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How To Calculate Sales Tax for Vermont Title Loophole

When using the Vermont title loophole, one common mistake applicants make is incorrectly calculating their sales tax amount. The reason for this error often lies in simple misreading and misunderstanding of NADA book values – which can lead to overpaying or underpaying on taxes.

The National Automobile Dealer’s Association (NADA) is the largest publisher of auto market information and provides value references to dealers across the country. The Vermont DMV statutes state that to determine the taxable cost of the vehicle, the applicant must use the NADA clean-trade in value of the vehicle. Other than the clean trade-in value, the NADA also references other values:

Rough trade-in

Reflects the value of a vehicle in rough condition such as significant mechanical defects, significant repairs required to restore reasonable operable condition, cosmetic damage that has considerable damage, or the vehicle will need significant repairs before resale.

Average trade-in

Reflects the value of a vehicle in average condition. The vehicle is mechanically sound but has imperfections that need to be repaired before passing all necessary inspections. The vehicle has a clean title history but will need some repair/servicing before resale.

Clean trade-in

Reflects the value of the vehicle in clean condition. The vehicle has no mechanical defects and would easily pass all necessary inspections. The vehicle may have minor surface scratches and the interior has minimal soiling with all internal parks working. The vehicle has a clean title history and has minimal adjustments needed before resale.

Clean retail

Reflects the value of the vehicle in clean condition. The vehicle has no mechanical defects and would easily pass all necessary inspections. The vehicle may have minor surface scratches and the interior has minimal soiling with all internal parks working. The vehicle has a clean title history and no additional repairs or adjustments are needed before sale.

The NADA also states regarding each value definition, “Because individual vehicle condition varies greatly, users of may need to make independent adjustments for actual vehicle condition”. Reference to valuation definitions as defined by the NADA found here

How to calculate sales tax

Once you’ve determined your NADA book value, you will use that figure to calculate the sales tax owed. Sales tax is always due at the time of registration. Calculating the amount of sales tax for using the Vermont title loophole can be done using this formula:

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

Example: $5,000 value x 6% sales tax = $300 sales tax owed

If your sales tax is calculated incorrectly, it’s very 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. Your application will be refused by the Vermont DMV if you send in your application without the proper sales tax and registration fee. By submitting the application for title, you are providing evidence that you are liable for paying sales tax.

Vermont dealer appraisal request

If your car’s value is significantly different from the book value due to damages or other conditions, an appraisal may be to your benefit. However, it’s important to consider the costs that will be incurred by the appraisal process. If the appraiser charges $400 but saves you $400 in taxes, you didn’t really save any money on the transaction. You won’t know how much you’ll save until the appraisal is complete and the appraiser still charges even if they bring down the value of the vehicle. We only recommend using the appraisal process if you have a very high-value vehicle or you have reason to believe that there is a significant difference between the book value and your vehicle’s value. Remember, you cannot register a parts-only vehicle using the Vermont title loophole. If the vehicle’s value is low due to it being mechanically inoperable, it is ineligible for this process.

An appraisal must be done by an approved Vermont licensed dealer and accompanied by the Vermont Dealer Appraisal Form. If you paid taxes and want to request a refund, you can send in a referral within 30 days of your payment. If you reside outside of Vermont, finding a licensed Vermont dealer could be a problem. However, there are many appraisers in other states who have nationwide appraisers licenses. Appraisers often travel to various states to appraise vehicles in specific situations so many are licensed nationally. Some states also have appraisal licenses that have reciprocity in Vermont.

Using comparable publications

The Vermont statutes are clear to use the NADA or comparable publication to determine the book value. If you can show that a particular book has more sales data that goes into a particular value than NADA, you may be able to use this alternate book value instead. If you want to make sure that your application gets processed the first time, use the NADA value. Don’t arbitrarily pick a low book or low value, your application will be rejected and you could face issues with the Vermont DMV. When submitting your application, always include a copy of the page of the book used for your valuation. If you feel that your book value is incorrect, contact an appraiser to discuss your options. Don’t write a letter to the Vermont DMV or call them to discuss the value, the Vermont DMV will only take the appraiser’s opinion of value as valid.

The Vermont title loophole is a great way for drivers to title their vehicle that is 15 years old or older. When pursuing this method to obtain a title, make sure to properly calculate your sales tax. Looking for more tips on using the Vermont title loophole? Check out this article listing the Top 5 Tips for Success Using the Vermont Title Loophole. For assistance with your paperwork, and to get started with this process, click here!

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