Buying a used car in TX

You've got it pretty much figured out.

You won't get a title if it has a lien. Go online and get the forms you'll need, as I recall the seller will have to sign a document about mileage. Get it insured, then inspected, then take all the paperwork to the Tax office and pay the tax.

Www.txdmv.gov has all your answers.

 

You will need to do an Out of State inspection to be able to get it registered in Texas. That is done at a local site of your choice in Texas. The title will need to be transferred out of the sellers name into yours and a Texas title registered. This could take 6 weeks or so to get transferred. Just have it insured and take the new title to the title office and they can you you good to go with new Texas plates in a matter of minutes. You will run on a temporary tag until you get it registered. I would go to the local title office and let them look everything over to see if they can shorten the process. Most work with you very well......

 

I could be wrong but I don't think the inspection has to precede the title transfer and getting plates? I titled 2 cars recently and they didn't ask for proof the inspection was current. But these were already titled in TX so maybe different if car comes from elsewhere.

 

If you just want standard issue plates, they hand you license plates and a registration sticker at the tax office. Put those on and you can drive immediately. The titles took about 4 wks. One of the cars I ordereda texas tech personalized plate and it took 3 weeks, they gave me a temporary paper plate in the meantime to drive with.

 

You will need the original title as well as a Texas title application ( it has blanks for mileage and sales price among others) signed by the seller. Before going to your Harris County Tax Assessor, you will have to get the car inspected at any vehicle inspection station, but make sure you ask for a "green sheet" (it is isn't green anymore). The only other thing the tax assessor will need is your evidence of insurance. They will collect the registration fees and sales tax and give you your permanent license plates at that time. The actual title will come to you from Austin in two or three weeks.

 

And the state tax will be 6.25%. At least in Harris county as they don't charge any of the local taxes on cars.

 

6.25% tax on a number that THEY decide on, has nothing to do with actual sales price. Is more of an NADA type price that's pre-established.

 

You've got it. You have 20 working days from the date the car enters the state (or the date the seller signs the title application) in which to get all this done. So, you can drive the car in Texas with registration from another state during that period of time.

 

For exotics they often have no information in their system about value. I bet they will tax you on whatever you state was the sales price. Have a bill of sale handy in case they ask for proof.

 

Apropos to very little... I recently bought a car at a city auction and the tax assessor made me pay the sales rltax on the book value (3x what I paid). I had a check in the mail a few days later with a note saying "sorry we should have only charged you tax on the purchase price not book value.“ I was stunned at the honesty.

Not sure if the tax basis that had anything to do with it being a city auction vs some other type of auction. Maybe since it was an auction that overrode the book value?

 

It could work that way. 11 years ago. With no bill of sale requested.

 

As to a lien on the car, it depends on the state in which it is currently titled. Texas is a title holding state, meaning that the lien holder gets the original title and holds it until the lien is paid off. The car owner gets a copy, which is not valid for title transfer. When the lien is paid off, the lien holder signs off on the lien on the front of the title and gives it to the car owner. The owner can then file with Texas to get a new title without the lien holder shown on it. Oklahoma, however is not a title holding state. The owner gets the original title with a lien shown on it. When the lien is paid off a separate document indicates that the lien is released. So, it depends on the laws of the state where the car is titled. Nothing in life is easy.

 

He signs the old Texas title, and there is also a Sellers Form you both fill out and you go pay sales tax to get your plates transferred to your name, or new ones..IIRC you give them the old title, you have the receipt for sales tax, and they mail you the new title.

He won't have a clear title if there is a lien, the lien holder will be shown on it.

 

They have everything in the data base, and you will pay on full retial even on a basket resto car.

A guy at the salvage yard looked up my steel 76s and was right on....

They know what is worth...I wouldn't try to be cute, Bill of Sale or not...

 

I would think sales tax would be based upon the transaction price of the asset, not its retail or wholesale value in the open market. The only exception I could think of would be if the transfer of title was the result of a donation, a gift or between related parties. Then, they would tend to fall back on a minimum tax amount calculation.

The only time the open market value of the car comes into play would be an area that collects annual taxes on personal property. I remember years ago (the 1990s I belive) the City of Dallas use to send me an assessment notice and a tax statement for my personal car. It was not much and eventually the tax bills stopped as the value of the car fell below their minimum amount.

Good luck with setting this up.

Cheers,

Dallas, Texas
1994 Alfa Romeo 164 LS

 

It has nothing to do with transaction price, it's based on an NADA-type valuation. They tell you what the tax is, and don't care what you paid for it. At least that's how it worked 2 years ago when I bought a private party car.

 

This is what happened when I bought a car last year as well. Paid $1800, taxed on $4300 "value". How do they get by taxing on more than an actual sale price??

 

They are taxing "across the board" at NADA values...

It just does not recognize sweetheart deals, nor restoration projects, which on older classics could be quite the spread.

 

Texas was tired of getting cheated out of sales tax revenue on under-reported prices for used cars. Many buyers and sellers colluded to lower the price on the bill of sale, or the state bill of sale form. in around 2008, the state changed the taxes calculated to a 'Standard Presumptive Value' for the car, based on year built, and mileage. There is no adjustment for condition. You may check what the SPV is with your VIN here:

http://www.txdmv.gov/vehicles/titles/std_presumptive_value.htm

However, and it is a big however there is a way around this. First, when you buy the car use a bill of sale form that is universal, and preprinted. It will have as a minimum the sellers and buyers info, the VIN, year, make, model, and color of the car, and the price paid with the date. All this info must be present. Next, take the car, or have the car appraised using the correct appraisal form from the Texas DMV (VTR-125), in addition to the appraisers form. Appraisers must be qualified by the Texas DMV.

Take the pre-printed bill of sale, and the appraisal form when you first apply for title to the car in Texas. It is critical that you tell them right at the start that you have a bill of sale, and an appraisal from a qualified appraiser to define value. These two items taken together override the SPV that Texas defines. It can save you hundreds of dollars in taxes. An appraisal is between $65-125, and must be from a qualified TX auto appraiser.

<edit: there is one other situation where the bills of sale value is used. If the car is not in the database of the SPV, then the DMV is required to use the bill of sale price, provided the bill of sale has the correct vehicle info in it. The SPV database does not have some Euro delivery cars based on VIN.>

 

Great post. Thanks for the info!