^^ That is what I would assume, but you never know with these stupid tax laws.

 

You don't have to pay any tax unless you're selling it more than what you paid hence making a profit. Profit is income which will be taxed.

 

Vincent, I think they do it backward in this case in that they pre charge you when you buy it so "profits" from selling have already been charged a tax (@ the price you bought the car at no less)
The thing that totally suck on this "method" is that the money the auto was purchased with was already post tax money to start with.
This is not how Cap Gains work because autos generally lose value over time where as Real Estate or Stocks are supposed to increase in value, supposed to

 

Sorry, re-reading your post, I'm not sure that's the point you were even getting at

 

Correct. The rep said just to bring "proof" of the values of the two cars (e.g. KBB print outs).

Simon

 

That was my point as well. This transaction is no difference than trading into the dealer for a car that's worth less than your car.

 

Good to know.
All else fails, the B&O tax is a whopping .5% if I recall correctly (at least it is, >$100K, for our timber).

 

There are two types of taxes being now being discussed. You are discussing "capital gains tax" which is not at issue here, since no one will be selling a car for MORE than it was purchased here. CGT has two rates depending on whether the asset was held short or long term.

"Use Tax" aka "Sales Tax" is chargeable on everything sold in the state, or bought out-of-state and brought into state. (Yes, that means that you are *supposed* to declare items that you buy online, and file a form to declare the purchase and pay the sales tax. The reason online sellers do not collect the sales tax for you in some cases is that they have no "physical presence" in the state.

AlgaeHater has confirmed my understanding of how sales tax would work with a transfer between private parties. Basically, if no money changes hand (ie two like-value cars are swapped), no use tax is due (registration taxes would be due as normal). If you trade a higher-value car for a lower value car (or lower-value car and cash), no use tax is due. If you trade a lower-value car for a higher-value car (plus cash) then use tax is due on the "plus cash" amount. If you do this transaction through a dealer, it's worse because there are *more* taxes that will be levied on the transactions (as mentioned B&O, but there may be others). All you need is a "bill of sale" that clearly states what payment was received (trade-in, cash amounts) in the transaction. Having KBB (or other recognized industry vehicle valuation report), or better yet examples of similar vehicles selling price handy in case they question the BoS as suspiciously low, can help.

Note that each state has it's own secret recipe for cooking use-tax laws!