KCBD, NewsChannel 11 Lubbock |Used Car Sales to Change in Texas
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Starting Sunday, used car sales between individuals will start making more money for the state. That is because a new state law kicks in on Sunday, requiring buyers to pay sales tax on what a used car is worth, not what it's sold for.
Used cars sold by licensed dealerships will not be affected. What is changing is when folks sell their used cars themselves. Right now, if you sell your car, the buyer pays sales tax on whatever price you and the buyer agree upon. For example, if I were to buy a used car from my neighbor, and we agree on a selling price of $2,000, right now, I would pay sales tax on $2,000. Using the state's current 6.25% sales tax, that comes up to $125.
Starting Sunday, the sales tax will be based on the car's Standard Presumptive Value, similar to the Kelley Blue Book value. Buyers will only be taxed on 80% of the total value. So, let's say the car I bought for $2,000 is actually worth $5,000. 80% of $5,000 is $4,000. That's the amount I would pay taxes on. The state's 6.25% auto sales tax is not changing, so take $4,000, multiply it by .0625, and I would owe the state $250. The new formula requires me to pay double the amount in sales tax.
"There are some exceptions. If it is a gift, there will just be a gift tax. If it's and even trade, there will be just an even trade tax, but if it's a salvage, then there are some exemptions on that. Also, if the vehicle is over 25-years-old and eligible for classic or antique plates, then you will not have to pay on the S.P.V.," said Lubbock County Tax Assessor-Collector Barbara Brooks.
If you do not agree with the S.P.V., you can get a certified appraisal. The legislature passed the law to ensure that all Texans pay their fair share of vehicle sales taxes. The S.P.V. will be used on cars, trucks, vans, motorcycles, and motor homes. It will also be used on vehicles purchased out of state. The additional revenue collected will help fund local schools.
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