Do I Have to Pay a Sales Tax for Buying a Car?
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In general if the state one lives in has sales tax, one will pay sales tax on the purchase of any car, including purchase of used cars from a private party. Sales tax is one of the many things that can significantly increase spending on an auto purchase. The sales tax will be calculated based on the purchase price of the vehicle and the current tax rate of the city or locality it is purchased in. As well, most people pay vehicle licensing and registration fees when they purchase a new car.
Currently, in the US, there are five states that don’t have sales tax. These are Delaware, Alaska, Oregon, New Hampshire and Montana. However, before one thinks of heading to one of these states to purchase a car, one should know that taxes will be assessed in the state where the car is initially registered. Thus if a Californian purchases a car in Oregon, he or she will have to pay sales tax when registering the car in their home state.
The only way to avoid paying the tax is by registering the car in the state where one purchases it, if the state assesses no sales tax. This is actually fairly difficult. One must have an address in the state. So if one owned two homes, one in Oregon and one in California, it would be technically possible to purchase a car in Oregon and pay no sales tax in California.
However, people have, in the past, abused this law, and it has led to some crackdowns on vehicle licensing. It is illegal to register a car using a dummy address, for example, an address borrowed from a friend. Generally, if one has an out of state license on a new car, he or she can still be assessed a tax if he or she really lives in a state with sales tax. Further, one could be charged with tax evasion, or pay fines for not registering the car sooner, in one’s home state.
If one does happen to live in a state with no sales tax, and is planning on purchasing a car and moving to a state with sales tax, the person should purchase the car 90 days prior to moving. This means one will not have to pay sales tax when one registers the car in the new state. This is not evading the tax, but simply being sensible about when to purchase a vehicle if one is considering relocating.
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jane: Most states will give you a tax "credit" for the value of the totaled vehicle. Delaware for example will deduct what your insurance company said the value was from your sales price before calculating tax. Some states do not give a credit at time of purchase but a "refund" may be issued by the state or even your insurance company. It all depends on the state you live in.
Submitted by a finance MGR in MD - anon49451
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ANON41591: I'm a finance manager at a MD dealer; how your tax is figured is based on the rules of your state. For example, in MD you are taxed on the selling price of your vehicle- before rebates or cash for clunkers. There is a deduction for your trade value but your vehicle would not qualify for the discount if you used the clunkers program. PA taxes after deducting both trade and rebate. Hope that helped! - anon49450
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I am a Mississippi resident and bought a car from a dealership in Florida. I had to pay sales tax in Florida, then when I registered it in Mississippi, had to pay Mississippi sales tax. Why? - anon48262
15
I purchased my car three years ago and registered in Alaska, then in Mississippi,
Now, moving to Kentucky, they said I have to pay taxes of 6 percent. Is this right? - anon46906
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My husband is active military and we live in VA. I am leasing a new car - is there any benefit (no sales tax or other) of getting the car in his name instead of mine - we both have excellent credit? - anon42892
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i bought a new car with a sticker price of 21,160. they took off 4,000 for a factory rebate,and 1400 from the dealer and 4,500 for cash for clunkers. My question is at what point do they figure the sales tax on? - anon41591
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I'm a California resident in the military stationed in Alabama and purchased a 1969 Chevelle in Alabama (from a licensed dealer) that has not been registered since 2003. Will I have to pay the fees for the expired registration? And will I have to pay sales tax on the vehicle if the dealer did not assess a sales tax? - ncecali
11
I was charged sales tax on a BMW in VA when I leased the vehicle three years ago. At lease-end, I am thinking of purchasing the vehicle but the price that they quoted me to purchase includes sales tax again. Is this legal? - anon31159
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So, I'm a Calif resident who buys a new car in Oregon where there is no sales tax. Wouldn't I be registering the car as a used car with a lower value? - johnt55
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Can I get sales tax return after purchasing a new car in California? - anon29126
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Same question, but I live in the Netherlands, do I only need a Delaware (mail forward address)? to register. I am using the car for extended vacations in the US. - anon25367
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Do military members have exemptions to sales tax on the purchase of a new car? For example, I am a resident of Alaska and currently stationed in Virginia. Am I exempt from VA sales tax since my home of record state does not charge sales tax? Thanks! - anon20067
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If I purchase a used car in California but export it to a country outside the US, do I still have to pay the Sales tax? Thank you - anon18901
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How do you know about the 90 days residency? I am being told by CA DMV that it is a year, so suddenly it looks like I owe big time. Help? - anon13212
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I have the same question as anon2361. I don't want to pay sales tax because I will ship the taxed item overseas. Is there any law or regulation governing this situation? - ddulguun
3
If I live in Canada and want to purchase a car from on the "non tax states" would this be possible, or would I be charged a tax for crossing the border? - anon3856
2
I'm purchasing a car in NY, which will be taken overseas. It will not be registered in the U.S. However, I'm still being charged sales tax. I was told this was the case because there will be a lien holder (my credit union). Is this correct and is there any way to get around it legally? - anon2361
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if you are replacing a total loss auto that you paid sales tax on only 4 months ago, will the sales tax on the new car be adjusted? or do you still have to pay the full sales tax again. - jane
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Written by
Tricia Ellis-Christensen
Last Modified: 20 October 2009
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