Why Use a Bill of Sale (Pros and Cons)
Any time that property goes from one person to another, it should be documented, not only to show new ownership but also for tax and revenue filing for both private and industrial sales. A bill of sale is such a document, recording the change in ownership and documenting the item’s price. It is used for many reasons, some beneficial to both the buyer and seller.
How Is a Bill of Sale Used in Car Sales?
One of the most common uses for a bill of sale form involves buying and selling a motor vehicle. It documents essential information about both the buyer and seller and lists details about the vehicle. This legal receipt is good for the change in ownership and serves to show the amount paid. All parties can use this information for tax purposes or to document income or revenue received.
When purchasing a car, the buyer should secure a bill of sale, using it to prove their purchase. They will need this documentation to register their new vehicle under their name, obtaining the full rights and responsibility for the motor vehicle. This is done at their state’s Department of Motor Vehicles. Buyers need a bill of sale for a car sale or some proof of their purchase to obtain rightful ownership and title legally.
Reasons to Use a Bill of Sale When Selling Any Property
There are several reasons why one would want to use a bill of sale to complete a transaction. Not only does a bill of sale show the passing of ownership of items from one person to another, but it also shows the total paid. The reason why someone would need this information on paper includes:
- For tax preparations
- To show income received
- To legally document the change in ownership
- To legally document the sale as completed and paid
On items bought, even those between two individuals, the buyer will need to pay a sales tax. This holds true with large investments like motor vehicles and other properties like jewelry or equipment. With the amount paid for the sale in writing, buyers and sellers can ensure that they have paid for all taxes required correctly, based on the final sales price.
Sales Contract vs. Bill of Sale
A bill of sale is not a sales contract and is most often filled out either during or after the transaction. However, it still acts as a legally binding document that both buyers and sellers can use for legal purposes involving the sold property. When buying or selling property of any kind, both parties should use the help of a legal document to provide details about the transaction in case of any legal mishaps.
A sales contract often outlines all of the transaction’s details before it is finalized and long before either party pays. For example, in a car sale, the buyer and seller may negotiate to get down to terms they agree with. In this case, the potential buyer will possibly request a copy of the details in writing to think the entire purchase over. This is the main difference between a sales contract and a bill of sale, as the latter can be used after the transaction.
Completing a Bill of Sale
When a transaction is complete, buyers should request a bill of sale. Using an online form, sellers or buyers can fill in the necessary information, providing details about each party involved and the property to change ownership. Once the form is filled out, all parties should consult the laws specific to their state for the proper actions to make the sale legal. Some states require witnesses when signing, while others ask that a notary public is in attendance at the time of signing.
Pros and Cons of a Bill of Sale
Reasons why parties should consider a bill of sale include:
- Legally documenting a purchase
- Show proof of payment
- Exchange ownership
- Protection from legal issues
Some areas in which a bill of sale can cause issues include:
- Preparing tax documentation
- Items that require payments in installments and not one lump sum
- If the vehicle in question is a lost or stolen property
Just as with any legal document, all parties should read it through and make sure they agree to all of the terms outlined before signing and dating the bill of sale. Once the document is signed and the payment is passed from one party to another, backing out from the deal becomes challenging. If necessary, parties can consult legal advice or check up on their local legislatures to learn more about their rights in a situation involving the buying and selling of property.