Mich. may be missing tax revenue in used vehicle sales
Lansing — State auditors kicked the tires on used car sales and found Michigan could be missing out on millions of dollars in taxes by not looking harder at the value of the vehicles.
Car buyers must report the sales price when they register it with the Secretary of State. There’s a 6 percent tax on the price or the value of the vehicle, whichever is higher. Vehicle transfers between family members typically are exempt.
State auditors last week said they studied a sample of April car deals between private parties and found many vehicles appeared to be undervalued.
“We estimated that the department could have collected additional use tax revenue ranging from $9.2 million to $36.5 million per year if it strengthened its procedures for verifying” values, the audit said.
Secretary of State spokesman Fred Woodhams said it’s up to Michigan’s tax agency, the Treasury Department, to later determine if a sales price or value doesn’t appear reasonable.
“We don’t inspect the vehicle for damage or how the mechanical parts are operating,” Woodhams said. “It doesn’t make sense for staff at the counter to ascertain the value. We accept the sale price as reported.”
Spokesman Terry Stanton said he’s barred by law from disclosing how often the Treasury Department challenges a used car deal. He said the department relies on the Secretary of State to flag a sale that looks fishy.
“We do not have staff whose sole responsibility is checking this documentation. … We are working with (the Secretary of State) to develop a process that would better ensure appropriate collection of use tax on such sales,” Stanton said.