Used Car Sales Tax Guide
Most states charge anywhere from 5% to 9% sales tax on the sale of motor vehicles. These percentages are calculated from the purchase price of a vehicle when it exchanges hands. Used car sales tax is levied at the same rate as new car sales tax.
In addition to the sales tax, expect to pay additional fees on the purchase of a vehicle. These vary by state, and can include the registration fee, license plate fee, and additional taxes or levies.
Who Pays the Tax on a Private Car Sale?
In states that charge sales tax, the buyer always pays the tax. Additionally, the buyer will pay the title transfer fee, registration fee, and any other taxes or fees charged by their state, county, or city. For example, some states and localities may charge a motor vehicle excise tax, sales or use tax, or other miscellaneous taxes and fees.
Do You Pay Sales Tax on a Used Car From a Private Seller?
Yes, you will pay sales tax when you buy a used car from a private seller. Sales taxes apply equally to private and dealership vehicle purchases. Also to new and used vehicles alike. If you live in a state that charges sales tax, you will pay sales tax, regardless of who sold you the car.
Vehicle Sales Tax By State
Each state sets its own sales tax, with a few states opting not to charge sales tax at all. Here are the vehicle sales tax rates by state. Note that the rates below are statewide and that cities, counties, or other entities can still charge their own sales taxes in addition to the statewide sales tax.
Also, the following rates do not include any sales and use tax, excise tax, or other state and local taxes.
States With No Car Sales Tax
The following states do not charge a statewide sales tax, although local sales taxes can still apply.
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Used Car Sales Tax Calculator
Our handy used car sales tax calculator can help you figure out how much you’ll owe in taxes when you buy a car in your state. Just plug in your vehicle’s purchase price and your tax rate. If you live in an area that charges a local tax on top of the state sales tax, add the two rates together.
For example, if you live in Alameda County, California, you’ll add the California sales tax rate (7.25%) to the Alameda County sales tax rate (3%) and enter the total (10.25%) into the calculator.
Estimated Car Sales Tax
$598
Total vehicle cost $20598
Car Sales Tax Summary
Vehicle price
Sales Tax Rate
County Tax Rate
$20000
0%
2.99%
Total Sale Tax
Total Vehicle Cost
$598
$20598
How to Avoid Paying Sales Tax on a Used Car?
Vehicle sales taxes can add up fast, so it’s no wonder that many people want to avoid paying them. Unfortunately, unless you live in a state that doesn’t charge auto sales tax, you’re probably stuck paying them. Here are a few ideas on how to minimize (or possibly get out of) paying sales taxes on your used vehicle purchase.
Buying in (or Moving to) Another State
Many people think that they can travel to a state that doesn’t charge sales tax, buy their car, and bring it home to their state. That doesn’t work. You pay taxes based on the state in which the car will be licensed and registered, not on where you purchased it.
If you move to a state that has no sales tax—and to a county and city that don’t charge auto sales taxes—then you’re scot free. However, moving is probably a lot more expensive than just paying the tax in the first place.
Purchasing Before Moving
If you live in a state with a low (or no) sales tax and are planning to move to a state with higher sales taxes, just buy your vehicle before making the move. Register it in your current state, then after the move, re-register it in your new state.
Get a Better Deal
Sales taxes are paid on the purchase price of the car, so getting a better deal translates to less taxes paid. Here are some tips to getting the best used car deal possible.
- Avoid dealers. Buying a used car from a private seller almost always gets you a better deal than going to a dealership (including online dealerships such as Carvana). Car dealers need to make their spread from buying low and selling high. By cutting out the middleman, you can often save a bundle on a used car purchase. PrivateAuto connects you directly to private vehicle sellers and does not take a cut of your transaction. Nor do we charge a transaction fee.
- Offer less than the asking price. Where most online used car marketplaces only allow you to accept the seller’s asking price, PrivateAuto also allows you to make offers on vehicles as you browse. Sellers can then accept, reject, or counteroffer. When a seller accepts your offer, the magic happens.
- Have cash on hand, or be pre-approved for an auto loan. Sellers prefer a buyer with verified funds. When you create your PrivateAuto profile, we allow you to verify funds so sellers will be more likely to choose to sell to you. Don’t have the funds? You can apply for used vehicle financing right within our app. When approved, your profile will show that you have verified funds.
- Lowball listings that have been active for a long time. If a car has been listed for a while and is not selling, the owner may be open to accepting a lower offer—especially if your PrivateAuto profile shows that you have verified funds.
