How to side step state sales tax, sort of

Planning on buying a car from my mother-in-law's work. The company she works for leases vehicles for their sales reps. When they come off lease, the rep is allowed to buy it. Unfortunately, only the employee can buy it. One of her coworkers has been kind enough to help us out. We wrote him a check for the car, and he's going to cash the check and turn around and buy the car. He's then going to transfer the vehicle over to us. My question is how do I get out of paying sales tax twice? In Ohio, you can only gift a car to a relative, & I don't want to put her co worker in the position to lie about it. Any thoughts?

Buy the car for $1

Pay the balance for something else...

I thought about that idea. A guy I work with said not to do it. It raises a big red flag, & they'll give me a hard time.

There is a limit of $12,000 annually in Ohio for a single person to give away as gift. And if any tax is due on the gift, it is paid by person who makes the gift and not the recipient.

The IRS also allows you to give up to $13,000 in 2009 and 2010 to any number of people, every year, without facing any gift taxes, and without the recipient owing any income tax on the gifts.
-Turbo Tax

Some more FYI:
You and your spouse together can give up to $26,000, per year to any number of individuals.

You can give up to $1 million in gifts that exceed the annual limit—total—in your lifetime, before you start owing the gift tax.

If you have 1,000 friends on whom you wish to bestow $13,000 each, you can give away $13 million a year without even having to fill out a federal gift-tax form

I don't think gifting money and a vehicle are the same thing. The snag for me is getting the title. I think I've got it figured out though.

Since this guy is violating company policy, in spirit at least, don't do anything that is going to make anybody ask questions and wind up getting him fired.

Why isn't your mother in law buying the car?

Titles are easy, you can write anything you want on there if the seller is cool with it. Just write $500 on there the tax won't be much at all. If they say anything, just say, it's in pretty bad shape. But they won't. You're buying a car, paying the tax is part of the expense.

can't your mother in law buy it, and gift it to your wife?

curtis97322 said:

Buy the car for $1

Pay the balance for something else...

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When he goes to the DMV they may base the tax he owes on the fair market value of the car. They do that in MD so people cannot do the $1 thing. I hate how greedy the damn government is.

I like being in a non sales tax state....

curtis97322 said:

I like being in a non sales tax state....

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Ya its nice but they usually get the money from you somewhere else. I really feel that the sales tax on a used private car sale isn't right. Just think how many times the state gets tax on that car once for every penny when new and then again on the same amount of residual worth when sold again.. So that car can be taxed any amount times.

Any gift, either monetary or material is giftable. You can gift clothing and even car to charities, family, & friends (even strangers) and you may right it off on your state and federal taxes. The gifter may write it off on their taxes as a deduction and the giftee must pay taxes, if applicable.

Skins_Brew said:

When he goes to the DMV they may base the tax he owes on the fair market value of the car. They do that in MD so people cannot do the $1 thing. I hate how greedy the damn government is.

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Not so in Ohio. (Seller) Writes whatever they want. You agree of course that "that's what you paid for it" Pay taxes on that amount.

Since this guy is violating company policy, in spirit at least, don't do anything that is going to make anybody ask questions and wind up getting him fired.

Why isn't your mother in law buying the car?

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It's pretty common for employees to do this at her work. 4 other people asked to buy his car also. He surely won't get in trouble. The company just doesn't want to deal with any outside liabilities, I guess. Mother-in-law can buy a car, but she wouldn't get the particular car we want.

Snyder said:

Mother-in-law can buy a car, but she wouldn't get the particular car we want.

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Is it a seniority thing or she just wouldn't buy you the car you want because she doesn't want you to have it?

First, the company orders a base model car. If the rep wants, they may add on options: leather, sun roof etc. with their own money. How it works is the rep gets 1st dibs on their own car. Then everyone else in the company get an opportunity to purchase a vehicle. For example, my mother-in-law could pick from a camry, vibe, or outlook. The company would give her a price for one. She wouldn't get to pick from color, extra options etc. Plus because we know this rep, we have the advantage to know what maintenance has been done on this particular car.

That's a pretty cool setup.

My wife has the same set up. We always buy the car she gets the last one is a 07 Dodge Charger. She had the navigation put upgraded the radio and blue tooth . We just bought the car for 8400 last fall .

She now has a 2010 Ford Escape now that she order some extra's in also we will most likely buy that one too if its a good car.