The Expert Podcast

So you've read about it, you've heard about it, and you want to know whether or not the Vermont loophole for bill of sale titles applies in your state. Can you take the Vermont registration and switch it over in your state? Are they going to give you a hard time?

Well, there's not any one particular state that, on any given day, is going to give you a hard time. However, you have to remember that this Vermont loophole is not a secret. This has been out there for more than 10, 15—really, almost 20 years. It's been written up in many articles, many automotive publications. Even large insurance companies like Hagerty have mentioned this, so it's a very popular, common thing.

For that reason, the DMVs in all 50 states know about it. They're not stupid; they know that this exists. So what you're going to find is if you're using this to evade or to avoid a requirement in your state, your DMV is not going to like that. Most states require that you bring an old title to get a new title, and if you're trying to evade that by going to Vermont to get a registration to use that for a title, your state might not like it. It might be legal, it might be allowable under the law, but it doesn't mean that your state DMV either knows about it or isn't going to have a hard time with it.

If you walk into your DMV with a registration from Vermont that has your name and address on it in your state, they're going to ask you questions. No states on a consistent basis flat-out reject it. At any given time, there's always going to be two or three states that say, "We don't take these." For a while, it was Indiana. A couple of years ago, it was Hawaii. Recently, it's been Florida. There's always a state that says, "We're not doing this," but after some period of time, they usually change that policy and go back to accepting them.

So you're not going to know on any given day whether or not your Vermont registration is going to be accepted by your state. It could be the day you walk in the door, and maybe it's that one agent at the DMV, maybe it's that one branch at the DMV, or maybe the commissioner of your state has said, "We're not doing these right now," so you're not going to be able to get it done at all.

What do you do? Well, the first thing is, before you go through the Vermont process, look to see if it's even really the best way to go. Remember, if you use the Vermont loophole that people call it, two things happen. First of all, you have to pay sales tax on the vehicle to the state of Vermont. You might be thinking, "Well, it can't be that much because my car is a 1970 Camaro, and I only paid $200 for it." They don't go by what you paid; they go by what the book value is, and they pick a very high book value at the Vermont DMV.

Why do they do that? Well, it's because they make money off it, and that's their law. The laws on the books say that in order to get a registration from Vermont, you have to pay sales tax based on the book value. That's number one. Number two is you have to pay their registration fee and wait a couple of weeks to get the license plates and registration. Then you have to go to your state and pay the fees to your state.

So why not just go directly through your state? You might be thinking, "Well, because they have extra requirements." Are the requirements any harder than going through Vermont? Usually, they're not. Usually, you can go directly through your state. A lot of times, people think their state is very hard to deal with at the DMV and that it's a pain in the neck, but all the states are the same. The only reason why you think your state is hard is because you haven't dealt with the other ones. The requirements for getting a title are pretty much the same nationwide.

The Vermont loophole could be used, and people do it all the time. However, at the end of the day, you have a risk of your state—or even an agent at your DMV—saying, "No, this is not a title. This is only a registration. Get out of here," and you have to start over. Especially if you are a resident of that state and the vehicle was last titled in that state recently, they're going to look at it like, "Yeah, this doesn't make any sense."

So it's possible, but you're not going to know if it's going to work until you've already paid all the fees to Vermont to get your registration. Then, you might find out they're not going to accept it. Then what do you do? Now, you have to do the process in your state anyway—whether it's a bonded title, magistrate title, court order title, or lien title. There are other ways you can get a title without using Vermont, but you're not going to know that.

Your state may give you a hard time, or they might make it easy. You're not going to know until you present it. Now, can you call in advance and ask them? Well, you could, but that information is not really going to help you. They might say, "Yeah, no problem, we will take the Vermont registration," and then two weeks later, you go there, and they say, "No, we're not taking this." You might say, "Well, I called two weeks ago and talked to Joe Schmoe." "I don't know who you talked to, but we're not taking it."

A phone call is not going to give you certainty about whether they'll accept it. They might say, "No, we don't take these; we only need a title," where, in fact, if you bring it there, it might still work. So a phone call in advance may or may not get you valid information, so take it with a grain of salt.

What we recommend doing is, before you consider doing the Vermont loophole, look at the options you have directly in your state. In many cases, by the time everything is all done, it'll be faster, cheaper, and even easier than going through Vermont. A lot of times, people say they want to do Vermont because they feel it's like a loophole, or they're getting over on somebody, or getting away with something. In reality, sometimes it's harder than if you just had persistence with the other process.

We had an example of a client who called up recently. One of our salespeople talked to him for probably 20 minutes. What they had was a kit car—a kit car where they purchased a kit from a company and assembled it. They had a serial number on the frame that they got from the kit car company, and they wanted to get a title for this newly constructed car. However, their state required bumpers and windshield wipers for it to qualify as a vehicle.

To try to evade this inspection requirement, they wanted to go through Vermont to get a registration and then switch it over. The reality is that, first, they would have to pay tax to Vermont. Vermont would see that serial number as a kit car and might have additional requirements. They couldn't get it inspected in Vermont anyway since they were out of state. Then, when they brought it to their state, it would still have the same requirements. So, a lot of times, you just go around in a big circle.

Certainly, people do this all the time, and certainly, it works a vast majority of the time. We estimate that probably 60-75% of the time, this process works just fine. In some states, it works 100% of the time. But just be aware that you might be the one who goes to your state and gets rejected—and then you're back to square one.

So really consider the other options. If you want to do Vermont, you have that option. People do it, and you can follow the same procedure. But don't disregard other methods just because they might seem, on paper or at the beginning of the process, to be more difficult. By the time you go through everything, Vermont might not be the best way to go.

Good old Vermont is always a standby, but there are downsides to it that you might want to consider. Look at other, more direct, and even more accepted options by your state.