Selling a Car: What You Need To Know About Selling Out of State, Taxes, and More

You would think that selling a car wouldn’t be a complicated process. However, the truth is that if you’re selling a car out of state and consequently outside of your home region, things may be much more complex than they would otherwise be.

The following article is here to help you understand the relevant issues so that you don’t become overwhelmed by it all. Here’s everything you need to know about this process:

Tax Implications of Selling out of the State

First of all, you need to understand the tax implications of selling your car out of state. You may or may not be obligated to pay taxes on the sale.

You should know that if you’re paying someone else to ship your vehicle across state lines, it’s considered a gift by the IRS. It means that if you’re shipping your car to a family member, they’ll be able to receive that gift without any tax implications. According to reports, the used car shipment was recorded at 102.8 million units in 2019.

If you decide to sell it directly after getting it across state lines, then the sale is considered a “deemed sale.” That means you won’t have any taxation coming from the buyer for this sale. However, there is taxation coming from the shipper and you, as the vehicle seller.

If your buyer lives in a different state and they’re paying to have it shipped directly to them, then there would be no gift tax since the car will already be out of your hands by the time it reaches their possession. In that case, the buyer will be required to pay tax on the purchase in their home state.

Depending on your situation, it can become very complicated, so make sure you do some research before you sell your car outside of your home state.

What to Do with Your Title When Selling Out of State?

If you can, you should transfer the title of your car into the name of your family member or friend who is going to be receiving it. It can make both gift and taxation issues disappear entirely.

If this isn’t possible (and sometimes even when it is), then you’ll need to send a photocopy of your title to the buyer as soon as the sale is complete.

The title should have both the seller’s and buyer’s signatures on it, as well as the date of purchase.

You’ll also need to send a bill of sale to your buyer that lists the car’s make, model, year, and VIN.

Handling the Registration and Other Documents

You should know that the buyer is responsible for registering the car in their state. It’s up to you to obtain any necessary paperwork from your state beforehand, which should include documentation of your sale and a title transfer form.

You should keep these documents with you when you go over to meet the new owner so that they can fill it out ahead of time and so that you can forward it to the new buyer. In addition to this, if your state requires a smog check for vehicle transfers, you should have had the car tested before selling it.

In most cases, all of this paperwork will be required if you’re selling a car out of state. However, there are some instances where it’s not necessary- for example, the car is being sold to a family member or friend.

You should ensure to check with your state’s regulations to be clear on what is required in your specific situation.

Shipping the Vehicle

It can be a bit tricky if you’re not familiar with it, but there are a few things you can do to make it simpler.

First, you should research shipping companies and get quotes from them to know what the cost will be. It would help if you took care of this part before you advertise the vehicle to understand what’s involved and get it done in time.

What Should You Do If You Don’t Want to Sell Your Car out of the state?

If you decide that you don’t want to sell your car out of the state, you can do a few things.

First, you can try advertising it in your local area and see if any buyers are interested. You can also find a cash buyer who will be willing to buy your vehicle in as-is condition, and then you won’t have to worry about any of the logistics involved in the sale.

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