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Q

I am giving an automobile to my daughter. There is a place on title transfer asking for selling price. My concern is if she will have to pay sales tax if I submit a dollar amount?


A

State laws and procedures differ however in general if you are gifting a car then you should not put in a dollar amount but instead write "gift" or $0 in the selling price area of the title transfer. If you are selling your daughter the car then the sale price should be put in so that sales tax is paid to the state though.

To find out what your state requires of you and your daughter when you gift your car to her contact your state's Department of Motor Vehicles. The title and registration section of the DMV should be able to answer your questions regarding gifting a car and what fees are associated with it.

For example the Missouri Department of Revenue (DOR) states that if you are gifting a car you must provide the following to the new vehicle owner:

  1. Properly assigned Certificate of Title with the word "GIFT" placed in the sale price area (Do not use a sale price of $1);
  2. A safety inspection certificate, less than 60 days old;
  3. A emissions inspection not more than 60 days old, if the recipient resides in St. Louis City or Franklin, Jefferson, St. Charles, or St. Louis County; and
  4. General Affidavit (DOR-768) or a written statement indicating the vehicle was given as a gift. The General Affidavit or statement does not have to be notarized.

You must also report the gift (transfer) to the Department of Revenue within 30 days by submitting a Notice of Sale (DOR-5049) or Bill of Sale (DOR-1957) form.

A seller who fails to report the sale of a required vehicle is guilty of an infraction and subject to a fine of up to $200. If the failure to report the sale was done to assist the purchaser avoid applying for title, paying applicable registration fees, or other fraudulent purposes, the seller shall be guilty of a class C misdemeanor and subject to a fine of up to $300. Prompt notification will help protect you from possible liability.

In California they have what is called a "family transfer" which this would fall under. There are three primary differences between regular transfers and family member transfers in CA:

1. A regular transfer requires smog certification in most cases before the vehicle can be registered in the new owner's name. A family member transfer does not require smog certification if the vehicle is currently registered and the biennial smog inspection is no due.

2. On a regular transfer, use tax based on the purchase price of the vehicle is due at the time of transfer. A family transfer is exempt from use tax with the exception of a transfer between siblings who are not minors. Transfers between siblings are exempt from smog certification regardless of age, unless a biennial smog is required.

3. A regular transfer requires the department to reestablish the vehicle value (reclassify) to determine the appropriate Vehicle License Fee due. The license fee is based on the purchase price or current market value of the vehicle. A transfer between family members is exempt from reclassification of the vehicle value.

To establish eligibility for the use tax or reclassification exemption in CA one must let the DMV know that it is a family member transfer. Transfer fees and registration fees will be due.

The Texas Department of Transportation states that if you are gifting a vehicle to a friend or relative you must give the recipient your (signed) negotiable title and request that the recipient complete a title application, which must be provided to their county tax office.

On the title application, the recipient should check the "$10 Gift Tax" box found in Section 21. The recipient will have to provide proof of auto insurance at the county tax office to register the vehicle.

You may want to check with an accountant or tax attorney to see if you will owe any gift tax due to giving your daughter this vehicle. We believe you can currently give cash or property up to $12,000 without owing gift tax but check with a tax professional to verify this and tell you about your situation.

Your daughter can get instant car insurance quotes here with us so that she can start a policy on the vehicle and have proof of insurance to show when registering the vehicle in her name.



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