Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
585.0000 VEHICLES, VESSELS, AND AIRCRAFT—Regulation 1610
585.0283 Transfer of Vehicle to Co-Signer. The transfer of title to a motor vehicle for a consideration from the registered owner to a person who was co-signer of the note for the purchase of the car is a retail sale by a retailer pursuant to section 6275. A co-signer is not a co-owner unless so designated on the ownership documents, and the transferee must pay use tax upon registering the car (unless the sale is nontaxable as in an intra-family transfer pursuant to section 6285). The measure of tax is the amount of the assumed liability plus the amounts, if any, that the co-signer agrees to pay the owner for the owner's equity in the vehicle.
There are circumstances, however, under which the payment of the loan by the guarantor will not result in assessment of tax even if that guarantor obtains the vehicle. When the purchaser defaults on the loan and the bank demands payments be made by the co-signer, the bank generally arranges to transfer title to the vehicle to the guarantor/co-signer who makes payments. In this situation, there is no sale since the bank is the one effecting the transfer of title under its power to collect payments from co-signer under the loan agreement and co-signer has not paid any consideration to the bank that the bank was not already entitled to from co-signer. 9/16/75; 10/10/97. (Am. M98–3).