Gift or Sale?
If a vehicle is transferred without consideration, it is considered a gift. Both seller and buyer need to sign an Affidavit of Gift stating under penalty of perjury that there was no exchange of anything of value for the vehicle. Gifts are not restricted to just family members. Whether or not there is an implication on your income taxes as either the gifter or the recipient is question for a tax professional.
In order for a vehicle titled in another state to be classified as a gift:
1. Vehicle must be titled in a state reciprocal with PA for sales tax.
2. Proof of sales tax paid in prior state. (Dealership bill of sale itemizing purchase price and sales tax or written verification from DMV.)
3. Affidavit of Gift signed by seller.
NOTE: If unable to provide necessary documentation for out of state gift and the applicant decides to list a nominal purchase price instead, they can expect a letter from the PA Department of Revenue seeking additional tax based on the fair market value of the vehicle. See Fair Market Value info.
What is listed as the purchase price is between you, the seller and the buyer. Our responsibility as an agent is simply to calculate sales tax based on the price stated and sworn to by sellers/buyers, and when necessary, complete an Affidavit of Fair Market Value, which acknowledges the purchase price and what the state believes to be the fair market value for the vehicle.
The PA Department of Revenue has a department dedicated to further research of sales transactions flagged for being considerably less than what is deemed to be fair market value. If flagged, the buyer can expect to receive a letter in the mail that will assess more tax if they can not demonstrate why the purchase price is less than expected. We recommend all of our customers getting a bill of sale for their transaction and making sure they keep contact info for all parties.
NOTE: Even if bill of sale is provided to PennDOT at the time of vehicle transfer, the PA Department of Revenue will still ask for a copy to be provided. The documents provided to PennDOT are not shared with PA Dept of Revenue at the time of flagging.
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