If you are buying or selling a vehicle in Tennessee and you want to complete the transaction without needing to pay taxes, you are out of luck. There is no way to do this legally. However, if you simply want to transfer the vehicle to another party and no money will exchange hands, you can do so and avoid needing to pay any taxes.
The Tennessee Department of Revenue allows those who have a vehicle to give the vehicle as a gift to another party through a process known as gifting. The interested parties must both participate in submitting a Affidavit of Non-Dealer Transfers of Motor Vehicles and Boats form. Those who gift a vehicle not only avoid paying taxes when the vehicle changes ownership, but they also may write off the gift as a donation when they file their taxes for the year.
A Tennessee resident who gifts a vehicle or who receives a vehicle as a gift avoids three different types of sales tax. Neither the giver nor the recipient needs to pay the local tax, the single-article tax or the state tax. While the combined sum of the local and single article tax could not be more than $80, the state tax is 7 percent of the purchase price. This is the area in which those gifting and recipients see significant savings when a vehicle is gifted.
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While no sales tax is due when a vehicle is gifted, there are types of costs that may arise. Some cars require emissions testing information forms. The recipient must test the emissions of the car before he can register it in his name. Tennessee charges a titling fee of $10.50. Your county clerk also may charge a small fee to process the paperwork.
To gift a title, you must have access to some specific information that is needed to fill out the gift affidavit. This includes the year and make of the vehicle, the vehicle's Vehicle Identification Number and the fair market value of the automobile. Both parties are required to sign this document to make it valid.