Sales Tax Loopholes and Exemptions
Different states have different exemptions for vehicle sales taxes. If you qualify for an exemption, you are not required to pay sales tax on your vehicle purchase. The following are some of the exemptions that some states offer: check with your state’s Department of Revenue (or equivalent department) to see what exemptions they offer.
- Farming vehicles. If a vehicle is used strictly for farming, your state may offer a tax exemption.
- Zero-emissions vehicles. Some states, such as New Jersey, give sales tax exemptions for vehicles that don’t produce emissions.
- Church vehicles. If a church purchases a vehicle, it may be exempt from sales tax.
- Historic vehicles. If you have a classic car or other historic vehicle, it may not be subject to sales tax in your state.
- Keeping it in the family. In some states, if a vehicle sale is between immediate family members, it may be exempt from sales tax.
- Disability or veteran status. Some states offer sales tax exemptions for certain disabilities (Nevada offers an exemption for the blind) or for disabled veterans or their surviving spouses.
- Gifts. Gifting a car may provide sales tax exemption in some states. If you live in a state that has a gift exemption—and a car owner who wants to gift the vehicle to you—then this is a way to transfer ownership without incurring sales taxes.
- Autonomous vehicles. Self-driving cars aren’t widely available, but if you do happen to purchase one, it may be exempt from sales tax.
Don’t Fake a Low Purchase Price
Don’t negotiate a “side offer” with the vehicle seller so that the paper amount of the sale is less than the vehicle’s market value. Your state’s Department of Motor Vehicles, Department of Revenue, or other government body will calculate taxes owed based on the vehicle’s market value. You’re likely to get busted when you go to take care of your vehicle registration.
That said, if you’re able to negotiate a $45,000 vehicle down to $39,000 fair and square, you shouldn’t have a problem. If you make a side cash offer to a seller so that the same $45,000 vehicle shows on paper that you paid $10,000, you’ll probably have a problem.
Used Car Sales Tax FAQ
Are private car sales reported to the IRS?
Private car sales are not reported to the IRS in the same way that an employer reports income tax. Especially in a private party car transaction, neither party is highly motivated to follow up and report the transaction to the IRS. Additionally, private party sales are not usually subject to IRS taxation. The buyer pays sales taxes to the state (and sometimes to the county and city), while the seller is not subject to taxation—unless they make a profit. If the seller fetches a higher price than they paid for the vehicle, they will be subject to capital gains tax on the difference.
Do I pay taxes when I sell my car?
In most cases, you won’t pay taxes when you sell your car. The buyer pays sales taxes based on the tax rate of the state in which the buyer will register the car. Additionally, if the buyer lives in a county or city that charges sales tax, they will pay those taxes as well.
As a seller, you won’t pay any tax, unless you make a profit. If you sell the car for more than you paid for it, you’ll be subject to capital gains tax on the difference.
How do I figure out the sales tax on a car?
Your vehicle sales tax is based on the purchase price and the tax rate of the state in which you live. Your county or municipality may assess additional sales tax. Finally, your car purchase may be subject to applicable local taxes and fees. You’ll pay all taxes owed at the time you go to register and title your car with the Department of Motor Vehicles (or your state’s equivalent organization). Be sure to get a receipt to show that each applicable tax was paid.
Does selling a car count as income to the IRS?
If you sell a used car for more than you paid for it, the difference will count as income and be taxable as capital gains.
Do I get a 1099 when I sell my car?
When selling your used car to a private party, you can choose to request a 1099 from the buyer if you so desire. Otherwise, you won’t get a 1099 when you sell your car.
Do I pay sales tax when I buy an all-terrain vehicle?
In most states, all-terrain vehicles are subject to sales tax the same as any other car. Check with your state’s Department of Tax (or equivalent) to see if they provide an exemption for ATVs, snowmobiles, and other OHVs.
What is the used car sales tax rate for vehicles in California?
If you’re thinking of buying a used car in California, it’s important to be aware of the California car sales tax rate. Used cars are taxed in California at 7.25% state sales tax plus any applicable local taxes. Relevant tax forms can be downloaded from the California DMV website.
Keep in mind that tax rates can change, so it’s always a good idea to check the tax information with the California Department of Motor Vehicles website. You can also go to one of your state’s DMV office locations, or your local tax authority office before making a purchase.
Do salvage vehicles get a highway use tax exemption in North Carolina?
