Legalities of flipping motorcycles in California

[PrincessFalafal]

I used to live in the midwest and was able to make a decent side income flipping bikes, especially because the market was so seasonal. However the title laws there seemed to be much more lax in the flyover states than they are in California, and I'm not sure how legal/tolerated floating titles is here. (When I was in the midwest I'd have the seller sign the title but I wouldn't sign it, and the person I sold it to would. The bike was never registered to me, I'd usually hold onto them for 3-4 months but wouldn't ever ride them on the street)

It seems like California's laws on this are a bit different. Those of you who do this semi-regularly, is it possible to do this without always having to pay the ~$500 in taxes and fees for the transaction?

 

[ViperThreat]

Sort of.

Sellers don't pay taxes on bikes, only buyers do.

If you are willing to risk it, you can always state a lower selling price on the title than you actually sell/buy a bike fore, and you only end up paying taxes on the amount you state. For the most part, you can get away with it - if anybody asks, you just say something like "the bike was wrecked, I'm rebuilding it" or something like that.

Obviously you might set some flags if you buy a $30k bike/car and state you bought it for $500, so keep that in mind too.


-----------

There are risks however:

1. there's potential for a scam if you state you sold a bike for X amount, but a buyer tries to stick you.

2. If the government finds out, you're up shit creek.

 

[sjuels]

You know how they got Al Capone ?
Tax evasion!

/Soren

 

[295566]

It's not legal.

It happens all the time.

I never have, and never will, buy a vehicle from someone where the title isn't in their name. Red flags red flags red flags.

 

[Abacinator]

I believe you need a dealer's license if you're doing over a certain amount of vehicles. It's possible to fly under the radar but if the state catches up with you, you'll be F'd in the A.

 

[bobl]

You're forgetting the report of sale that the seller will file after the sale to release his liability. I believe the law requires re-registration in a specific time frame. I have done favors for people and not filed, only to get stuck later on, when they sold the vehicle, never registering the vehicle, and then selling it to someone else who never registered it, then collected parking tickets, abandoned the vehicle on the roadside. I got a done for 1200 dollars. I went to DMV, and was allowed to file a report of sale after the fact. If I sell something, bet your ass I will file a report of sale, and keep a copy for my self. The registered owner can still be reliable until the title is changed, or DMV is notified.

 

[Krooklyn]

... is it possible to do this without always having to pay the ~$500 in taxes and fees for the transaction?

Not legally AFAIK.

I never buy a car/bike from anyone, but the person on the title. I guess some people are less careful...

 

[Aeroslash]

Look into a dealers license.

In CA the new buyer has to register the vehicle in their name within 10 days. The seller also needs to report the new owners info within 3 days.

I'm sure if you try and stretch that out to a few months or if you sell it on without registering you'll attract unwanted attention...

Register it in your name and get creative with the declared sale price - that's where you can minimize the transfer costs and maybe do some profitable flipping.

 

[PrincessFalafal]

You know how they got Al Capone ?
Tax evasion!

/Soren

Heh, noted. In my defense I do declare any profits I make from this on my income taxes, although the profits are usually quite small. I do this 70% for fun, 30% for profit. Honestly as long as I break even, I'm happy. I like working on and fixing up bikes, so it's mostly a hobby for me.

I believe you need a dealer's license if you're doing over a certain amount of vehicles. It's possible to fly under the radar but if the state catches up with you, you'll be F'd in the A.

I usually have done 3-4 bikes a year and I'd be surprised if that's over the limit. But I will keep this in mind, thank you.

 

[PrincessFalafal]

Look into a dealers license.

In CA the new buyer has to register the vehicle in their name within 10 days. The seller also needs to report the new owners info within 3 days.

I'm sure if you try and stretch that out to a few months or if you sell it on without registering you'll attract unwanted attention...

Register it in your name and get creative with the declared sale price - that's where you can minimize the transfer costs and maybe do some profitable flipping.

Yeah that's what has surprised me about California. In the prior states I operated in, there was no such requirement (Also you got new plates every time the bike was registered, not like here in Cali where the same plate stays with the bike). Or at least if there was a requirement, it was basically never enforced.

It seems like even if the bike cost is really low, there's still the other fees that make it unlikely to pay much less than $400. Usually I'm buying/selling low-cost bikes and I'm not doing very many, 3-4 a year.

