship. You do not have to bring proof of relationship with you when processing a title application at a Secretary of State Branch Office. But if your claim is selected for review by the Department of Treasury after the title transfer, you will need to submit documents proving the qualifying relationship.
Documents to support your claim must show the relationship between you (the buyer) and the seller.
If an exemption claim is found to be invalid or cannot be proven, Treasury may impose penalties as high as 100% for making a fraudulent claim.
 
They need to use the same book dealers use to appraise your used trade in ! That book is really low balling everyone. LOL. Your State makes Ohio look a lot better.
I know they have tried in the past but wait until they start making you license tractors. I think they have to do that overseas.
That's why I always liked wheeling and dealing on tractors no taxes and titles, and rarely did any cars.
 
I think its a joke that used vehicles are taxed in the first place. They already got the full tax amount when it was bought new and then they tax it again every single time its sold. On some vehicles they probably collect as much in taxes over the life of the vehicle as what the original purchase price was!
 
That's what happens when you LIE AND CHEAT. Too many people were lying about the amount they paid for a private-sale vehicle to get out of paying the sales tax on it. So they made it a law so you can't do that anymore.

Last time I bought a private sale vehicle here in NY, if the amount was "reasonable" they didn't pull out the book, but if you wrote in something like $1, $100, or even $10,000 for a 2015 Ford F350 for example, they would nail you for full NADA value. You can squeak a few thousand off the price, as long as you have a receipt from the seller to match, but you can't flat out claim you paid $1 for a 3-year-old truck.
 
When in the state of New Jersey I routinely got affidavits from the state accusing me of cheating them out of sales tax . They all went in the garbage because the fifth amendment allows you to not testify against yourself. They never got a penny and I never received any threatening letters. Know your constitution.
 
If he has a cancelled check, or proof of payment, I would photo copy it and say, buy it if you think it is worth so much more....
 
I tend to hang on to vehicles longer than most people do. I would rather let the folks who trade vehicles every few years pay the high sales taxes on each trade than to have my registration fees go up $250 to $500 per year on each vehicle. The money for roads has to come from somewhere. I can control how often I trade vehicles, but I have to register them every year.
 

I thought it worked that way everywhere. I have heard of that in Kansas, although they use a "range" of values, but still based on average price. Otherwise everyone would report that they sold their vehicles for a dollar.

Honestly it makes sense to me, and I am generally oppposed to taxes, but this seems like a legit way to handle used vehicle sales.
 
New York DMV cannot charge you a higher value then you actually paid. Just need the proper yellow sales affidavit filled out by the seller.
 
Indiana only charges actual sales tax on the purchase price.

however, they get you every year with excise tax based on what THEY think your car is worth.

it seems wrong to tax what's already been taxed. and then retax it again and again and again... its a racket.
 
(quoted from post at 21:26:44 02/12/18) Any of you MI guys recently buy a used vehicle and get a letter saying you owed more tax on it? 2 guys from work both got a letter from the Secretary of State saying they underpaid for their vehicle and owed the tax that was still due on it. I don't know the exact details, but it has the contacts for a state lawyer that will answer your questions about your specific case. In the case of one guy, he bought a 2013 Ford F350 diesel from his uncle, it was a company truck his uncle had. It has 170,000 miles on it and he paid 25,500 for it. He bought it around 4 months ago. Just last week he got the letter stating he owed this much for the extra taxes based on NADA values, I think he said it was like 8-900 bucks. So he called the number on the letter, and the fellow told him he owes the state whatever the certain amount was because he paid 25,500 for the truck when the NADA value is 36,000 with 50,000 miles. He told the guy that the truck clearly had 170,000 miles written on the title and the guy said that would adjust it a little, but that they base their mileage amounts on 10,000 miles per year X the age of the vehicle. The guy said it does not matter what you pay for the vehicle, it will be based on the NADA price for that vehicle in good or excellent condition and the mileage calculator they use. He was also told that the tax adjustment does not apply if the vehicle was purchased between siblings or a parent and child.
The other guy guy at work had bought a 2005 Ford F150 for around 2,500, it was VERY rusty and beat up, with 250,000 miles, a winter beater essentially. This guy got the same letter saying it was worth X amount based on NADA,and he owed extra taxes on it. This all happened with him probably 6 months ago. He took it to a body shop for a written estimate to fix all of the body issues, rust, dents, etc, and got a 7,000 or so quite. He sent that quote to the contact on the letter, and said he hadn't heard anything back. He did sell the vehicle a month ago, so wonder how that's gonna work out? The other guy with the newer Ford said he's gonna try to do the same thing to fix scratches and stone pecks, try to get it's value down by having a body shop quote. He said you can pay the extra tax at the right at the Secretary of State, or send it in. Sounds ridiculous to me, a vehicle is only worth what someone wants to pay for it. Not too long ago there was an auction an hour or so away that had a 2000 Ford F250 Super Duty 4wd, ext cab short box, with a 7.3 diesel and 50,000 miles. It was immaculate, and brought 28,000 dollars. At least whoever bought that probably won't get a letter stating he owes more taxes on it.

Ross
Click to expand...
If the vehicle has been re-titled in the current owners name, that means the state already had their chance to collect the taxes at that time.
Coming after the current owner AFTER going thru the new titling process is done and over.
If the Secretary of State's office clerks failed to collect the proper amount of taxes, that's their mistake, not yours.
Educate the clerks better or update your computer program to through a red flag if the entered sales price is out of whack.
 
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