Vehicle flipping and tax evasion

[Number Six]

Anything bought and sold can potentially be a venue for avoiding taxes. My current Subaru for example was bought for $1200 by some guys who do this, sold unbeknownst to me for $3000 after running some quick fix through the engine that later came undone. I did some research after the purchase where I spoke to the guy who sold it to them. Recourse? Since they had not registered the car but took the paperwork from the other seller apparently there would have been no way for state vehicle tax people to collect their share. This must be fairly common practice by vehicle flippers, buying sweet deals for cash and flipping them without trouble, I ran into a guy at the local auto parts place who said he sold a Subaru last week with a quick $1K profit after paying $1500. It probably doesn't make a lot of difference whether there is a check vs. cash on one of the transactions for the state to catch substantial vehicle flippers? Are there states that effectively interdict this type of tax evasion?

[Jeffrey]

Are there states that effectively interdict this type of tax evasion?

This seems nearly impossible to track.

[bmxninja357]

the tax man always seeks his due. unfortunately for him curbing cars is hard to track since the buyer turns into a middle man and does not register the vehicle. over the years here in alberta i have seen this many times. in fact i am currently driving a 1999 honda van because i bought a 2004 chevy cavalier.

i had wrote off my car and went on kijiji to look for a replacement car. i had less than a grand so there was not a whole lot of choices. i found a blue chev, new tires, new windshield, good breaks, and a standard trans. paid 800 bucks. had asked the guy about out of province and a few other things. was assured it was all good. it was not.

i went to registries and was told it was out of province and needed an out of province inspection. this is an expensive and very strict inspection in alberta. but luckily alberta has some pretty good lemon laws in case of such things. so i called this guy and got the run around and was getting no where really in getting my money back or a different vehicle. so i stepped up the game.

i went on line using the guys name and phone number and email address. i found several vehicles for sale using his email or number. i recorded them and gave this guy a text again. i told him about all the vehicles i had found of his for sale. i told him in alberta selling 6 cars in a year makes you an auto dealer and you need the appropriate license for it. i told him i could prove he has sold more than that. went on with since he is an auto dealer in alberta i have 30 days to return or exchange my vehicle. and since he is not registering the cars to avoid taxes it would be in his best interest to have me my money back or an exchange vehicle of equal value by 3 pm or i call alberta transport and report him as an unlicensed car dealer. and since he is being a dick im also calling revenue canada to report he is not paying his gst. told him he will get to pay it for every vehicle he has sold. plus penalties.

needless to say by 3pm i was on my way to register the honda van he exchanged me. lol.

and i missed something when i was telling him what would happen. i could have made him pay for the out of province inspection and any repairs that it needed to pass. it seems a bill of sale for an out of province vehicle must say on it that the vehicle is out of province. and mine did not.

i have also known several curbers. one was a german guy who laughed at how easy it was. he said canadians are pigs and there cars are filthy. he did basic tune ups and a good cleaning and gave cars about a $3000 mark up. took him on average 6 hours of cleaning. he made a bundle. all tax free.

i think the tax man just dosent have time to look for folks unless there is a complaint.

peace,
ninj

[Burnaby49]

i think the tax man just dosent have time to look for folks unless there is a complaint.

Probably right.

[Jeffrey]

i think the tax man just dosent have time to look for folks unless there is a complaint.

I know a retired tax man who likes to complain about how back in the 60's and 70's there was a budget for tax investigations and have boots on the ground double checking for tax evasion. For example counting cars on dealership lots, guys claiming low income but driving luxury cars etc. Very easy to piss off people by doing that, and ironically the big evaders tend to have big pockets and friends in politics. The budget for that kind of investigation ended decades ago at least locally, arguably by design. And of course we see the simultaneous shift from reliance on progressive income based taxes which can be evaded to regressive consumption based taxes like gas taxes (which SovCits seem to love), which of course, can't be evaded.

Nice little self fulfilling prophecy. Reduce budgets to tax auditors, tax evasion rises, and then use that to justify shifting the tax base.

And that's probably too political upon re-reading.

[eric]

the tax man always seeks his due. unfortunately for him curbing cars is hard to track since the buyer turns into a middle man and does not register the vehicle. over the years here in alberta i have seen this many times. in fact i am currently driving a 1999 honda van because i bought a 2004 chevy cavalier.

Yup, I've dealt with these guys as well. If you're a seller to someone you expect may try to curb the vehicle, cancel the registration as soon as the deal is complete. You will actually get money back from the government pro-rated to the unused portion of the annual fee. More importantly, curbers usually drive the vehicle without registration until they can flip it and if it runs off the road or dies they just walk away, leaving you with the tussle with the police over tow and impound charges since the vehicle is still in your name.

i went to registries and was told it was out of province and needed an out of province inspection. this is an expensive and very strict inspection in alberta. but luckily alberta has some pretty good lemon laws in case of such things. so i called this guy and got the run around and was getting no where really in getting my money back or a different vehicle. so i stepped up the game.

If you get the Vehicle Information Report, not only will it tell you about any liens, it will tell you the last three year's municipalities it was registered in and its current registration status, all information that can be used to tell if the seller is really a curber. You can use that knowledge to possibly beat the price down by confronting him with it - "You say that's your daily driver, but the registration shows inactive and the vehicle is actually from the other end of the province - what did you pay for it and how much work did you put into it before selling it"
... eric, from a long family history of horse trading.

[Number Six]

It seems that the former laid back and hippy types are finally waking up to the rip-off artists.



I got some flack bringing it up on a Subaru site:

"That's called a title skip, and the state actually doesn't like that. They want the car flipper to title the car in their name and pay the tax on it while they own it, then the customer to title it in their name and pay tax again.