Yes. In August, 2013, Governor Pat McCrory signed House Bill 727 that provides an exemption from the highway use tax for salvage vehicles. North Carolina HB 727 explains the requirements for transferring the title of a salvaged vehicle in detail.
Do I pay sales tax on a motor vehicle trailer in Texas?
When purchasing a vehicle or trailer in Texas, the sales tax rate is 6.25%, but there are some exceptions. Farm and timber trailers, manufactured housing, mobile offices, and oilfield portable units are all exempt from vehicle sales tax. So if you’re planning to purchase one of these types of trailers, you won’t be subject to the state’s sales tax. Keep in mind, however, that local taxes may still apply.
Do autonomous vehicles have a sales tax exemption in the US?
In the United States, new cars are subject to a sales tax, which is typically a percentage of the purchase price. However, there are often exemptions for vehicles that are classified as autonomous. This means that self-driving cars are not subject to sales tax in many states.
The rationale for this exemption is that autonomous vehicles are still in the early stages of development and are not yet widely available. As such, they are considered to be an emerging technology. The sales tax exemption is intended to encourage people to purchase autonomous vehicles, which will help to promote their development and eventual widespread adoption. Be sure to check the laws and rules of your state regarding autonomous vehicles, their use, and their taxation.
Can I deduct sales tax on a vehicle purchase?
When you purchase a vehicle, you may be able to deduct the sales tax on your income tax return. The amount of the deduction depends on the state in which you purchase the vehicle and the amount of sales tax you pay. You can claim the deduction for either the state and local sales taxes or the state and local income taxes, but not both. The best way to determine if you are eligible to deduct sales tax on your vehicle purchase is to consult with a tax professional.
How do I figure out sales tax on a car?
A sales and use tax driver guide manual is a document that provides guidance on the proper application of sales and use taxes. The driver guide manual is typically published by a state DMV agency and is designed to ensure that buyers and sellers comply with the state’s sales and use tax laws.
The manual will typically include information on the definitions of various terms used in the tax code, the rates of tax that apply to different types of transactions, and the procedures for filing and paying taxes.
How to get temporary license plates?
States can have different requirements for issuing temporary license plates (also known as a temporary tag), but commonly required documents include:
– Certificate of Title
– Temporary tag application
– Proof of car insurance
– A valid driver’s license or ID card
– Results of inspections or emissions testing, if applicable
– Loan documentation or release, if applicable
Some states require you to show multiple forms of identification. Typically, government-issued ID cards, or something like a bank statement or utility bill.
How do you organize road tests (test drives) when selling a car?
When it comes to selling a car, the road test, also called a test drive, is an essential step in the process. Not only does it give potential buyers a chance to see how the car performs, but it also allows them to get a feel for the car’s features and get a sense of its overall quality.
However, organizing road tests can be a bit tricky, especially if you’re working with a busy schedule. Here are a few tips to help you make the most of your test drive:
1. Don’t give out personal contact info to strangers. Protect your privacy by selling your car on PrivateAuto. Use our in-app messaging and scheduling feature to keep yourself secure.
2. Make sure you have plenty of time. A test drive should take at least 30 minutes, so be sure to schedule accordingly.
3. Choose a route that showcases the car’s strengths. If you’re selling a sports car, for example, choose a route that includes some twists and turns.
4. Be prepared to answer questions. Potential buyers will likely have plenty of questions about the car, so be sure to know your stuff.
5. Take your time. Don’t feel rushed to get through the test drive—this is an opportunity to really show off your vehicle.
By following these tips, you can help ensure that your test drive goes smoothly and gives potential buyers the information they need to make a decision.
How do you sign over a car title in Alaska?
To sign over a car title in Alaska, the current owner must fill out the appropriate forms and submit them to the Alaska Division of Motor Vehicles. However, there are a few laws and rules that must be followed in order for the transfer of ownership to be valid.
First, gather all of the necessary paperwork. This includes the driver’s licenses of the buyer and the seller, as well as the registration cards for both the car and the buyer’s new vehicle.
The form will need to include the vehicle’s identification number, make and model, as well as the buyer’s name and address. Both the buyer and seller need to fill out a form and provide an identification card. The seller also needs to provide proof of insurance.
In some cases, the DMV may require an emissions test before vehicle registration can be completed. The process is similar for other types of motor vehicles, such as RVs and motorcycles. In most cases, the seller will also need to provide a bill of sale as proof of purchase.
Once the forms have been submitted, the Division of Motor Vehicles will issue a new title in the buyer’s name. The buyer will be able to register their new vehicle and obtain license plates.