Table of Contents
- The Basics: What is a Bill of Sale?
- When a Bill of Sale is Needed
- The Consequences of Not Having a Bill of Sale
- The Most Common Bill of Sale Situations
- What Should be Included in a Simple Bill of Sale
1. The Basics: What is a Bill of Sale?
A bill of sale is a legal document that memorializes a business transaction between two parties — a seller and a purchaser.
In exchange for a certain amount of money, the seller agrees to transfer ownership of an individual item (i.e. personal property) to the purchaser.
A bill of sale is used for personal property or chattel that is tangible and movable, such as a car, motorcycle, or even a dragon.
A simple bill of sale serves as proof of purchase and will include the following 6 elements:
1. The “Seller” or “Grantor”: the person who currently owns the item being sold
2. The “Purchaser” or “Grantee”: the person buying the item or becoming the new owner
3. The “Property”: a complete description of the item being sold and its current condition
4. The “Payment Terms”: amount of money paid or “value received” by the Purchaser
5. The “Warranty”: whether the good is being sold “as is” or if there are any guarantees
6. The “Date”: when the item was sold by the Seller to the Purchaser
As a reference, people often call a bill of sale a “sales invoice” or “record of sale”.
A bill of sale goes by other names depending on the type of personal property being sold or transferred.
The Many Names & Types of Bills of Sale
[table “15” not found /]Overwhelmed by the choices? It’s simple — a bill of sale applies to personal property that can be easily moved, NOT real property like land or buildings (i.e. home, cabin, apartment, or condo).
In addition to cars and motor vehicles, a bill of sale may also be used for a wide variety of personal property:
Bills of Sale Names Continued — Types of Vehicles & Chattel
[table “16” not found /]* Mobile homes are treated as personal property by the IRS in a 2008 memo, when sold as retail and placed on rental property like a trailer park or mobile home park and community.
2. When a Bill of Sale is Needed
A bill of sale serves as an official record that a specific item was sold on a certain date for a certain price. To formally register items like a car, motorcycle, or boat, many states require a bill of sale with specific information like an odometer reading or vehicle identification number (VIN).
A bill of sale provides written proof of the following:
- a transaction actually occurred
- the item truly belonged to the Seller
- the Seller intended to transfer ownership of the item to the Purchaser
- which item was transferred (i.e. year, model, make, serial number, unique markings)
- the Seller made promises and assurances as to the condition of the item or sold it “as is”
Further, there are two types of bill of sales.
1. A “conditional” bill of sale
A conditional bill of sale transfers ownership of the item to the purchaser only after they have paid all money owed to the seller.
For example, a bill of sale is first used to document that both the seller and purchaser agree to transfer ownership of an item like a car if certain conditions are fulfilled. Then, a promissory note is used to record how the purchaser will pay the seller over time.
2. An “absolute” bill of sale
An absolute bill of sale proves a transaction took place and that ownership has been completely transferred to the purchaser without any restrictions.
In contrast to a conditional bill of sale, an absolute bill of sale is used when the purchaser is able to pay the entire amount for an item immediately. Unlike a conditional bill of sale, the seller no longer has ownership claims to the item in an absolute bill of sale.
3. The Consequences of Not Having a Bill of Sale
A simple bill of sale could ward off some of these preventable consequences:
Possible Consequences of Not Having a Bill of Sale
[table “17” not found /]What happens if I do not have an auto bill of sale?
A bill of sale is sometimes one piece of evidence needed to document or transfer ownership. For motor vehicles, a certificate of title and registration is also needed to complete the transfer of ownership.
When buying or selling cars, check your state’s Department of Motor Vehicle (DMV) or Motor Vehicle Administration (MVA) for a bill of sale form and title transfer requirements specific to your jurisdiction.
Without a bill of sale to complete a proper title transfer, the seller may continue to be on the hook for any fees, fines, violations, or criminal shenanigans the new owner (i.e. the “purchaser”) incurs while using the item.
