The Expert Podcast

Today we're going to talk about two of the most common questions that we get about the Vermont registration bill of sale process that many people like to try to use for their vehicle. The two questions are: Can I use this if my vehicle is a shell or not roadworthy or in parts? And how much tax do I have to pay? How can I reduce my amount of taxes? Do I have to pay tax on what I paid for it if it's in that good condition? And how does that all work? So let's take a closer look.

Before we do that, remember that this Vermont process is only one of 10 different ways you can get a title. Many times, people gravitate to this Vermont—what they call a loophole—because they think it's going to be some sneaky way to get a title. It may not be the best way. In fact, in many scenarios, there are way better ways to get a title than this Vermont process. So before you even look at this, look at all the different methods. Our website will describe all of them. Many of them are cheaper, you don't have to pay tax at all, they're quicker, and they're more direct with your state.

So let's first talk about vehicle condition. This is the Vermont VD119 form. This is the official form that is entered for the Vermont process. We've talked before about how to fill this out and the best way to get it so it's approved because not all of them get approved and what other documents you need with it. You can't just send this in by itself—you have to fill this out properly. We recommend typing it, don't handwrite it. We also recommend putting some marks in the margin so it's processed automatically—we've talked about that in other videos.

So what about condition? Right where you sign it, right here: "Signature of owner applicant must sign in ink." They don't do electronic, fax, email, text—nothing. Statements herein are certified under penalty of VSA. That means you're signing this under penalty of perjury—you're swearing under oath that this is correct. The owner certifies that this vehicle, one, is properly equipped in good mechanical condition. That's all you have to know right there.

If your vehicle is a shell, if it is in parts, if it's not running, if it's not safe for the road, if it is smashed up—you can't register it. Now, they're going to take your word for it, but there may be triggers that come up that make them aware of the condition, and we'll talk about that a little bit later. But the first thing you have to do when you sign it—and most people don't even read this—is certify the vehicle is properly equipped, good mechanical condition. End of story. If it's not in good mechanical condition and properly equipped, you can't register it.

The reason that's important is because many people don't want to pay sales tax on a bucket of parts when the vehicle is being taxed at a value of a complete whole vehicle. What they'll do is they will take pictures of their car and they will write a letter saying, “Hey, my car's all taken apart and it's not worth the value that you're saying it's worth.” And we'll talk about how to value it in a moment.

They'll write a letter. Well, Vermont DMV will now write you back and say, “Oh, thank you for letting us know about your condition. Not only will we not change your taxable value, but now since we're aware that your vehicle is in parts, we won't register it at all—even if you pay the tax—until you get it inspected.” Many times, you have to get it inspected in Vermont, so that's going to defeat the whole purpose.

In addition, it says you have to have current liability insurance. Again, they're going to take your word for it, but if it turns out later it wasn't insured, that could be a problem. So hopefully that answers your question about the condition of the vehicle.

We'll talk about taxes here in a minute. If you're trying to register a vehicle that's in parts or a project car—just not complete—then this is not the way to go because there are going to be things that come up that could indicate to the state of Vermont that this vehicle is not eligible for registration. Remember, you're not applying for a title, you're applying for registration. Vermont does not title vehicles that are 2007 or 2008—pretty soon—and older. They only give registration. But in order to be registered, it has to be properly equipped and in good mechanical condition.

There are ways to get a title for your vehicle, but not through Vermont. You have to do that through your state or through some other process. Many times it's better to do that than try to leapfrog through Vermont and pay the tax and everything else.

How much tax do you have to pay? Well, it's pretty straightforward. Here is the Department of Motor Vehicles for the state of Vermont: sales tax, purchase and use tax. Purchase and use tax is due at the time of registration at a percentage of the purchase price or NADA clean trade-in value, whichever is greater. Whichever is greater—those are the key words.

When you pay your tax, it's based on what you paid for it or the clean trade-in value, whichever is greater. So if you paid $500 for the vehicle—maybe because of condition, maybe you got a good deal, maybe the seller discounted it because it had no title—that's why you got it for $500. If the book value shows $10,000, that's what you're paying tax on.

Now, it says here NADA—National Automotive Dealers Association—that is one book value that can be used. That's the one that is mentioned here. However, there's a little bit of a loophole there: the state of Vermont actually may allow different books to be used. There are 11 different book values: there's NADA, there's Galves, there's Auto Price Look Book, there's Blue Book, there's Black Book, there's MMR, there's Auto Price Lists—there's many books.

