The bill of sale serves as a legal proof of a change in ownership of a car in some states. It is common to use this document when you sell a car, but you can also use it when you give the car to a family member or donate it to a charitable organization. When the car is a gift, it is important to make this evident on the form. This way, you can avoid future liability and possible penalties for the new owner.
Each state requires varying amounts of information on a bill of sale, but all need the same basic details. These include the year, make, model and vehicle identification number of the car; the names and addresses of the previous owner and the gift recipient; the date of the change in ownership; and the value of the car. Some states accept "Gift" instead of the current value of the car, along with a description of the family relationship between the parties.
The states also have varying instructions for signatures on a bill of sale. Most require a signature from the previous owner only, while others require it from both parties. In some states, the signatures must be notarized.
There are costs involved in changing ownership of a vehicle, even when it is a gift. The new owner must pay the sales tax, registration fee, title fee and, sometimes, a gift tax. Some states waive the sales tax if the gift recipient is related to the previous owner. When it is required, the tax depends on the value of the car, as given on the bill of sale. It is payable to the state's department of motor vehicles.
Donating to Charity
The process of completing a bill of sale is the same when donating a car to charity. The document should include all information necessary to describe the car; the date of the transfer of ownership; the name and address of the donor; the name of the individual representing the charity and the address of the organization. The signatures may need to be notarized, depending on the state.
Warnings and Considerations
There may be special tax considerations if the car is of great value. It is best to contact an attorney for advice before transferring ownership. It is not advisable for a seller to help a buyer avoid the sales tax by calling the sale a gift. Upon discovery, the buyer will have to pay the sales tax, interest on the tax and penalties. The previous owner must ensure that the DMV is notified of the change in ownership to avoid being held liable for any parking tickets or even a collision involving the car in the future.
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