In less extreme situations, if you sold your car to someone off of Craigslist without a bill of sale and title transfer, you may still be on the hook for future speeding tickets that should actually be sent to the new owner.
What happens if I do not have a bill of sale for a firearm?
If you sold your gun to someone without properly documenting the sale with a bill of sale, your name might become associated with a possible robbery if the new gun owner went rogue. On the flip side, you do not want to accidentally buy a stolen gun or a gun previously used to commit a crime or felony.
In other instances, a simple bill of sale or receipt is helpful to travelers carrying a firearm and entering or exiting the United States, according to a January 2015 NRA-ILA article.
Federal law currently does not require criminal background checks for firearms transfers between private individuals, but beware of 18 U.S. Code §§ 922(g) and (n) which outlaws the sale of firearms to people who are fugitives, drug users, face imprisonment, perpetrators of domestic violence, or dishonorably discharged from the Armed Forces.
You can learn more about how to become a Federal Firearms Licensee (FFLs) from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and how to use the FBI’s National Instant Criminal Background Check System (NCIS).
4. The Most Common Bill of Sale Situations
A bill of sale could be used in any number of transactions ranging from automotive vehicles to farming equipment and livestock.
Here are just a few people who could commonly benefit from a simple bill of sale:
Possible Sellers and Purchasers
- Individuals
- Family members
- Friends
- Farmers
- Users of Craigslist or online car sale platforms (i.e. autotrader.com or cars.com)
- Organizations
- Antique Dealers
- Car Dealers
- Gun Dealers
- Livestock Dealers
- Nonprofits (i.e. buying sports equipment for youth)
5. What Should be Included in a Simple Bill of Sale
What should be included in a bill of sale?
A simple bill of sale should include the following basics:
1. Parties to the Sale
It is critical to provide information about who is buying, and who is selling the item.
Include the following information:
- Names and Addresses of Seller and Purchaser
- Signatures of Seller and Purchaser
2. Description of the Item
Give a detailed description of the item to ensure that it is identifiable to anyone reading the bill of sale in the event of a dispute.
Include the following information:
- Identification number (i.e. serial number or vehicle ID number)
- Year, make, and model if available
- Unique markings if available (i.e. tattoo on livestock or 3 C’s of a diamond)
3. Condition of the Item
A detailed description of the item’s condition will help to prevent a disagreement if the purchaser is unhappy with the quality, function, or general condition of the item.
Include the following information:
- “Sold As Is” unless you have agreed to something else
- Certified that the Seller is the legal owner
4. Details of the Sale
Details about the sale will help keep your records organized and prevent misunderstandings.
Include the following information:
- Date of Purchase
- Sale Price
- Payment Arrangement (i.e. paid in full, initial down payment, or installments)
5. Delivery of the Items
How you intend you deliver or receive the item is easy to overlook, but should also be included in the document.
Include the following information:
- Available immediately
- Pick up at a later time from a specific address
- Delivery at a later time (additional charge for delivery may apply)
What should be included in an auto bill of sale?
Depending on the item being sold or transferred, the description should include necessary identifying details. For example, an auto bill of sale may include the following details:
- Make
- Model
- Color
- Vehicle identification number (VIN)
- Model year
- Year of manufacture
- Type of body (2-door, truck, van, etc.)
- Number of cylinders (V6, V8, V12, etc.)
- Odometer reading (mileage)
- License plate number (if your state allows plates to be transferred)
Bill of Sale, Notarization, and Other State Requirements
States have varying requirements and laws surrounding the buying and selling of vehicles. Some require a bill of sale specific to that state, in others a general bill of sale will suffice, and others don’t require one at all but may ask for other legal documentation. In some cases, states also require that the bill of sale is notarized. For more information about which states require a bill of sale, notarization and all other legal requirements, we have compiled the following list of DMV websites by state.
50 States + D.C. DMV Websites
[table “19” not found /]