You may be able to use another book. That's a subject of another video. When we do our tax calculations for clients, we look at all the books to see which one is the lowest amount that Vermont will still accept. NADA may still be the lowest amount, but we'll look at all the books based on the year of the vehicle, what type of vehicle. Sometimes you can use another book that might save you some money on taxes. But you notice it says here NADA—National Automotive Dealers Association—but the actual statutes for the state of Vermont actually have some different wording.

So tax—real simple: whichever is greater, whichever is greater, whichever is greater. That's the key to this whole thing. And that's right from Vermont DMV.

Question is: do you have to pay it twice? Well, you can claim a tax credit. If you already paid sales tax to another jurisdiction, they'll give you credit for that. No additional tax will be due if the tax paid is equal to or more than the Vermont tax.

Now, if you paid an amount of tax in your jurisdiction already that’s less than Vermont, you have to pay the difference. And in most states, it works in reverse as well. If you pay the sales tax—NADA clean book value—to Vermont and then you bring it to your state to exchange for a title, if your state has sales tax that's higher than Vermont, you'll have to pay the difference to your state. Most states give you a credit. You have to verify with your state, but that's how most states work with sales tax.

Now, what if you believe the vehicle's value is less than NADA value? You may submit a Vermont dealer appraisal form—we provide that with our packages to our clients. There's a process for that. It's very important how you do it. You want to be very careful in submitting that because it could trigger some problems with your application. And you don't want to just send in any appraiser like the body shop down the street because that could also create problems for you registering the vehicle.

It's usually not worth doing because in most cases what you're going to get it appraised for by any legitimate appraiser is still going to be close enough to the value of what's in the book. For example, if let's say the book value is $10,000 and you get an appraisal for $6,000—well that saves you $4,000 on taxable value. Well, times 6%, that's a couple hundred dollars you're saving on taxes.

Any legitimate appraiser that will be accepted by Vermont DMV—they're going to charge you $300 or $400 for the appraisal anyways. You can't just have your brother Bob who works at a body shop do an appraisal. They have to have a very specific type of an appraisal license. And unless you're saving $1,000 in taxes—not $1,000 in value but $1,000 in taxes—it’s not worth doing the appraisal in most cases.

We'll provide you with the form, we'll give you instructions on how to fill it out, who to get to fill it out, but in most cases, unless—you know, we had a client a couple months ago that had a $106,000 European imported sports car and this car had a book value that was $100,000, but the condition, even though it was running and driving, only put it into the $30,000 or $40,000 range because it was in rough shape. That appraisal was worth doing. The appraisal cost $1,000 for that car, but it saved them several thousand dollars in sales tax. So in that case, it was worth doing.

There's a lot of details with this. If you want more information, you can reach our website car titles.com. We also have title consulting available.

Remember two things—the two takeaways: whichever is greater and properly equipped, good mechanical condition. Those are the big takeaways from the Vermont process that all potential applicants should be aware of.

Whether we do the forms for you or you do it yourself, either way we're glad to be part of your solution. We're glad to give you this information and advice—but use all of it. Don't just try to wing it. Don't just try to fill out this form yourself without watching our instructional videos. Because look—we talk to Vermont on a regular basis and they tell us all the time: a large number percentage of the ones that people fill out get sent back. And that's just going to cost you time. You have to wait weeks for this to happen, and sometimes when they send it back it's a permanent cancellation of your application—you can't fix it.

Some of the errors you might make will make your vehicle ineligible for a title, and you don't want to do that. So make sure you watch our videos. You don't have to pay us, you don't have to have us do it—we're glad to, we like doing it for people. But if for some reason you want to do your own work and be a DIYer, that's fine. But definitely watch the videos. It gives you good instructions, it gives you good feedback, and we update them on a regular basis—just like this one with taxes and condition.

Because we've received a lot of calls. We get 800 or 900 calls a day. A lot of them are asking the question: “Hey, can I do this if my vehicle is just a shell, if it’s just parts?” Well, properly equipped, good mechanical condition—that's the thing to take away from it.

Let us know what you think in the comments. Have any questions? Put them there and we'll put them in our next video.