New ‘liar’s affidavit’ aimed at auto sellers

No, I’m not talking about the oft-maligned used-car salesmen.

I’m talking about you, me and the guy down the street when we buy our cars from each other instead of a dealership. According to state officials, person-to-person deals account for around one-third of used-car sales in the Lone Star State.

A new Texas law that takes effect today, Oct. 1, is designed to stop the shorting of tax collection on autos sold via such private transactions. 

You’ve seen the classified ads: "For sale. 2000 Chevy Cavalier. Great condition (recently tuned up). Low mileage. A steal at $4,000."

When the used-Chevy buyer registers and titles the auto at the county tax assessor-collector office, he pays a 6.25 percent motor vehicle tax.

But Texas lawmakers were concerned that cars sold privately often go for too little, thereby reducing the tax take. So they enacted the standard presumptive value (SPV) requirement, which has been given the catchy moniker of "liar’s affidavit," to make sure that the vehicle’s real value, not just its sales price, is reported for tax purposes.

This basically means that regardless of what you pay for an auto you buy from an individual, the state reserves the right to reassess the vehicle’s value and then collect tax on 80 percent of that state-approved price.

Take, for example, the for-sale Chevy cited earlier. You agree that four grand is indeed a good price, call the eager seller and close the deal.

Kelley Blue Book, however, says a 2000 Cavalier is worth $6,770 and the tax collector agrees with the automotive pricing publisher.

Actually, the Texas Department of Transportation determines the value of each vehicle separately. The state has a calculator that uses the vehicle’s VIN and odometer reading to figure how much it is worth. Values are updated monthly. But for our illustration purposes, let’s go with the KBB price.

So now, instead of owing $250 in auto tax ($4,000 x 6.25%), you’ll have to pay $338.50 ($6,770 x 80% to arrive at the SPV of $5,416, which then is taxed at 6.25%) when you title your new-to-you used auto. 

That $88.50 difference will definitely not sit well with a lot of potential buyers. Even with today’s gas prices, you could fill up the Cavalier three times with what you’ll now have to hand over to the tax collector.

If you disagree with the state’s valuation, you can get your own appraisal from an auto dealership or a licensed insurance adjuster within 20 business days of the sale and challenge the tax. But make sure that such a move is worth it. Appraisals could cost from $100 to $300.

Will the SPV requirement last? We’ll see.

State officials estimate that the "liar’s affidavit" will generate $35 million annually. But the cost in used-auto buyer, aka voter, goodwill might be much more.

Kansas passed a similar law a couple of years ago. It was repealed after just one year because Sunflower State residents complained that they paid excessive sales taxes.

You can get the official word, including exceptions to the SPV rule, at this Texas Comptroller of Public Accounts Web page.

More motoring: If you’re interested in buying a used car, from a private seller or a dealer, then you need to click on over to Tapscotts Behind the Wheel  for the latest Carnival of Cars.

One of the items in this week’s car-news compilation is part two of The Garage‘s used car shopping tips. Mark also brings us insightful bloggings on electronic tracking devices for the teen driver in your family, the challenges facing any possible Renault-Nissan-GM alliance and, on the lighter side, nicknames for auto industry powers-that-be.

Mark also was kind enough to include my Swainson’s hawk sighting, made while on my driving trip across West Texas last month.

So click on over and take your own journey through this week’s Carnival of Cars.

Time’s up for Toyota tax break: Or at least for the full tax credit if you buy one of the Japanese manufacturer’s hybrid models.

Starting today, any Toyota hybrid you purchase will get you only half the original tax credit (as discussed in this previous entry) when you file your 2006 federal return.

Since we humans tend to be a reactive species, I suspect there wasn’t a big rush to Toyota dealerships yesterday by folks looking to buy a gas saving, but typically more expensive, hybrid.

Also reducing the fuel-efficiency urgency: As soon as the summer driving season ended on Labor Day, gasoline pump prices fell. Coincidence? Well, that’s a topic for another whole blog … .

Even before then, though, the Autoextremist reported that hybrid fever seemed to be cooling. In the blog’s 2006 Alternative Fuels and Vehicles Survey, published in July, Autoextremist found that hybrids were losing steam.

If, however, you still want a hybrid, you’ll get a least some tax relief from a Toyota model and full credits on all the IRS-approved hybrids from Honda, Ford and GM.