When Do You Pay Taxes When Buying a Vehicle out of State?

You have to pay taxes when buying a car.
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Whether you obtain the vehicle in person or have it delivered, you can find a better selection and possibly a better price when buying a car out of state. However, you might worry about getting taxed twice or not knowing when and where to pay your vehicle sales taxes. The good news is that you'll only have to pay taxes once where you register the car, and the seller may have collected and handled the taxes already for you. Otherwise, you can easily pay the taxes at your local motor vehicle department when you go register your vehicle and pay other fees.

Buying a Car Out of State

When you buy your car from a dealership in another state, they may have the authority to collect state sales tax and send it to your state along with other paperwork for the title and registration. You'll want to ask the dealer so that you're prepared to pay the amount when you go to register the car if the dealer can't collect it.

You can expect the tax amount to get added to your vehicle's purchase price, and any sales tax collected should show up on the bill of sale you receive. In some cases, this doesn't mean you've completely met your tax obligations as you may still need to pay local sales tax in your county when you register the car. On the other hand, you can expect to get a credit from your state if the dealer had calculated higher taxes than what you owe.

If you're buying a car out of state from an individual online or in person, you can expect to handle everything with taxes, fees and registration on your own as the individual won't have the authority to do these things. You'll want to make sure the seller provides a bill of sale with the purchase price so that your state can properly calculate the tax due. If you're buying from an out-of-state family member, check with your state since you can potentially get a tax exemption that saves you money, although you may need to pay a small fee.

Determining Your Vehicle's Sales Tax

In cases where you have to pay the vehicle sales tax yourself, you'll want to visit your state's government website that handles car registration – often the department of revenue or motor vehicles – to learn about state and local tax rates and the process for determining what you owe. You can expect the tax to get calculated based on your car's purchase price or value, but the actual rate can depend on factors like whether the car is new or used, whether you're a new resident and which county you live in.

Vehicle sales tax rates often range between 1.5 percent and 8 percent and may have a minimum charge. However, some states such as Alaska, New Hampshire and Delaware don't charge sales tax on car purchases in general, while Oregon charges a small use tax just when you're buying a car out of state. On top of any state sales tax, you'll need to add the county portion, if required, to know how much to bring for registration.

Keep in mind that you can usually deduct any rebate or trade-in value that the seller applied to your car purchase in the calculation. Your state may offer a tax calculator that makes determining your taxes easier.

Registering Out-of-State Vehicles

When going to register your out-of-state vehicle, you'll need to prepare with the right documentation. For example, you'll need the bill of sale to show the vehicle's price along with any taxes paid. Also, bring the car's title or certificate of origin, odometer reading, proof of insurance and any vehicle inspection certificate required in your locale.

Along with paying the car's taxes and fees for things like the title, registration, processing and license plates, you can expect to complete a title application. In the case of a car purchased from a family member, your state will have some sort of vehicle tax exemption form to fill out that will prove the out-of-state purchase met the requirements.

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