Is the US government breaking the tax law?

Question

Please someone with experience in taxation can explain to me how this is legal?
Lets say I bought a car for $60,000 dollars and I paid 7% ($4,200) dollars tax at the time to register the car (this is not leasing) after two years If I sell the car for $50,000 dollars the new buyer will have to pay $3,500 dollars in taxes. If the second buyer sells the car one more time the third buyer will also have to pay taxes again. Ok since the government is collecting taxes from every sells, why is the first owner of the car is not entitled to get back his taxes since only its been used for the $10,000 worth of the car, is there any law a such? please serious answers only.

Answer 1

You're trying to apply logic to government... a fool's game. Anyway, it depends on the jurisdiction. Where I live, private sales are not taxable. So in your example if private parties are doing the selling after your initial purchase of the car, no tax. If you trade it in and a retail car dealer sells it, wham-o! Taxable. Makes sense, huh? Gotta feed the bureaucratic beast.

Answer 2

There are some kinds of tax exemptions.

You buy some expensive parts to put onto someone else's car. You can get a tax exemption from the government so that the expensive parts will be taxed only once. There are special business licenses for doing this.

Without the special business licenses, the stuff is taxed again every time it changes hands.

You have an old car worth $ 5,000.00
You trade it in on a new car, whose price is $ 25,000.00
The increase in value for you is $ 20,000.00
You pay taxes on $ 20,000.00

This trade-in rule of thumb applies for anything you are trading in at a retail store.

Now these are SALES taxes to the State in the USA, not to the federal government. There are also fees associated with you registering ownership, and getting the license plates ... again to the State in which you are doing this.

If you keep the car forever, then the only taxes you pay will be the periodic renewal of license plates, and if the car is covered by property taxes in your state.

For example ... suppose you owwn a home worth $ 150,000.00 ... your property tax bill could be on the basis of $ 175,000.00 which is the value of the house plus the value of the car.

Over time, you can file a declaration to the property tax assessor that the value of your property has changed.

Each time anyone sell the car to another person, there is a declaration of what the value of the car is, that you get paid. The new owner pays taxes on that value.

Your personal property has now gone down by the value of the car, so now you are only paying property taxes based on the value of your home.

Suppose you have a brother. You may sell the car to your brother for $ 1.00 even though you both agree that it is worth $ 10,000.00. Your brother pays new owner sales taxes based on the fact that the declared value of the car is $ 1.00.

This is legal, but it is also dangerous. Suppose later it is totalled in an accident. Auto insurance will pay off the declared value of the car, which is $ 1.00.

Suppose you are in the business of buying and selling cars. Your company pays taxes based on the total value of all the cars on the lot, as of a particular time ... which is why they offer deep discounts to get cars sold on the eve of that time,

Answer 3

They are following the law to the letter. You are arguing the law is unfair. The 2 issues are totally unrelated. As a previous answer stated, applying logic to government is a good way to drive yourself insane.

Answer 4

Your used car is a commodity once it hits the market. I know it seems like double, tripple, and quadruple taxation, but since it is a sale, the government wants its cut.

Answer 5

Each sale is taxed. That's how the system works.