How to Figure Sales Tax on Vehicles

Most states levy either a sales tax or a use tax on vehicle purchases. The sales tax on a vehicle is the vehicle base amount multiplied by the applicable sales or use tax rate. These two figures will vary depending on where you're registering the vehicle and who you purchased it from.

Understand Your State and Municipality Sales Tax

States generally levy a sales tax on vehicles purchased from a dealership and use tax on vehicles purchased from private parties or brought in from another state. To understand your tax liability, determine the tax rate for the city or county where you plan to register the vehicle.

Tip

Many municipalities, cities and counties charge a rate that's different from the primary state tax rate.

You can find out your rate by visiting your state's Department of Revenue or your local tax assessment website and searching for sales tax or use tax. Alternatively, you can use a sales tax look-up program, like this one offered by GeoTax.com, to determine your local sales tax rate.

Some states -- like Oregon, Alaska, Delaware, New Hampshire and Montana -- don't charge any sales or use tax at all. That means you won't pay any sales tax on a vehicle you purchase and register in these states.

Determine the Base Amount for the Tax

New Cars and Trade-Ins

Check your state's Department of Revenue or Department of Treasury website and review its vehicle tax policies. Not all states use a car's sales price as the base amount for sales tax. For example, California charges sales tax on the purchase price of a new car, but Washington bases the sales tax on the car's fair market value, if that's different than the car's purchase price. If you traded-in a car to the dealer when you bought a new one, some states may offer you a trade-in credit for the value of the vehicle that you gave up.

Used Cars

When you're reviewing your states' rules, note any differences for used cars. The tax base for a used car is sometimes calculated differently than it is for new cars. For example, Texas bases the sales tax on the sales price if you paid 80 percent or more of the vehicle's standard presumptive value, which is a figure determined by the state. Otherwise, the base used for the sales tax is the car's certified appraised value, or 80 percent of the standard presumptive value.

Gifted Cars

Some, but not all, states allow a tax exemption for vehicles that are gifted. A car recipient in California, for example, can avoid tax on a gifted car by filling out the Statement of Use Tax Exemption Form. In contrast, the state of Arizona allows no tax exemptions at all. You can find out about tax exemptions from your state revenue website or by checking the title transfer rules for your state on DMV.org.