"You sound bitter about your car and are trying to blame it on the people you bought it from. You own a car that's at least 16 years old, it's going to have failures, and you're going to be responsible to pay for repairs, that's the deal when you buy old cars out of warranty. Whining about it and trying to blame other people is immature. Trying to sic the tax man on the people you bought it from is a douche move."
http://www.ultimatesubaru.org/forum/top ... oid-taxes/

Of course lots of people avoid paying due taxes on their vehicles and many people try to get their sales tax bill reduced by mistating what they paid.

And then occasionally you have rogue cops like this guy: http://www.ctpost.com/news/article/Ongo ... 326434.php

I don't care what Pope Francis says, crooks like that should be hung from the highest tree.

[morrand]

Not sure if this is why, but Illinois now attaches a stub to their vehicle titles that the seller is meant to forward to Vehicle Services upon selling the car. I'd have to go grab one of mine to check, but I think it's supposed to list the buyer's name and address. (Certainly the official form for the same purpose, for older title certificates that don't have the stub, wants that information.) At any rate, there's a limited time available to re-title the vehicle once sold; I suppose that, the state could be coming back with a lot of pointed questions if they don't get a transfer application inside of 30 days, unless the buyer can flip the car in that time.

Though, if you want to see untitled transfers at their most blatant, forget curbstoners. Motorcycle racers are some of the worst for that, from my experience. Not needing plates (and, in many cases, making the bike street-illegal to make it track legal) seems to lead naturally to the idea of not bothering with titles, and bikes often trade to the third or fourth owner on the manufacturer's statement of origin.

[Duke2Earl]

In short what we have in operation is a black market. Consider what would happen if we adopted the Fair Tax which is a 30% sales tax in lieu of income tax which at least one Presidential candidate is supporting.

[The Observer]

The budget for that kind of investigation ended decades ago at least locally, arguably by design.

No, what your retired tax man is omitting that such investigations become inefficient and expensive due to the cost of labor in pursuing them. Here is an example from the other side of the coin. During the 60's and 70's my ex-brother-in-law stopped filing tax returns. He was self-employed and paid in cash; thus the only way to ferret him out would have been to conduct life-style audits. Given that the IRS audit rate has never exceeded 5% at anytime in its past, the odds were quite good that the ex-BiL and others like him were never going to get caught. Then things changed when the IRS started pushing for legislation that would force the ex-BiL into the open: requiring banks to report interest being paid to their depositors, lenders to report who was paying them mortgage interest and requiring parents to get SSNs for their minor children. It was much more effective to work from lists of who was obviously under-reporting their income or over-claiming exemptions, much cheaper to have a computer calculate the missing tax and add it systemically, and more efficient than spending billions of dollars in hiring, training and maintaining a large enough staff that could audit a significant portion of the population that would impact on compliance.

But the other question to ask here is the cost and effectiveness of chasing down auto sales to see whether the tax has been paid. In most cases the transfer taxes are not going to be worth the cost of the attempt to collect such delinquent taxes:

One was the claim by Bridgeport Tax Collector Veronica Jones that “proceeds from tax tows and tax auctions rarely return to the city because storage fees usually outweigh the value of the vehicle.”

Most state governments are content with most of the population complying with the registration and leave the outliers to another time and place when they make a mistake and get caught.

"You sound bitter about your car and are trying to blame it on the people you bought it from. You own a car that's at least 16 years old, it's going to have failures, and you're going to be responsible to pay for repairs, that's the deal when you buy old cars out of warranty. Whining about it and trying to blame other people is immature. Trying to sic the tax man on the people you bought it from is a douche move."

Researching the title of a used car prior to buying it is also preferable. Gaps in the title are going to show up, the wrong names, etc., all of which should be warning flags about the vehicle and its condition. But I would agree that buying a 16 year old vehicle for $3000 and expecting it to not have problems is unrealistic, regardless of whether the transfer taxes had been paid or not.

[Number Six]

Actually the problems developed within months, but there is no recourse according to the guy quoted with private vehicle sales. My guess is that he plays that game and is worried of exposure. And the buying and selling of vehicles in this state anyway is so lightly regulated as to be a joke.

[The Observer]

But again, I fail to see the relevancy of a car breaking down and the seller not paying the registration fees on acquiring the car.

[NYGman]

But again, I fail to see the relevancy of a car breaking down and the seller not paying the registration fees on acquiring the car.

If the car has not been reregistered, and is left on the side of the road, who will come back as the owner, when it gets tickets and towed? I think that is the issue

[eric]

But again, I fail to see the relevancy of a car breaking down and the seller not paying the registration fees on acquiring the car.

If the car has not been reregistered, and is left on the side of the road, who will come back as the owner, when it gets tickets and towed? I think that is the issue

In this province (Alberta), the last registered owner is responsible for any tickets, tow, and impound fees. Of course, you can go after the new owner as a civil matter, probably win, but your chances of collecting any monies are probably nil. Hint - it only costs $8.40 to cancel your registration, but it's important to clear your name just in case, especially if you have sold a vehicle privately which is a junker for salvage value only. If it gets left at the side of the road when it breaks down you are no longer responsible for the few tons of rusty metal.

[The Observer]

If the car has not been reregistered, and is left on the side of the road, who will come back as the owner, when it gets tickets and towed? I think that is the issue

I am not sure that is the issue at all. This thread opened on the point of the poster stating that he had bought a used vehicle that broke down, ostensibly due to the previous owner making a cheap and low-quality fix. Additionally the seller had sold the car for over twice the price he had purchased it for. What I am scratching my head about is why the issue of whether the seller had paid his share of the transfer and/or registration taxes is coming up in this scenario. I am not sure if the poster is saying that there is a nexus to these issues and that if the state were to pursue the non-payers, it would result in less auto sale fraud/misrepresentation.