How to calculate the tax on a used vehicle

If it's time to part with your vehicle, be aware that the market is still very favourable to sellers, who can usually get a very good value for it.

We recently gave you a series of tips on selling your vehicle at the best possible price. However, many people are wondering how to calculate the tax on a used car.

First of all, it is important to remember that in Quebec, used car dealerships charge both the 5% Canadian Goods and Services Tax (GST) and the 9.975% Quebec Sales Tax (QST) on the decided selling price.

In the case of a transaction between individuals, only the QST is payable and the buyer will have to pay it not to the seller (since it is assumed that the seller is not registered in the QST file and is therefore not authorized to collect this tax), but rather to the Société de l'assurance automobile du Québec (SAAQ) at the time of the transfer of the vehicle registration.

Sale Price or Estimated Value

Here, the QST is calculated on the higher of the sale price of the vehicle or the appraised value of the vehicle.

However, there are exceptions. When the transaction is between individuals, one of whom is the spouse of the other or one of whom is related to the other by blood, marriage or adoption, the QST is calculated on the sale price agreed upon by both parties, even if it is less than the appraised value.

Now, the way to establish the estimated value of a used vehicle varies depending on whether it is a car or a light truck, a collector vehicle, a motorcycle or a snowmobile or an all-terrain vehicle (ATV).

As explained by Revenu Québec, the appraised value of a used car or light truck must be established by subtracting $500 from the average wholesale selling price (AWP). Le Guide d'évaluation Hebdo (automobiles et camions légers), published by Trader Corporation, must be used to establish the AGWP. This value must be the one indicated in the most recent edition on the first day of the calendar month in which the transaction took place. However, if a model is no longer listed in the guide, the QST is calculated on the selling price agreed upon by the parties.

For a high-end used vehicle, the appraised value must be established in an appraisal if the car meets the following conditions:

• it is Aston Martin, Bentley, Ferrari, Hummer, Lamborghini, Lotus, Maserati or Rolls-Royce;
• the year of its model is no longer listed in the Guide d'évaluation Hebdo (automobiles et camions légers);
• he is under 25 years old.

The appraisal must be performed by an appraiser who holds a Certificate of Qualification as an Automobile Damage Appraiser, issued by the Automobile Insurance Association.

For collector vehicles (i.e., a truck 40 years or older or any other road vehicle 25 years or older, including a motor home), the appraised value is either of the following:

• the one indicated on endorsement 19 of the owner's insurance policy and written in the purchaser's name;
• by an appraisal of its value (either by a licensed road dealer, an appraiser with a Certificate of Qualification or an antique vehicle owners association).