Sell a Car In Texas: Understanding Taxes and the Fees Involved

January 27, 2012

If you want to sell a car in Texas to another individual, you will need to know what laws you must follow in order to legally facilitate the transfer of the vehicle to the new owner. Generally speaking, selling a car in Texas is about the same as it is in any other state. Still, you should know what to do in order to avoid costly penalties, fees or even liability for a improperly transferred vehicle title.

Needed Documents and Forms

If you plan to sell a car privately in Texas, you will need several different documents in order to complete the sale and have the vehicle title transferred to the new owner. This is particularly important because of the potential liability you face once the buyer takes possession of the car.

For example, if the buyer of the vehicle is involved in an accident, or even worse commits a crime, while driving the vehicle, you'll want to make sure that the vehicle is properly registered with the Texas Department of Transportation (DOT) under the new owner's name. If you are still listed as the legal owner of the vehicle, you may incur liability for any actions taken by the driver while driving the car. So, here is a list of documents you'll need to sell a car in Texas:

  • Bill of sale or vehicle purchase agreement (much better if this document is notarized)
  • Original vehicle title properly endorsed to transfer the title to the buyer
  • Texas motor vehicle transfer notification

When creating a bill of sale for a car, which is sometimes also returned to as a vehicle purchase agreement, the document itself does not need to be complicated or even very long. In fact, the only elements of the document that are really needed are:

  • Buyer's name and address
  • Sellers name and address
  • Vehicle identification number and description of vehicles to be transferred
  • Selling price
  • Date of sale

If all of these elements are present in the bill of sale, then it should be acceptable to the Texas Department of Transportation for title transfer purposes. You'll also need to make sure that you properly endorse the backside of the original Texas car title to the new owner of the vehicle. Finally, you'll need to obtain a Texas Motor Vehicle Transfer Notification form from the Texas DOT. You can visit the Texas Department of Transportation website and download the form directly from there.

Reporting the Sale for Tax Purposes

Once you have sold your vehicle, you need to report the sale to the Department of Transportation. When reporting the sale, you should also inform the DOT of the selling price of the vehicle. The buyer will then most likely be required to pay use tax on the amount that he/she paid for your vehicle. Use tax is for all practical purposes almost identical to sales tax. However, when paying taxes on a sale by one private citizen to another, the tax is simply referred to as use tax.

Insurance Cost Considerations

After you finalize the sale of your vehicle, you should also contact your car insurance company and notify them of the transfer. You should be aware that some insurance companies may charge a cancellation fee if you do not transfer the covers to another vehicle within about a month or so. If you've prepaid premiums on the vehicle, you may also be entitled to a refund on amounts you've already paid. Check with the car insurance agent be sure.


Related Questions and Answers

What Fees have to be Paid to Purchase a Vehicle in Texas?

Whenever you purchase a vehicle in the state of Texas, there are fees that need to be paid. If you purchase a new vehicle or one from a dealer, they will likely help you with all the paperwork and collect the fees. When buying from a private seller, though, you'll need to make sure you take care of everything. There is a sales tax to be paid, based either on standard presumptive value or the actual sale price. Title transfer and registration are required all over the state of Texas. However, there are often county or local fees in addition to be paid, but they vary with location.

Does the Car Title Owner have to be the Same as the Insurance Owner in Texas?

Texas law requires auto insurance coverage, but the car title owner does not necessarily need to be the same as the insurance owner. Car insurance policies are matched to vehicle identification numbers (VIN), so the policies apply to the car, not the owner. Texas has an automated system in place where insurance companies notify the DMV directly about insurance coverage. Additionally, proof of insurance cards are still required. Getting a policy on a vehicle you don't own could be a problem, though. That would need to be resolved with your insurance agent for more information.

What Taxes are Required to Sell a Car to Someone in Another State from Texas?

If, as a resident of Texas, you sell a car to someone in another state, any sales tax is up to the buyer. If the buyer is living in another state, then the tax would need to be paid in that state, not in Texas. One thing you do need to make sure gets done, though, is a vehicle transfer notification. If you fail to submit that, and the driver doesn't register the car in their new state, any issues with that car would come back to you. Also, be sure to keep a copy of the purchasers information, just in case some question arises later.

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