How much Massachusetts sales tax do I have to pay buying a car from a non-dealer?


#1

Hi,

I recently moved to Massachusetts and bought a car.
According to the RMV (Registry of Motor Vehicle) site, the state collects sales tax of 6.25% on the higher value of the actual sales price or the NADA guide posted price.
My problem is that my car has had fender benders on all corners (cosmetically not very appealing); the check engine light is on, and the seller was leaving the country 3 days after the selling the car to me. So, I bought it at a price much lower than the lowest NADA price.

Will the state insist on charging me sales tax based on the NADA price?
Or, can I report the actual sale price, which is a lot lower than the NADA price and be charged sales tax based on that?

When I bought a car in California, I was told that the state will accept whatever the sales price the seller and buyer claim and charge sales tax according to that figure. The state knows people are lying, but it will prevent people like me getting screwed over by the state.


#2

I believe NADA prices do reflect the condition of the car. Take pictures of the car showing the damage, CEL light on, and see if you can get a rating of “poor” for the car’s current condition. Show the “bill of sale” for the price actually paid also. DMV’s can be tough, but some are reasonable, not sure how Mass is it deal with.


#3

The NADA web site shows “rough trade-in” as the lowest value for a car, it seems your car fits into that category from your description.


#4

CT is not that different from MA - our DMV is like the army without guns, being an insane bureaucracy but the people behind the counter aren’t that bad.
Show the bill of sale. If it is half way reasonable, I doubt they’ll give you a hard time.


#5

Yeah agree with everyone. In Minnesota you pay on the actual sales price unless it is too low to be unbelievable, then they assign a value to it. But just go to the library and look up the NADA prices and make sure you adjust the price down accordingly for condition. Pictures and copy of NADA conditions may be helpful.


#6

You talking about sales tax or the yearly excise tax??

Sales tax is based on the actual amount the vehicle was sold for. The excise tax is based on the cars value…which depreciates every year.


#7

When you go to the DMV to pay the tax, make sure you drive the car there. Offer to take the clerk or supervisor outside to show them your car if they don’t believe what you say about the condition.


#8

Registering a car in Mass is a nightmare. The sales tax issue is the LEAST of your worries. Unlike California, Massachusetts has a 'Safety Inspection" along with the emissions test…Also, insurance in Mass is sold by agents who live off the 50% commissions…So by the time you get a set of Mass plates, the sales tax issue will be long forgotten. Oh, by the way, they charge you the sales tax EVERY YEAR…They call it an “excise tax”. This is on top of the registration fee, safety inspection and emissions test…


#9

I’m soooo glad I live in a low tax state like Maryland.


#10

You can say that again.


#11
Unlike California, Massachusetts has a 'Safety Inspection" along with the emissions test..

You do that AFTER you register the car.

Oh, by the way, they charge you the sales tax EVERY YEAR..They call it an "excise tax".

Um…NO…if it was the sales tax…then the amount would be the same every year. But it’s NOT…it’s lower every year based on the depreciated value of the vehicle. NH has the same excise tax system…but no sales tax.

Also, insurance in Mass is sold by agents who live off the 50% commissions

More like 10% commission. MA has independent agents (along with most states). But MA insurance is regulated. So the price doesn’t vary much from vendor to vendor.


#12

In addition, the excise tax is collected by the city or town you live in. The first year for a new vehicle can be fairly expensive but it rapidly decreases. It’s equivalent to a personal property tax in other areas but is limited in MA to any vehicle that is registered with the DMV (including trailers). This tax is deductible if you itemize your taxes.

MA insurance is regulated. There’s not much to be saved by going away from an agent and then you lose all the benefits they provide like running to the DMV for titles, registration and plates.

The sales tax collected and the excise tax will be based on the average value of the vehicle if it was bought from anyone other than a registered dealer. This is to prevent fraud. It does however, catch people like the OP who buy a beater but those are the minority compared to the overwhelming number of vehicle transactions that occur. Mainly because getting a beater through the safety inspection can be difficult. There are places that will overlook certain infractions but if they do it too much, they are often caught and then lose a lucrative source of income so it’s more of an isolated case than the general rule.


#13

And now you don’t even need to go to an agent for insurance in MA. I live here and have Geico and do all my car insurance stuff online.

However, if you do your car insurance online, without seeing an agent, BE SURE to call and ask your insurance co to email you a signed RMV-1 BEFORE you go to register the vehicle. If you show up without a signed RMV-1 from your insurance co, you WILL be turned away. An insurance agency will know to give you one, but if you by your insurance online from Geico, etc, you have to know to ASK them to email you a signed RMV-1. If you don’t ask, they won’t send you one, and you’ll waste a trip to the RMV.


#14

In Colorado, I can put plates on a car and insure it for exactly HALF what it costs in Massachusetts…


#15

If you have the check engine light on, you won’t be able to pass the inspection. That is a serious problem. The inspection is done after you register the car, so you won’t know with absolute certainty that it will pass after you register it. Having passed the inspection prior to the sale does not count, no matter how recent it was. You know there are ways to make a car pass smog inspection without doing proper repair, so any inspection prior to the sale is no indicaiton that your car will pass after you buy it.

As far as I remember, MA RMV does not accept any value other than the NADA value, which means a beater like your car would pay the same sales tax as one that is in showroom condition. But check with RMV to make sure that is so. There may be a way to appeal it.

I miss CA. I once bought a car from a dead person (actually, the heir of a dead person), who did not have all her paperwork in order. This prevented her from selling the car. I was able to buy it, because the seller was a coworker. I went to AAA and asked them what sale price I should report. The attendant told me to just report whatever I want. I don’t remember whether I reported it as gift and paid no sales tax or reported some rediculous amount to pay very little sales tax.


#16

This is so stupid. I am answering my own question. I thought the quesiton looked familiar. After 4 years of living in MA, now I know the answer.


#17

Roger, you made my day…welcome to the human race…

;-]


#18

I think in South Dakota the plates are something like $35 and of course no income tax. I’d have to look but in Minnesota I think one car was $500 for plates and $300 for the other. And the sales tax is about 8%. We’ve got a budget surplus though so not all bad except the choo choo lovers are bound and determined to get a billion or two.


#19

Most of us live where we live because of family, or work, or because we like it there. Most of us don’t make a decision about where to live based on the amount the State charges as property tax on your vehicle, or the sales tax.

So, the assessment of value and the tax on a car you buy is set by State rules. Go online and search for them, read them and behave the way they direct.

I just did that, and 30 seconds later I found this in the official State website:

Book Value - Tax Assessed on Non-Dealer Sales

The amount of sales/use tax assessed on casual sales (non-dealer sales) is based on the higher amount of:

the actual amount paid for the vehicle; or
the clean trade-in value of the vehicle adjusted by either the high mileage adjustment (decreases value) or the low mileage adjustment (increases value).
The Registry of Motor Vehicles makes the proper adjustment for mileage at the time of registration. Adjustments to value based on the mechanical or structural condition of the motor vehicle are not provided for under current sales/use tax law. For example, if the car engine or doors need replacing, no adjustment will be made to the book value of the vehicle.

Exception to above Rule - Vehicles Sold with a Salvage Title:
A salvage vehicle is any vehicle that has been determined by an insurance company to be a total loss due to fire, theft, collision, flood, or similar event and that has been issued a title stamped or otherwise labeled “salvage” by the Registry of Motor Vehicles. If a motor vehicle has been titled to the seller by the Registry of Motor Vehicles as a “salvage vehicle,” the sales/use tax is computed on the actual amount paid by the purchaser.