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Vehicle Sales Tax Questions

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  • kyfdxkyfdx Posts: 29,801
    VA does have some sort of 0.17% tax for vehicles, on top of their 3% sales tax.. It is possible (as alluded to above) that it is some sort of inventory tax, that could be charged to any purchaser, regardless of residence.

    I don't know that for sure, but it would make sense in this case. For the sales tax, you'd definitely pay your home state tax, and not where you bought it (ergo, the 6% for Maryland).

    regards,
    kyfdx

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • I am thining of assuming a lease that is currently owned by someone in CT. I am wondering about the taxes I will have ot pay once I register the cal in NJ. I am being told many things. Either a) that they will just charge 7% on top of the motnhly payment. or b), that I have to pay 7% of the total outstanding payments on the lease term - UPFRONT, or c) 7% of the total lien amount outstanding - UPFRONT.

    Can anyone help clarify? Thanks.
  • I live in tazewell county Illinois and I'm looking to purchase a vehicle after the 1st of the year. I'm looking for a specific used vehicle, and as of right now, there are a few I'm interested in up in the chicago area, as well as some just north of there in Wisconsin.

    Chicago and it's surrounding areas all have much higher sales tax then the county I live in. I don't know what Wisconsin has for sales tax. My question is, if I buy a car from the chicago area, will I be charged sales tax from the county I purchase the vehicle in, or from the county that I live in? If I were to get it from Wisconsin, how would the sales tax situation work out?
  • fushigifushigi Posts: 1,241
    In Illinois you pay the tax for the county you buy in, not the county you reside it. This was brought home to my wife & me in September when we were car shopping as we live in the western suburbs of Chicago and one dealer was touting that they had a lower sales tax than Cook & the collar counties.

    If you buy in Wisconsin there are a couple of ways to do it. If the dealer does Illinois sales often enough they may be able to charge you Illinois sales tax (not sure what rate .. maybe just the base state rate or the rate for your county) and that's the end of it. Failing that, they will be legally obligated to charge you WI sales tax. You, in turn, when you register the car in Illinois will be obligated to pay IL sales tax (all at once). You should, though I'm not sure about WI law in this regard, then be able to file a claim with the WI DMV to have your WI tax refunded.

    BTW, if you change your mind & buy new and buy this year, the sales tax is deductible on your income tax.
  • Thanks for the help. That is not what I was hoping to hear as Chicago area sales tax is 7.25% instead of 6.25% where I am currently living.

    I am looking for a very specific car that is no longer in production, so I won't be buying new. I'm not going to be able to take advantage of it on my tax return, but that is fine with me.
  • sorry for the double reply, but this has seemed to contradict other information I have been finding. I keep reading that you pay sales tax based on the location where you live, and not where you buy. Is that the case when buying within Illinois?
  • fushigifushigi Posts: 1,241
    From page 34 of http://tax.illinois.gov/Publications/Sales/STS76.PDF

    The_tax_rate_the_dealer_is_required_to_collect_is_preprinted_in_Section_6,_
    Line_4._This_rate_is_based_on_the_registered_business_location_of_the_dealer_tha- t_is_preprinted_in_the_upper_left_portion_of_Form_ST-556.


    Sorry for the icky cut-n-paste but note it mentions the address of the business, not the buyer.
  • I just purchased a new vehicle in Maricopa County, AZ

    Assume the agreed upon price was $55K; the agreed on trade in price was $15k.
    Dealer calculated sales tax on new vehicle price. Shouldn't this tax be calculated on $40k instead?
    (new vehicle-trade in)
  • robr2robr2 BostonPosts: 7,901
    AZ is a trade in allowance state so you should only pay tax on the difference.

    Did you buy or lease? Many states tax the entire value of the purchase when leasing.
  • I am coming off a lease and due to market conditions have equity in my car.

    The lease agreement indicates my purchase price and then has the sentence. "the purchase option price does not include fees for tags, taxes or registration"

    When I leased the vehicle, I did not pay tax up front, however I do pay tax each month along with my monthly payment. It makes sense to me that if i want to buy the car at the end of my lease, I would need to pay tax. this would be 6.25% of $16,000 or $1,000.

    I also understand if I had originally purchased the car as opposed to leasing, I would have paid the tax up front so if I was trading it in, it would offset the new car price reducing my tax cost.

    here is my question - if there is equity in the car and the dealership is buying the car, how does the tax work? Is tax payable and by whom?

    For example, if they value my car at 18,000. Do I net $2,000 or am I only going to net $1,000. Is the answer different if I do the transaction to (a) reduce cap cost on my next lease or (b) take a check for the difference.

    thanks
  • dwynnedwynne Posts: 4,018
    In most states the title from a leased car can pass to the lessee (you) or a licensed dealer. So I could not buy your leased car - you can or you can sell / trade it to a dealer.

    In most states, tax would be due if YOU purchased the car based on the buy out (at that time) price. In your example you used $16k - so that would be the taxable amount.

    If a dealer buys your car, no tax is due (at this point) so if the dealer offered you $18k to buy / trade your car your net would be $2k and you could ask for a check or roll that into the next deal. I have found that Carmax offers as good / better money than local dealers if you have a clean, low mile, never wrecked car to get rid of. It is nice to car shop without a trade as well, makes things a lot simpler.

    Always be sure you get the buyout price inclusive of any fees (disposal fee, etc) but excluding the taxes. This is the price a dealer would have to pay to buy the car, if you buy it you can simply add the tax to this amount yourself to figure the total. You do not need to wait until lease end either, at any point your car is worth more than the current buy out you can sell / trade and net the difference. At certain ages (like after the warranty expires) and certain mileages (like when major maintenance is due) the value can drop a good deal. Ditto market conditions like time of year (selling a convertible now, for example) and supply and demand can make not waiting until lease end a better option.

