The $1.00 Purchase Price Dilemma
When a vehicle owner declares the purchase price of a vehicle was $1.00, most likely the vehicle owner will receive a letter from the PA Department of Revenue, Bureau of Enforcement Planning Analysis & Discovery Unit.
The PA Department of Revenue has the authority to monitor the actual purchase price reported in all vehicle transactions under the Motor Vehicle Understated Value (MVUV) program. Revenue receives information electronically from PennDOT with regard to the purchase prices of vehicles. When a purchase price appears to be less than the vehicle’s value, Revenue will request an explanation.
Explain to the vehicle owner that $1.00 should not be entered as the purchase price of a vehicle. If the purchase price is below market value, submit Form MV-3 with the title application.
If the customer receives an audit letter from the PA Department of Revenue, the customer must reply directly to the PA Department of Revenue. The agent and/or the Department of Transportation are not involved.
If a taxpayer fails to provide acceptable documentation on the purchase price of a vehicle as requested through Revenue’s MVUV program, Revenue will assess the sales tax that should have been paid based on the vehicle’s fair market value, plus penalty fees and interest from the date of the purchase.
If the vehicle was a gift to the purchaser with no consideration, explain that $1.00 should not be the purchase price; instead sales tax exemption reason code #13 should be used and Form MV-13ST should be submitted.