Does transferring title of a car to your own revocable living trust for estate planning purposes trigger New York sales tax?

Plain-English summary

Stephen Brady set up a revocable living trust for probate planning and tried to transfer his car's title and registration into the trust's name. When he presented Form DTF-803 (the DMV's sales tax exemption claim form) and checked the box for an exemption not otherwise listed on the form -- describing the transaction as a "transfer to current registrant's revocable living trust" -- DMV staff nonetheless tried to collect sales tax. Brady asked the Department to clarify whether tax actually applies to this kind of transfer.

Under New York law, a trust is its own "person" separate from its creator for tax purposes, even though a revocable living trust is often functionally just an estate-planning wrapper controlled by the same individual. Because retitling the car moves ownership from Brady individually to this separate legal entity, it's a "transfer of title" -- the basic building block of a taxable sale. But a sale requires consideration -- something of value changing hands -- and simply moving your own car into your own revocable trust for estate-planning purposes doesn't necessarily involve any consideration at all. So the real-world answer splits cleanly: if there's no consideration whatsoever for the transfer, no sales tax is due. But if there IS consideration in any form, tax applies. The Department flagged the single most common way consideration sneaks into this kind of transfer: if the car is transferred subject to an existing loan or debt, the trust's assumption of that debt counts as consideration equal to the amount assumed, and that triggers a taxable retail sale on that amount.

What this means for you

Individuals setting up revocable living trusts for estate planning

Retitling a debt-free vehicle into your own revocable living trust, with no money or other value changing hands, should not trigger sales tax under this ruling's reasoning. But if the car still has a loan against it and the trust is taking over responsibility for that loan, expect sales tax to apply on the assumed debt amount -- plan for that cost before you retitle.

DMV customers hitting resistance on Form DTF-803

If DMV staff try to collect tax on a living-trust retitling and you believe no consideration was involved, this ruling supports your position that the transfer alone -- absent consideration -- isn't a taxable sale, though you should be prepared to demonstrate that no consideration (including debt assumption) was part of the transfer.

Accountants and estate-planning attorneys

This is a clean, general-purpose "transfer to a trust" consideration analysis that extends beyond vehicles to other tangible personal property transfers into a revocable trust -- the key variable to check with every client is always whether the asset carries debt or other consideration that would transfer with it.

Common questions

Q: Is moving a car into my own revocable living trust always tax-free?
A: Only if there's no consideration for the transfer. If the vehicle has an outstanding loan and the trust assumes that debt, that assumption is consideration and triggers sales tax on the assumed amount.

Q: Does it matter that the trust is revocable and I still control it?
A: No -- for sales tax purposes, the trust is treated as a separate "person," so retitling into it is still a transfer of title to a separate entity, regardless of your continued control as trustee/settlor.

Q: What form is used to claim a sales tax exemption at DMV for this kind of transfer?
A: Form DTF-803, Claim for Sales Tax Exemption-Title/Registration -- as in this case, using the box for an exemption not specifically enumerated on the form and describing the trust transfer.

Citations and references

Statutes, regulations, and prior rulings:

• Tax Law § 1101(a) (definition of person, includes trusts/trustees)
• Tax Law § 1101(b)(4) (retail sale)
• Tax Law § 1101(b)(5) (sale, selling or purchase)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• 20 NYCRR § 526.7 (definition of sale, selling or purchase; consideration)
• Randy T. Rodecker, Inc., TSB-A-98(54)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_22s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(22)S
Sales Tax
April 8, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990210A

On February 10, 1999, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Stephen R. Brady, 224 Monroe Drive, Williamsville, New York 14221.
The issue raised by Petitioner, Stephen R. Brady, is whether sales tax applies when the owner
of a vehicle re-registers the vehicle in the name of his revocable living trust.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner formed a revocable living trust (the "trust") for probate planning purposes, and
sought to transfer title and registration for a motor vehicle to the trust. In the process of registering
the vehicle in the name of the trust, New York State Department of Motor Vehicle (DMV) personnel
attempted to collect sales tax when Petitioner presented Form DTF-803, Claim for Sales Tax
Exemption-Title/Registration. When Form DTF-803 was presented, box 14 was checked (indicating
an exemption was claimed other than those enumerated in the form) and the transaction was
described as a "transfer to current registrant's revocable living trust". Petitioner also submitted
documentation to DMV that identified the trust, the trustee, the settlor, and the IRS issued employer
identification number document.
Applicable Law and Regulations
Section 1101 of the Tax Law provides, in part:
Definitions (a) When used in this article the term "person" includes an
individual, partnership, limited liability company, society, association, joint stock
company, corporation, estate, receiver, trustee, assignee, referee, and any other
person acting in a fiduciary or representative capacity, whether appointed by a court
or otherwise, and any combination of the foregoing.
(b) When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
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TSB-A-99(22)S
Sales Tax
April 8, 1999

(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property...
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*

(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume (including, with respect
to computer software, merely the right to reproduce), conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or any agreement therefor,
including the rendering of any service, taxable under this article, for a consideration
or any agreement therefor.
Section 1105(a) of the Tax Law provides for the imposition of sales tax on the receipts from
every retail sale of tangible personal property, except as otherwise provided.
Section 526.7 of the Sales and Use Tax Regulations provides, in part:
(a) Definition. (1) The words sale, selling or purchase mean any
transaction in which there is a transfer of title or possession, or both, of tangible
personal property for a consideration.
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(b) Consideration. The term consideration includes monetary consideration,
exchange, barter, the rendering of any service, or any agreement therefor.
Monetary consideration includes assumption of liabilities, fees, rentals, royalties or
any other charge that a purchaser, lessee or licensee is required to pay.
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(e) Transfer of possession. (1) Except as otherwise provided in paragraph (3)
of this subdivision, a sale is taxable at the place where the tangible personal property
or service is delivered, or the point at which possession is transferred by the vendor
to the purchaser or his designee.
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(4) Transfer of possession with respect to a rental, lease or license to use,
means that one of the following attributes of property ownership has been
transferred:

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TSB-A-99(22)S
Sales Tax
April 8, 1999

(i) custody or possession of the tangible personal property, actual or
constructive;
(ii) the right to custody or possession of the tangible personal property;
(iii) the right to use, or control or direct the use of, tangible personal
property.
Opinion
By registering the motor vehicle in the name of the revocable living trust and transferring
title to the trust, Petitioner is transferring tangible personal property to a separate entity. Therefore,
if there is consideration of any form in connection with the transfer, a retail sale of tangible personal
property occurs in accordance with Sections 1101(b)(4) and 1101(b)(5) of the Tax Law and sales tax
is imposed under Section 1105(a) of the Tax Law. (See Randy T. Rodecker, Inc., Adv. Op Comm.
T&F., August 6, 1998, TSB-A-98(54)S.) If there is no consideration for the transfer, no tax is due
on this transaction.
A common situation that might cause the sales tax to be imposed on the type of transfer
described by Petitioner occurs where the motor vehicle is transferred to the revocable trust subject
to an existing debt. In such a case, the assumption of the debt by the trust would constitute
consideration, in the amount of the assumed liability, under Section 526.7(b) of the Sales and Use
Tax Regulations, and a retail sale subject to sales tax would result.

DATED: April 8, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.