Revenuers crack down on private boat, car sales

“If we don’t know where it is, we can’t quantify it,” agency spokeswoman Emily Richard said Tuesday when asked how much money is at stake for state and local governments.

But the Department of Revenue has an inkling. In the past three years it has collected more than $500,000 from investigating suspected fraudulent transactions, and in October alone 15 more cases were referred to its special investigations unit.

In one recent case, a boat that cost $118,000 was reported to the local county clerk as being sold for $1,000 — dramatically lowering the sales tax paid at registration.

Consider that in fiscal 2003-2004, county clerks remitted $108.8 million in sales taxes from voluntary registrations — some $76.2 million from vehicles and $32.6 million from boats.

“The Department of Revenue takes fraudulent tax activity seriously and will continue to investigate such cases and collect all taxes due the state of Tennessee,” said Revenue Commissioner Loren L. Chumley. “We need auto and boat owners’ and county clerks’ assistance to ensure this tax is administered equally and fairly.”

The department is assigning five auditors to specialize in boat and vehicle transactions between individuals. Auto and boat dealerships aren’t targeted because taxes on their transactions are collected by the state.

Under the law, responsibility for collecting the correct state and local sales tax on private sales rests with vehicle and boat owners and county clerks.

County clerks are required to collect tax on the amount listed on the bill of sale, but they can’t simply accept what they are presented.

State law says the tax must be paid on at least 75 percent of fair market value — checked against the National Automobile Dealers Association guide, for instance.

When a boat or car is transferred from one individual to another for less than fair market value, the application filed with the clerk is sent to the Department of Revenue for review.

If the department determines fraud is involved, it can prosecute for the underpayment of taxes and hold the county clerk liable for it plus a 15 percent penalty.

Richard said no action has been taken so far against a county clerk.

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Tennessee Department of Revenue: http://www.state.tn.us/revenue
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Information from: The Knoxville News Sentinel, http://www.knoxnews.com