When the Harmonized Sales Tax activated in Ontario July 1, 2010, all car purchases are taxes at 13%. New cars are taxed at 13% of the invoiced price. Used cars have a “higher-of” calculation for taxable amount, this is explained in further detail below.
Taxable Amount For Used Cars
The taxable amount is the higher number of either the purchase price or the amount listed on the Canadian Red Book for the car. The purchase amount should be written on the bill of sale on the last page of the Used Vehicle Information Package (“UVIP”) before signed. The Canadian Red Book value for the car can be found on the first page of the UVIP.
The UVIP is an important document required to buy a used car. Learn about how UVIP analysis can save you money.
Very often when selling a car privately, buyers will approach you right before the purchase and ask you to write down a lower amount than when you are selling it for. Since the buyer will be paying for the tax on the highest price, there are quite a number who request the seller to write a lower number.
At the point where a buyer is making that request, he has already decided in his mind that he will buy the car — he is just trying to save a bit more on tax. Tax evasion is a serious offence, we strongly recommend insisting on declaring the true purchase price on the UVIP.
Exceptions to Tax Requirement
The exception to HST on car purchase is if the car is purchased with the intention of resale by an individual with a valid dealer license. Repairs to this car are also HST exempt.
Family Car Title Transfer
If you are transferring title to a family member, you are able to avoid taxation. We cover the steps in Transfer Car Ownership Between Family.