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Penalty for Selling Cars Without a Dealer’s License

Selling cars for a profit without a license is considered illegal in every state. If caught, you will have to pay a very hefty fine and possibly face jail time.

In the United States, you are only permitted to sell four vehicles per year without an auto dealer’s license. In addition, you are not permitted to title these vehicles in your name without paying either sales tax or use tax. In most states in the United States, individuals who regularly buy and sell vehicles are required to register with the Department of Revenue (DOR).

Once registered with DOR, you are then expected to apply for a reseller permit. You can then utilize this permit to purchase the vehicles for resale without having to pay sales tax or use tax if you do not title the vehicle in your name.

In most states in the United States, if you sell vehicles three or more times in a year, DOR will assume that you sell vehicles for a living. This simply entails that you have to register and obtain a tax registration endorsement. DOR mandates you to obtain tax registration irrespective of whether you need to obtain a vehicle dealer’s license or not.

Penalties for Selling Cars Without a Dealer’s License

Note that the penalty for selling cars without a dealer’s license in the United States will most often depend on the regulations in your state as well as the degree of your offense. Nevertheless, below are the penalties that come with defaulting;

1. Civil Penalties

In most states in the United States, selling cars without the proper authorization is considered a civil offense. The exact amount you are fined will depend on your state or possibly the number of violations you have committed.

2. Criminal Penalties

There are also instances where selling cars without a dealer’s license can be considered or treated as a criminal offense. This is usually in a scenario where there is evidence of fraudulent or deceptive practices. Once it has been proven to be a criminal offense, the penalties you should expect include exorbitant fines, probation, and even imprisonment.

3. Cease and Desist Orders

A cease and desist order is an order by an administrative agency that mandates certain practices to stop. It is possible for the relevant agency in your state to issue cease and desist orders if you are found to have been selling cars without a dealer’s license.

The sole purpose of this order is to mandate the person to quit selling vehicles immediately. Failure to adhere to the order might give rise to more legal consequences.

Steps to Obtain a Dealer’s License

  1. Application for a Dealer’s License

The very first step is to obtain the appropriate request form from the webpage of your state’s DMV. Although certain DMVs allow online forms, others still require application packets by post. Aside from the application, you will be expected to include documents that prove that you have satisfied the necessary requirements in your state. This might include:

  • Documents for registering a business organization
  • A Certificate of Authority or a Certificate of Good Standing as evidence of adherence to site criteria
  • Pictures showing the exterior of your office, your company signage, your opening times, and your yard/exhibition area (if needed)
  • Tenancy agreement or ownership documentation (if needed)
  • Personal history form and/or criminal background check

2. Get a surety bond and insurance

Note that even before you are allowed to send in your application package, a good number of States will ask that you provide a car dealer bond. The essence of the surety is to guarantee that you are in conformance with your region’s rules and guidelines especially when it has to do with the sale of automobiles. In addition, the DMV might necessitate garage liability coverage.

3. Submit and Obtain Your Dealer’s License

Once you filled and submitted your registration and licensing packet, you should expect to hear back from the DMV within a few weeks.

Prior to your request being examined and your license approved, some states demand that your business facility and property (if you possess one) undergo an inspection. Once this is done and your application is approved, your license will indeed be granted and mailed to you.


Selling cars for profit without a license is considered illegal in every state. If caught, you will have to pay a very hefty fine and possibly face jail time. States and city government agencies are cracking down on this and leveraging massive penalties to deter those who are even considering it.

However, irrespective of the state or province you live in, note that you have to obtain a dealer’s license if you want to be able to sell cars for profit. Depending on where you live, this process can be a simple matter of paperwork or more of a headache.