Car Sales Tax by State

Registering a vehicle is often a complicated process. This is typically the point in your vehicle purchase process when your state collects the sales tax that’s due for your transaction and any title transfer, DMV, license plate or other state fees that may be required. Every state’s tax rate, fees, process and required documents are different.

Learn More About Car Sales Tax by State

One of the less exciting aspects of buying a new car is dealing with the extra costs involved. Especially when it comes to thinking about sales tax, which is calculated differently depending on where you’ll be registering your car. 

 

All vehicles are subject to road tax in the form of an annual registration fee, the cost of which varies by state. Additionally, there is the often-overlooked cost of sales tax which must be paid whether you’re buying a new or used vehicle. Again, this varies from state to state.

 

These taxes may feel like a chore to have to pay, especially if you had been forgetting to factor them into your budget. And they can really add up! An 8% sales tax on a $15,000 car is an additional $1,200, for example. But these taxes are necessary and go towards public projects, such as keeping our roads in a safe condition and funding public services like schools and emergency services. 

 

Since these costs, and the way they’re calculated, vary so much from state to state, it can be confusing to understand exactly how much you will have to pay to register and legally own your new car. Luckily, we’ve gathered everything you need to know about car sales tax by state

 

Why are state sales taxes different?

Sales tax is usually the biggest hidden cost involved with buying a new car and much like other car taxes, it is calculated at the state level. Each state government has control over how much they charge or whether they even charge anything. Some states don’t charge sales tax when buying a car at all (good news for anyone living in Alaska, Delaware, Montana, New Hampshire, and Oregon!)

Some of the most expensive states for car sales tax are California at 7.25%, followed by Indiana, Mississippi, Rhode Island, New York and Tennessee at 7%. The lowest include Colorado at 2.9% and Alabama, Georgia, Virginia, Hawaii and Wyoming at 4%.

You might think that it’s a good idea to save money by traveling to buy a car out of state but unfortunately, you have to pay car tax in the state where the vehicle is registered, not the one you buy it in.

What goes into sales tax and how is it calculated?

% Total Value

Sales tax is a percentage of the total value of the car. So if you buy a $20,000 car in Mississippi, you will have to pay an additional $1,400 in sales tax. However, if you bought the same car in Wyoming, you’d only need to pay an extra $800 in sales tax.

The True Cost

The true cost of buying a new or used vehicle can be calculated by taking into account the value of the car, the cost of sales tax in the state you’re in, and other charges such as the registration fee in your state and the title transfer costs. 

Additional Costs

When buying any vehicle, you are responsible for these additional costs so it’s essential to make sure you’re aware of exactly what taxes your state charges. Your local DMV office will be able to help advise you on this when you go in to complete your title transfer paperwork. 

% Total Value

Sales tax is a percentage of the total value of the car. So if you buy a $20,000 car in Mississippi, you will have to pay an additional $1,400 in sales tax. However, if you bought the same car in Wyoming, you’d only need to pay an extra $800 in sales tax.

The True Cost

The true cost of buying a new or used vehicle can be calculated by taking into account the value of the car, the cost of sales tax in the state you’re in, and other charges such as the registration fee in your state and the title transfer costs. 

Additional Costs

When buying any vehicle, you are responsible for these additional costs so it’s essential to make sure you’re aware of exactly what taxes your state charges. Your local DMV office will be able to help advise you on this when you go in to complete your title transfer paperwork. 

Is sales tax different when buying a used car vs. a new car?

In short, no. You are required to pay sales tax on any vehicle you’re buying, regardless of whether it’s new or used. 

 

Car taxes are managed at the state government level, and there are no federal car taxes involved in buying a new car. However, there may be some local taxes involved. In Alaska for example, they don’t charge state sales tax on car purchases but some local governments apply a local tax of up to 7.5%.

 

You don’t have to pay sales tax more than once but if you’re moving to Texas, be aware that they charge a $90 new resident tax on “any motor vehicle purchased outside Texas and brought into Texas for use by a new resident.” 

 

Car taxes by state are calculated by the value of the vehicle, so if the used car that you’re buying is comparable to a new car, the sales tax will be similar. Registration fees are either a flat rate or based on other elements such as the weight of the vehicle depending on which state you register the car in, and the title transfer fee is usually a flat fee which also differs from state to state. 

Is sales tax different when buying a used car vs. a new car?

In short, no. You are required to pay sales tax on any vehicle you’re buying, regardless of whether it’s new or used. 

 

Car taxes are managed at the state government level, and there are no federal car taxes involved in buying a new car. However, there may be some local taxes involved. In Alaska for example, they don’t charge state sales tax on car purchases but some local governments apply a local tax of up to 7.5%.

 

You don’t have to pay sales tax more than once but if you’re moving to Texas, be aware that they charge a $90 new resident tax on “any motor vehicle purchased outside Texas and brought into Texas for use by a new resident.” 

 

Car taxes by state are calculated by the value of the vehicle, so if the used car that you’re buying is comparable to a new car, the sales tax will be similar. Registration fees are either a flat rate or based on other elements such as the weight of the vehicle depending on which state you register the car in, and the title transfer fee is usually a flat fee which also differs from state to state. 

We Will Help You Navigate the Costs

The costs involved with buying a car can be confusing. If you’re looking to buy a car in the near future and want some help navigating these costs, get in touch with the team at Motobyo today to find out how we can help you!