Automobile Sales Tax
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Automobile Sales Tax In America specified by state. How to avoid sales tax on used car? Which state has lowest sales tax on cars? So lot of questions comes on your mind while you are just planning to buy your dream car, right?

Don’t worry. I am here to answer those questions along with few amazing technique by which you can avoid sales tax while buying used cars. A full list of automobile sales tax for every state will be mentioned and will be updated periodically. Don’t forget to bookmark this page.

 

Why being an owner of a vehicle is costly?

See, vehicle is always a premium category product. Though it’s a necessity but the production cost push it to a higher level. Anyways there are not only buying cost but also automobile sales tax, insurance premium, maintenance, repairs and so on. If you are going to be a proud owner of a Car kindly keep this costs calculated before you purchase.

These are the most common and primary reason of expenses against vehicle. Though there is a common practice that people often overlook the automobile sales tax but this is not deniable.

 

How automobile sales tax is calculated?

If you are buying a car no matter it’s new or old, you have to pay sales tax. Now this automobile sales tax are varies in percentage from state to state. Now this percentage is calculated based on the resale value.

For example you have bought your car in a state where there is no sales tax and bought this into the state you live. Unfortunately your state has a sales tax but as you didn’t buy it here you might get an exemption from paying sales tax if it is bought 90 days before moving to your state.

On next year car registration in your state you might get an exemption or even if you need to pay the tax that will be calculated based on the resale value of the car not the price you have bought with. So as the price depreciates every year you might get a good amount of money saved.

 

How much vehicle sales tax need to pay in USA?

Usually, automobile sales tax varies from state  to state. In general sales tax is charged between 2% to 8.5%. It depends on which state you are purchasing the car.

Even if you buy an used car you need pay tax based on the resale value on the current market.

Let’s say you are buying a car which 3 years old and current value is $10,000. You are staying in a state where automobile sales tax is 5%. So you need pay $500 sales tax.

5% of $10,000 is $500. Hope you have understand now. This $500 is additional so your actual cost for this car will be around $10,500.

Some of the states has very less sales tax like 2-3% but few states charge even more than 8% for buying a car. let’s see which state charge less as an automobile sales tax.

 

What State has lowest sales tax on car?

Albama is the state with the lowest car sales tax which is only 2% of the resale value of the car. Albama DMV maintain this and fortunately it is the lowest.

DMV means Department of Motor Vehicles which is a government organization to monitor licensing and vehicle registration.

Following this Colorado, North Carolina, Oklahoma, Hawaii has comparatively less sales tax which is between 2.9% to 4%.

 

What State has highest sales tax on car?

If you are living in Nevada, Cansas or California then you have to pay highest sales tax. Nevada has highest car sales tax which is 8.25% of the resale value and this really hurts.

Following Nevada, Cansas & California also charge higher vehicle sales tax from you which is not less than 7%.

 

Vehicle sales tax in USA by state

So far you have read a lot about costs, taxes and all. Now let’s make it easy for you. Here is the list of vehicle sales tax in USA by state. Hence you can calculate by your own if you already determined what car you’re going to buy and what is the market value of that.

*** State having value “0” means in those states you do not need to pay any sales tax while purchasing new/used vehicle.

State Sales Tax (%)
Alabama 2
Alaska 0
Arizona 5.6
Arkansas 6.5
California 7.25
Colorado 2.9
Connecticut 6.35
Delaware 0
Florida 6
Georgia 6.6
Hawaii 4
Idaho 6
Illinois 6.25
Indiana 7
Iowa 5
Kansas 7.5
Kentucky 6
Louisiana 4
Maine 5.5
Maryland 6
Massachusetts 6.25
Michigan 6
Minnesota 6.5
Mississippi 5
Missouri 4.23
Montana 0
Nebraska 5.5
Nevada 8.25
New Hampshire 0
New Jersey 6.63
New Mexico 4
New York 4
North Carolina 3
North Dakota 5
Ohio 5.75
Oklahoma 3.25
Oregon 0
Pennsylvania 6
Rhode Island 7
South Carolina 5
South Dakota 4
Tennessee 7
Texas 6.25
Utah 6.85
Vermont 6
Virginia 4.15
Washington 6.5
West Virginia 6
Wisconsin 5
Wyoming 6

 

Did you have calculate your payable sales tax already. If yes then great. If not, that is even great. Sit relaxed and do it carefully.

Well, I know it feels bad to expense extra penny and it is difficult when you are spending a good amount. This additional payment comes like a burden.

What if you wouldn’t need to pay the sales tax. That would be great right? Definitely yes.

There are few factors to meet before you are eligible to pay car sales tax. If you are buying a new car then it only depends which state you are living. According to that state DMV there is a fixed rate (mentioned in above table) and you need to pay as it required.

Now if you are buying a used car then you can avoid sales tax.

 

How to avoid paying automobile sales tax ?

For used cars there are few conditions which will be considered before calculating sales tax against your purchase. Have a look on the factors mentioned below.

You can avoid sales tax if…

  1. You are buying an used car
  2. The vehicle is 10 years used or more.
  3. The car comes as a gift from your parents, spouse.
  4. You are disabled
  5. You your car in a state where there is zero sales tax.

There are lot more ways to avoid paying sales tax legally. Transferring ownership also incur sales tax so there is no way. Assume your friend bought a car and paid sales tax. After 1 year you are buying this car from him but you too need to pay sales tax based on the market value of that car at current time.

To make it simple, if it is change of ownership and does not fall under any of the condition mentioned above to avoid paying sales tax then you must pay the fee. Even if it is a gift you have to pay sales tax if it requires.

Finally, I would like to say that it is not possible to make you understand all the factors of motor vehicle sales tax in one article.

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