5 Important FACTS You Need to Know About Flipping Cars
1. Flipping cars is illegal!
2. It’s a violation of your state laws
3. It’s federal and state tax fraud!
4. It may have heavy fines or jail time associated with it!
5. Flipping cars could stop you from ever getting a dealer license
I hope I have your attention. I’ll explain the 5 facts about flipping cars!
But first, let’s define what “flipping cars” means.
The agreed on general definition is to buy and sell cars without a dealer license. Another name for it in the auto industry is curbstoning. This comes from the fact that individuals who want to sell a car usually park it at the curb with a for sale sign in the window.
[note color="#F4ef62"]The California DMV says…. Curbstoning is the repeated, unlicensed “flipping cars” for profit. Curbstoners are people who actively and regularly buy and sell vehicles without a license, proper permits or a legally established place of business and who, many times, represent themselves as private sellers in order to attract buyers.[/note]
So on to the 5 facts….
Flipping cars is illegal!
To buy and sell cars, for profit, without a dealer license, is illegal in EVERY state. Some states MAY allow a minimum of sales without a license. This is usually 3-6. Check your state’s requirements. Many states set the number at absolute ZERO (California). Don’t blindly follow what you read on the Internet blogs and forums.
As an example here is what Georgia’s FAQ website states:
I thought I could sell up to five vehicles in a year before I had to be licensed?
The “five cars per year” statement has been misinterpreted by many people. The origin of the “five car” phrase is the Used Motor Vehicle Dealers’ and Used Motor Vehicle Parts Dealers’ Registration Act. O.C.G.A. 43-47-2 (17)(A) states that “…the sale of five or more used motor vehicles in any one calendar year shall be prima-facie evidence that a person is engaged in the business of selling used motor vehicles.” This means that evidence indicating that a person has sold five or more used motor vehicles in any one calendar year can be used to show that the person is engaged in the unlicensed practice of used motor vehicle sales. This statement should be read in its context, and should not be misinterpreted to mean that a person may sell up to five vehicles in a year before becoming licensed.
It’s a violation of your state laws!
The auto industry is one of most regulated industries. Both in manufacturing and sales. Why the sales side regulations? A car is the second most expensive purchase a consumer makes. A home being the most expensive.
To protect consumers from being ripped off, states have passed dealer licensing regulations and rules.
The states have inspectors to monitor curbstoners. They track by title transfers using names and addresses in the state DMV database. They check Craigslist for repeated sales by individuals.
Watch this video. It’s a California state investigator speaking. He reflects the attitude of other state’s investigators about car flippers.
If you’re selling cars, as a business for profit, without a license (flipping cars), your state considers you a curbstoner and will take legal action against you.
It’s federal and state tax fraud!
Some car flippers will slip a title or use an “open title”. This means they never register the car in their name. They leave the buyers info on the title blank so they can fill in the name of the person they resell it to.
When a car flipper buys a car he is the new legal owner. EVERY state requires the flipped car owner to register the vehicle, obtain a new title and pay fees and taxes. To not do this is tax evasion.
When an invidual or business sells vehicles for profit they must also pay state and federal income taxes on their profits. To not do this is tax evasion.
It can have heavy fines or jail time associated with it!
(g) Any person who violates this Code section shall be guilty of a misdemeanor and,upon conviction thereof, shall be subject to a fine not to exceed $1,000.00 for each violation or imprisonment for a period not to exceed 12 months, or both.
South Carolina law is: If you operate as a dealer, wholesaler, auto auction, or transporter without the proper license, you may be convicted of a misdemeanor and fined up to:
1. $200 and/or imprisoned for up to 30 days for first offense.
2. $1,000 and/or imprisoned for up to six (6) months for second offense.
3. $10,000 and/or imprisoned for up to two (2) years for third and subsequent offenses.
ALL states have similar stautes, fines and possible imprisonment for violating dealer licensing laws.
So follow what the YouTube videos and “flipping cars for profit” web sites are saying and you could be toast!
Want more proof about jail time? Click here!
Flipping cars for profit could stop you from ever getting a dealer license!
Most states will deny an application for a dealer license if the applicant has been found guilty of past fraudulent actions concerning the sale or lease of motor vehicles. As an example here is Arizona’s law.
[note color="#F4ef62"]An applicant convicted of fraud or an auto-related felony within the last ten years or any other type of felony within the last five years will have his or her license application denied.[/note]
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