Responsibilities of Buyer and Seller
To avoid being defrauded when purchasing an automobile, you should take great care, use common sense, and follow the guidelines listed here.
- Get/give a bill of sale in a private transaction
- Get a negotiable title from the seller
- Does the seller need to collect sales tax?
- How sales tax is calculated when a trade-in is involved
- What to do if you sell your car
Get/Give a Bill of Sale in a Private Transaction
It is important to write up a bill of sale when selling an automobile. For the seller, a bill of sale provides proof that title to the vehicle has been legally transferred. For the buyer, the bill of sale documents the purchase price of the vehicle for sales tax purposes. The bill of sale should contain:
- name and address of the buyer;
- name, address and signature of the seller;
- complete vehicle description, including the Vehicle Identification Number (VIN);
- description of trade-in, if any;
- purchase price of the vehicle;
- trade-in allowance, if applicable; and
- net purchase price.
The bill of sale can be handwritten or typed/printed, but it should be in ink, not pencil. If desired, you can use the TC-843, Bill of Sale provided by the DMV.
Get a Negotiable Title From the Seller
It is unwise to rely on a seller’s promise to “get the title to you.” Although Utah law requires a seller to provide a title within 48 hours of the transaction, a common-sense approach is to obtain a title at the time of sale, or wait to pay for the vehicle until the seller can provide the title. Without a negotiable title, you cannot title and register the vehicle in your name. A negotiable title is one that:
- Belongs to the vehicle being purchased. Check the make, model and compare the 17-digit Vehicle Identification Number (VIN) against the VIN on the car.
- Has been properly signed off by the seller. If the title is in more than one person’s name (a husband and wife, or a co-signing parent, for instance), both may need to sign. If the title says, “John Doe and Jane Doe”, both must sign off on the title. If the title lists “John Doe or Jane Doe,” only one must sign. No notary is needed to sign off on a title.
If a Utah title is lost, the buyer and seller may fill out a Form TC-123, Application for a Duplicate Title. This document, properly completed, can then be used to register the vehicle in the purchaser’s name.
Also have a properly completed Form TC-891, Odometer Disclosure Statement filled out and signed by the owner and the buyer (if the car is 10 years old or older you do not need the Federal Odometer Disclosure Statement).
If the title shows a lien holder, verify that the lien has been released.
Does the Seller Need to Collect Sales Tax?
In a private-party car sale, a seller (who is NOT a dealer) is not required to collect sales tax on the transaction. The purchaser will pay the sales tax at the time the vehicle is titled and registered at the Utah Division of Motor Vehicles.
Calculating Sales Tax With a Bill of Sale
If the purchaser of the vehicle obtains a signed bill of sale from the seller of the vehicle, the amount of sales and/or use tax to be collected will be based upon the net purchase price shown on the bill of sale, if it contains the information described above.
Calculating Sales Tax Without a Bill of Sale
If the buyer did not obtain a signed bill of sale from the seller (or the bill of sale does not meet the requirements described above), the DMV will calculate the amount of sales or use tax based upon the “Fair Market Value”. Fair Market Value is based on the depreciated cost new as established by the Tax Commission in Rule R884-24P-33.
If the person registering the vehicle wishes to dispute the use of “Fair Market Value” he or she may, at the owner’s expense, obtain a certified appraisal on the vehicle from a licensed and bonded Utah auto dealer, an authorized insurance adjusting firm, or obtain a bill of sale which meets the specifications listed above.
The sales tax amount will then be calculated and collected on the lower of the fair market value, certified appraisal or acceptable bill of sale for the vehicle purchased.
How Sales Tax is Calculated When a Trade-in is Involved
If a vehicle titled to the buyer is traded-in to a seller, the trade-in value of that vehicle may be deducted from the purchase price or value of the vehicle being purchased. The value of other items, such as TVs, refrigerators, labor, etc., may not be used to reduce the net purchase price of any vehicle. The vehicle make, year and VIN must be submitted at the time of registration.
Net Purchase Price
Net purchase price is the established purchase price minus the established value of a traded-in vehicle.
If the trade-in value of a vehicle is stated on a bill of sale that stated value may be deducted from the purchase price of the vehicle being registered.
Without a bill of sale, that states the value of the trade-in vehicle, the fair market value of the trade-in will be used to establish the net purchase price. If the purchaser disagrees, he/she may obtain an acceptable bill of sale or a certified appraisal of the trade-in from a licensed and bonded Utah auto dealer, or from an authorized insurance adjusting firm.
To calculate the sales tax due, multiply the net purchase price or net fair market value times the sales tax rate for the locality where the vehicle was purchased (if purchased from a dealer) or the locality tax rate where the vehicle will be registered.
What to Do if You Sell Your Car
When you sell your vehicle:
- Remove your license plates from the vehicle. If you do not, you may be liable for any parking or traffic violations occurring while your plates remain on the car.
- Give the new owner the signed title, current registration certificate, and current safety and emission certificates. The new owner may obtain a temporary permit from any Motor Vehicle office by presenting the signed title, proof of insurance, and picture identification and paying all applicable fees
- Report the vehicle as sold to the Division of Motor Vehicles. This can be done by choosing one of these options:
- Online. Use Utah’s Motor Vehicle Portal—MVP.
- By mail or fax. The written notification must include the vehicle year, make, plate or vehicle identification number, and the owner’s signature. This notification can be sent to:
Division of Motor Vehicles
P.O. Box 30412
Salt Lake City, UT 84130
Fax: (801) 297-3570
- By phone. Contact the DMV at 1-800-DMV-UTAH