Calculating Sales Tax Using the Vermont Title Loophole

One of the most common mistakes that vehicle owners make when using the Vermont title loophole is miscalculating their sales tax amount. The reason for this error is often simple – the applicant used the wrong NADA book value for their vehicle. Choosing the wrong NADA book value not only misrepresents your vehicle but can also lead to overpaying or underpaying on taxes.

Determine the book value

The Vermont DMV states that to determine the book value of a vehicle, the applicant must use the Clean Trade-In value outlined by the National Automobile Dealers Association (NADA) commonly referred to as the “NADA Value”. The book value of your vehicle is how much the vehicle is worth and how much it would cost to replace it entirely. When determining your NADA book value, be sure to choose the lowest possible value to avoid overpaying in taxes. Some older model vehicles may not have a clean trade-in option outlined by the NADA. In these cases, you may be able to utilize a comparable book such as Kelley Blue Book to determine the value of your vehicle. 

Calculate the sales tax

Once you’ve determined your NADA book value, you will use that figure to calculate the sales tax owed. Sales tax is due at the time of registration and is calculated using the NADA value or the purchase price, whichever is greater. Calculating the amount of sales tax for using the Vermont title loophole can be done using these formulas:

NADA book value is greater than the purchase price

(NADA value) x (6%) = Sales Tax Due

NADA book value is less than the purchase price

(Purchase price) x (6%) = Sales Tax Due

If your sales tax is calculated incorrectly, it’s likely that your application will be rejected. If it’s not rejected, but the sales tax amount is too low, you’ll receive a revised invoice for the remaining balance within 15 days.

Dealer appraisal request

In some situations, the applicant may believe that the vehicle’s value is lower than the stated NADA value. If so, the applicant may submit a Vermont Dealer Appraisal Form. The purpose of the appraisal process is to ensure that the fair amount of tax is being paid by the applicant for the vehicle they are registering. 

Looking for additional tips for using the Vermont title loophole? Check out our article here on the top 5 tips for success. For assistance with your paperwork, learn more about our Bill of Sale only title utilizing the Vermont title loophole here!

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