Book Value On Used Cars

Q.Being a classic car enthusianst, I'd like to share the following, as it could apply to anyone purchasing a used car or truck. In this case, the vehicle is not a classic or antique, but the same scenario could just as easily apply. One of my best friends purchased a late 80's GMC Sierra pickup truck back in October, 2002, for $150.00, and while he paid the 6% sales tax to the State of New Jersey upon transferring the title, he just received a letter from the state which implied that, given the NADA book value of his vehicle--I believe around $2400.00--he was responsible for additional monies due the state, for sales tax. However, there is plenty of justification of why he paid such a small amount, and I'm hoping a simple letter, along with some additional documentation (drivetrain parts receipts, body shop estimates, etc.) can settle this matter. I am posting this message in hopes of some insight into the laws governing NJ State tax, as it applies to used vechicles, and most importantly, to ascertain whether the state can impose a tax based on a book value that was non-commensurate with the condition of the vehicle at the time of purchase. I this case, the seller was ready to have the vehicle towed, after unsuccessfully attempting to sell it, since the transmission was blown, all the tires were dry rotted, and the paint was faded and peeling, and overall in slipshod cosmetic condition. The motor, however, despite having over 200,00 miles, seemed to run fine. My friend, being an excellent auto mechanic, inspected the vehicle and decided to make an offer of $150.00, which the seller accepted. Due to the nominal sles price, neither insisted on a Bill Of Sale. After spending more than $600.00 on a rebuilt transmission (installed by himself) and related parts, plus another $250.00 on tires, my buddy now has a rather reliable work truck. Despite his efforts, the truck runs ok, but looks like S#@!. Now, the State Of New Jersey is asking him to cough up close to $250.00, which I believe includes some fines. Hence, given this scenario, I have the following questions in which I'd welcome any informed responses: 1. Does New Jersey state law allow the State's Division of Taxation the right to use a price guide to access an "across the board" tax on his vehicle, without regard to the actual condition of the vehicle at the time of purchase? 2. Can my friend refute this tax accessment by use of his own documentation, such as online price guides (e.g. Edmunds, Kelley Blue Book, etc.), where variables such as "salvage" or "restorable" condition prices would apply? 3. Also, with regard to above, could he use estimates from paint shops,or calculations of the monetary value of his own labor--used to make the vehicle "driveable"--in order to either diminish or negate the accessed value implied, or perhaps I should say, "imposed," by the state? 4. Does my friend have grounds for pursuing his legal remedies,should the State be reluctant to acknowledge his rationalization of the fact that sales tax has, indeed, already been paid to the State, based on the actual selling price of a vehicle that was--at the time of sale--in effect, a non-driveable, non-functional vehicle in disrepair, and essentially only $150.00 away from ending up in a salvage yard? 5. Finally, is there a way in which my friend can access the ownership records of the vehicle to try and get in contact with the seller again in order to substantiate the selling price, since a copy was never made of the title, and my buddy doesn't recall the name of the seller? ADDITIONAL NOTE: My friend only had a phone number for the seller, and the vehicle was towed from the roadside spot in which it was being displayed, and this was not the property of the owner/seller of the vehicle. In conclusion, thanks to anyone who can share their experiences with such a dilemma. If there are any lawyers and/or accountants, car dealers, etc., out there who can shed some information or cite the names of pertinent court cases, I realize that you are only sharing public knowledge, for what it is worth, being FREE. Moreover, I acknowledge there being no association whatsoever between myself and any divulging parties or otherwise kind hearted informants who share such helpful information with me and others, in this public forum. I think this subject matter is something of importance to anyone who may happen to rely on used cars for transportation, and live in a state that collects sales tax on used vehicles at the time of purchase. Therefore, I'd imagine that this encompasses a plethora of the general public. I myself, have never had a car newer than a 1972 until this past November, due to both my fondness for older classic American cars, the mechanical knowledge I've gained from the friend I am now trying to help here, as well as my financial situation of being unable to afford a new vehicle.

A.In Ontario Canada they went to a system like this (10 or so years ago) because of the real or perceived fraud in claiming paid price to avoid the 8% provincial sales tax. A friend had an older dodge 76 truck he got for $100 and painted, put a motor and trans in and so on. He could have gotten it in his name unfit before the law was changed but waited and had to pay tax on $800, not to bad. That said your only recourse in Ontario is to get an appraisal from an accredited appraiser. ($100 in his case to save $56 tax, not worth it) Up hear they tell you right there or you can phone in and get the book value that tells the minimum they will tax you on on that particular vehicle. Again your only recourse is the appraisal. Makes it hard on the guys like your friend buying something beat into the ground to bring it back to life. Barry A. Lee Before the law I once picked up a 64 Dodge 4 door out of a fiends parents place for free. They wrote me a letter questioning the $5 claimed price. I phoned the guy in Toronto and explained I really paid nothing, the story about making the offer to remove it while having a couple beers in buddy's parents back yard after slow pitch, a couple weeks later they said I could have it for a buck. After I winched it onto my trailer with a come a long his mother would not even take the buck. So he said good nuff. That can't be done now but book value on some real old stuff is next to nil. I later sold it or traded it to a friend for about $200.

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