A bill of sale is a written document that records the transfer of personal property from one person to another for a stated price on a stated date. It works as a receipt and as proof of ownership, and most people run into one when buying or selling a used car, boat, motorcycle, trailer, or piece of equipment in a private deal. Done right, it protects both sides if anyone later disputes who owned what and when.
What the Document Actually Proves
Under the Uniform Commercial Code, which every state has adopted in some form, a “sale” is the passing of title from seller to buyer for a price.1Legal Information Institute. LII Uniform Commercial Code UCC – Article 2 – Sales A bill of sale documents that passing. It fixes four things in writing: who sold, who bought, what changed hands, and for how much.
One boundary worth naming up front: a bill of sale is not a certificate of title. For a vehicle, the state-issued certificate of title is what officially assigns ownership on state records. The bill of sale is the receipt showing the transaction happened, and you typically need it to apply for a new title at your state’s motor vehicle agency. The document itself does not make you the legal owner in the eyes of the state; it is the bridge between the old owner and your new title.
What a Bill of Sale Needs to Contain
A vague bill of sale can create more problems than it solves. To hold up in a dispute or satisfy a titling agency, it needs to cover the following:
- Full legal names and current addresses for both the seller and the buyer.
- A detailed description of the property. For a motor vehicle, that means the Vehicle Identification Number, make, model, year, and odometer reading. For other items, include serial numbers, model numbers, or identifying marks that distinguish this specific item from similar ones.
- The purchase price, ideally stated in both numerals and words, along with the payment method.
- The date of sale, which establishes when ownership transferred for liability, insurance, and tax purposes.
- Signatures of both parties, dated.
Specificity is the whole point. A document that says “one blue truck, $5,000” without a VIN or year is practically useless once two parties disagree about which truck was sold.
The “As-Is” Clause
Sellers in private transactions almost always want language like “sold as-is, with all faults.” This is not filler. Under UCC ยง 2-316, expressions like “as is” or “with all faults” exclude implied warranties about the property’s condition.2Legal Information Institute. UCC 2-316 Exclusion or Modification of Warranties Without those words, a buyer could argue the seller implicitly guaranteed the item would work properly.
For sellers, this clause is the single most important protective feature of the document. It draws a clear line: the buyer inspected the property, accepted its condition, and takes it from there. For buyers, seeing “as-is” is the cue to inspect thoroughly before signing, because your legal options shrink considerably once you have agreed to those terms.
Signing, Witnesses, and Notarization
At a minimum, both parties should sign and date the bill of sale. A neutral witness is not universally required, but a witness signature adds credibility if either side later claims they never agreed to the sale.
Notarization goes further. A notary public verifies the signers’ identities and confirms they signed voluntarily. A number of states require notarization for vehicle or watercraft bills of sale, and some state titling agencies will not accept the document without a notary seal. Even where it is not mandated, notarization is cheap insurance against a later claim that a signature was forged. Check your state’s motor vehicle agency website before you finish the sale to find out whether notarization is required in your jurisdiction.
Gifts and Nominal-Price Transfers
Not every transfer involves a real purchase price. When property is given as a gift or sold for a token amount like one dollar, a bill of sale still matters, because it documents who transferred what to whom and when. Without that paper trail, the recipient has no clean way to prove ownership.
Gift transfers carry tax consequences ordinary sales do not. For 2026, the federal gift tax annual exclusion is $19,000 per recipient.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 If you transfer property worth more than that to one person without receiving fair market value in return, you may need to file IRS Form 709 to report the gift, even if no tax is ultimately owed. Selling a $25,000 car to a family member for one dollar does not sidestep the gift tax question; the IRS looks at the gap between the sale price and fair market value.
Absolute vs. Conditional Bills of Sale
Most private transactions use an absolute bill of sale: the buyer pays, the seller hands over the property, and ownership transfers immediately.
A conditional bill of sale works differently. The buyer takes possession but does not actually own the property until the price is paid in full. The seller retains title as security, and can reclaim the property if the buyer stops paying. This arrangement is common in equipment financing and installment sales of expensive machinery. If you use one, spell out the payment schedule, any interest charged, what counts as a default, and what the seller may do on default. A seller who retains title as security is essentially holding a security interest in the property under UCC Article 9,1Legal Information Institute. LII Uniform Commercial Code UCC – Article 2 – Sales and without those details, enforcing the arrangement later becomes much harder.
Aircraft and Documented Vessels
State law governs most bills of sale, but aircraft and Coast Guard-documented vessels are the major exceptions.
The FAA requires a bill of sale as part of every aircraft registration. An applicant for initial registration must submit FAA Form AC 8050-2 signed by the seller, or an equivalent document showing proof of ownership.4eCFR. 14 CFR 47.33 – Aircraft Not Previously Registered Anywhere Without it, the FAA will not process the registration.
The U.S. Coast Guard runs its own documentation system for vessels over five net tons in certain uses, such as coastwise trade or commercial fishing. Transfers of documented vessels require a bill of sale filed with the National Vessel Documentation Center, using Coast Guard Form CG-1340 or CG-1356.5eCFR. 46 CFR Part 67 – Documentation of Vessels The document must name and give addresses for both parties, describe the interest being transferred, and be signed and acknowledged before a notary. A vessel bill of sale that is not filed is “deemed invalid against any person except the grantor or a person having actual knowledge of the sale.”6U.S. Coast Guard. CG-1340 Bill of Sale If a dispute arises and you never filed, the document is essentially worthless against third-party claims.
Keep Your Copy
Both parties should keep a signed copy indefinitely.
For the buyer, the bill of sale is usually required to apply for a new certificate of title and registration. It also proves ownership for insurance and establishes the price paid, which becomes your cost basis if you ever resell.
For the seller, the retained copy is liability protection. It shows the exact date ownership transferred. If the buyer gets into an accident or racks up parking tickets the week after the sale, your copy shows you no longer owned the vehicle. Sellers should also notify their state’s motor vehicle agency of the sale separately, because relying on the buyer to transfer the title is a gamble that does not always pay off.
Tax Consequences
The price recorded on a bill of sale has real tax effects.
Most states impose sales or use tax on vehicles, boats, and other tangible personal property, and the amount on the bill of sale is typically what the state uses to calculate that tax. Some states use fair market value instead of the stated price if the two are significantly different, specifically to prevent people from writing “$500” on a bill of sale for a $15,000 car.
For sellers, the federal tax picture depends on how the property was used. If you sell personal-use property, such as your daily driver, for more than you originally paid, the gain is reportable as a capital gain on IRS Form 8949 and Schedule D.7Internal Revenue Service. Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets If you sell personal-use property at a loss, the loss is not deductible.8Internal Revenue Service. Capital Gains, Losses, and Sale of Home The IRS only allows deductions for losses on property used in a trade or business or held for investment.9Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets Since most cars, boats, and personal equipment depreciate, this rule catches almost everyone: no tax owed on the sale, but no loss to claim either.
The bill of sale is your documentation for all of it. It records what the buyer paid, which sets that buyer’s cost basis, and what the seller received, which sets the seller’s proceeds. Keep it somewhere you can find it at tax time.