Lots of Ninja 250s/300s and SV650s with rashed fairings and cosmetic damage that I'll pay around $1500 for. New(er) fairings and gas tanks from e-bay, new levers and footpegs, occasionally chains and tires, do all the required maintenance and I'm usually getting $2500-$3,000 for them. Given that I almost always do a valve check and oil change, plus the monthly membership to Motoguild, I'm pretty sure if I broke it down by how much time I put in I'm lucky to make $5/hr...:thumbup

 

[usedtobefast]

So if someone tried to go totally legit on this ... and officially became a dealer ... then I assume that dealership has to title the bike in the interim? And pay taxes & fees??

I've never bought a used bike from a dealer ... I would assume the title would be in that dealer name vs. the previous owner?

 

[Junkie]

So if someone tried to go totally legit on this ... and officially became a dealer ... then I assume that dealership has to title the bike in the interim? And pay taxes & fees??

I've never bought a used bike from a dealer ... I would assume the title would be in that dealer name vs. the previous owner?

A dealer certainly doesn't pay tax, not sure if they pay other fees

 

[/dev/null]

CVC 285 defines a dealer.
CVC 286 defines exemptions to the dealers license.
CVC 12120 states only a registered owner can sell a vehicle
CVC 12121 provides the exemptions for 12120

 

[budman]

Please note OP.

If you flip them here we will block your access to classifieds.

 

[dmfdmf]

You can register it non-op to save some of the reg fees but just don't ride it or park it on the roads.

Low-balling the price to reduce taxes will get you a letter from the DMV if too low. This happened to me just out of college when a buddy of mine sold me his car for the price of his outstanding loan (much below market price) so he could move to Florence, Italy to be with his Italian honey (they did get married and lived happily ever after). This was back in the day before easy-peasy world wide comm. and I couldn't easily reach him to get a signed letter of affidavit on the price (we, being young and dumb, didn't do a bill of sale). Not wanting to go to San Quentin, I contacted a lawyer (free 1hr consult) and he advised to just pay the tax + penalty (it wasn't that much) and wrote me a letter stating I was paying due to circumstance but not admitting guilt to tax evasion. DMV got their pound of flesh so I never heard from them again. The end.

If you have a cooperative seller, you could write up a contract that you'll fix up the bike then sell it paying you X contingent on final sale price but leaving it in his name so there is no transfer to you. You could even put a mechanics lien on the bike to prevent him from selling it without your sig. Of course, this entails risk of the seller taking the bike back and not compensating you but if you have a legit contract you could sue in small claims court but that could get ugly if things go sideways.

Welcome to California where things are more expensive and complicated than they should be.

 

[radvas]

Legality aside, The kind of dealing you do is shady af. I’m sure you’re a wonderful person just trying to make a side buck, but how does a buyer know that signature on the title really is the previous owner’s and not faked by you or a disgruntled ex?

I’m not a fan of the way our state taxes vehicle sales and usage, but the rules are there to protect people... you included (and there are a lot of scammers out there).

 

[dmfdmf]

Please note OP. If you flip them here we will block your access to classifieds.

I can't speak for the OP but it sounds to me its more like buying, fixing, riding for bit then selling project bikes not flipping bikes for fun and profit. It sounds like more of a hobby than anything else.

What is the criteria for a flipper -vs- project-bike hobby?

 

[radvas]

Edit - never mind... misinterpreted.

 

[bikeama]

Edit - never mind... misinterpreted.

I don't think you misinterpreted anything. Not signing a pink to avoid paying taxes is against the law. No one on BARF should be giving advice on how to get around DMV fees (ie breaking the law).

I used to live in the midwest and was able to make a decent side income flipping bikes, especially because the market was so seasonal. However the title laws there seemed to be much more lax in the flyover states than they are in California, and I'm not sure how legal/tolerated floating titles is here. (When I was in the midwest I'd have the seller sign the title but I wouldn't sign it, and the person I sold it to would. The bike was never registered to me, I'd usually hold onto them for 3-4 months but wouldn't ever ride them on the street)

It seems like California's laws on this are a bit different. Those of you who do this semi-regularly, is it possible to do this without always having to pay the ~$500 in taxes and fees for the transaction?

 

[radvas]

I don't think you misinterpreted anything. Not signing a pink to avoid paying taxes is against the law. No one on BARF should be giving advice on how to get around DMV fees (ie breaking the law).

Agreed. The part I misinterpreted is that the previous comment was about BARF policy wrt classifieds, not vehicle titling. I stand by all those comments, but I did misread dmfdmf’s post. :thumbup