    I have heard there are some lease banks that will not allow any 3rd party to buy their lease vehicles, you either buy it yourself or turn it in. These are rare, however.
  • thanks a lot for the info!
  • Hi all,

    I am looking to buy a new car. AK doesn't have a sales tax, but they do have overpriced cars for the car I am looking for :( I want to buy it ENROUTE to AK and then just register it in AK when I arrive. Anyone know if that is possible?

    I would really like to use the new car to drive across the US but I heard there is some kind of stipulation that you would need to register the care within 10 days of purchasing. Is that correct? I really don't want to waste money on sales tax!

    To make matters more complicated, I am trying to trade my current vehicle in for the new car (old vehicle is registered in Alabama). Thoughts?? :)
  • Also, what is considered proof that you are "living" in another state? Is a bill good enough or do you have to have a state driver's license too?
  • Did you ever get an answer on this? I am considering doing the same thing with a slight twist: I live in Alabma, want to buy a vehicle in TX, and within 20 days I will be registering it in Alaska. I have a friend in Alaska who will let me use his address for a bank statement or bill so that I don't pay the tax in TX
  • """""Sales tax is owed and due to the state of which you are a resident at the time of the purchase. It has to be paid in order for the title to be issued by your residential state. The selling dealer is responsible for making sure that you get the title. """""

    So how does the dealer "know" what state you are a resident of? It gets complicated: I have a driver's license, voting, and pay income taxes to CO (residency), but my current vehicle is registered and insured where I live now (Alabama). I am moving to AK and want to buy a car in Texas enroute, thus registering my new car in my new state, Alaska and changing EVERYTHING (voting, license, registration, etc). I am planning on trading my old car in at the Texas dealership. I already checked with AK and they won't charge me any tax on the vehicle, only registration. But how do I get the Texas dealer to let me out the door without paying any sales tax?
  • dwynnedwynne Posts: 4,018
    I have purchased or leased from out of state dealers many times (though never from Texas) and I have never had to pay sales tax to the dealer. We pay tax when we title the car and get the tags. Any dealer used to selling to out of state folks should not try to collect any tax from you. It should not matter what state your ID shows as long as it is not Texas.
  • So how does the dealer "know" what state you are a resident of? It gets complicated: I have a driver's license, voting, and pay income taxes to CO (residency), but my current vehicle is registered and insured where I live now (Alabama). I am moving to AK and want to buy a car in Texas enroute, thus registering my new car in my new state, Alaska and changing EVERYTHING (voting, license, registration, etc). I am planning on trading my old car in at the Texas dealership. I already checked with AK and they won't charge me any tax on the vehicle, only registration. But how do I get the Texas dealer to let me out the door without paying any sales tax?

    Also, I will be financing the vehicle either through the dealership or through USAA. Please help!
  • stickguystickguy Posts: 14,931
    most likely your driver's license is enough. Plus the registration is out of state. Pick one!

    but as others noted, as long as you have proof you aren't a Tx resident,you should jsut be given an out of state transport/temp tag.

    2013 Acura RDX (wife's) and 2007 Volvo S40 (mine)

  • I live in NY, and am thinking of buying from a dealer in NJ. The dealer is saying that to obtain financing, I have to finance the purchase price plus NY sales tax, and the dealership will cut me a check for the sales tax so I can pay it myself.

    The salesman is saying they won't get funding unless he can prove I paid the sales tax. I don't see how me paying additional interest and them cutting me a check helps prove anything.
  • qbrozenqbrozen Posts: 17,520
    edited March 2012
    I've never heard of that.

    And it is completely ridiculous because what if you wanted to pay a down payment? How would they work that out? It makes no sense.

    I've only purchase one car out of state that I financed and that dealer (in PA) took the money I paid out of pocket for NJ sales tax and gave it to NJ themselves.

    '13 Stang GT; '15 Fit; '98 Volvo S70; '14 Town&Country

  • zyaaaaazyaaaaa Posts: 36
    Florida offers a sales tax credit on the trade-in value when purchasing another vehicle. My question is - if the current vehicle is in my wife's name only and we trade it in for a new car that is only in my name, will we still get credit for the trade-in when the tax is calculated?
  • zyaaaaazyaaaaa Posts: 36
    I spoke to the DoR today. They told me that as long as the trade was part of the same transaction the value of the trade in is credited towards price for the sales tax calculation.
  • wwj1wwj1 Posts: 1
    Illinois vehicle sales tax is very confusing. Check this site for a pretty good overall answer for anyone in the Chicago area.

    http://salestaxoncars.com/
  • doowledoowle Posts: 1
    Question from Auto Dealer point of view:
    Usually when we have an out of state resident purchase a car here in California, we deliver the vehicle outside of California on a one-trip permit. These out of state delivery sales are usually to residents of Arizona, Oregon, or Nevada. We collect no sales/use taxes, and the buyer has to pay sales/use tax in their resident state when they title the car there.

    However, we have a lot of (non-cash) buyers asking how they can include the sales tax in the amount financed.
    We were talking about what if we were to give the people who live in states w/reciprocity one-trip permits (to avoid DMV registration fees becoming due) but did NOT deliver the vehicle outside CA, so CA sales tax would be due and could be included in the contract.
    Assuming they live in a state with reciprocity, when they title the vehicle in their home state they would then only have to pay the difference btw what is normally due in their state less whatever was paid in CA, is that correct?

    And if so, what rate would we collect? Would we collect including the full county/city sales & use tax rate of where it was sold? Or....?
  • dwynnedwynne Posts: 4,018
    I have done many out of state deals - as a purchaser or lessee. Often the dealer will write me a check to pay the taxes, sometimes they write a check to my DMV (those can be tricky to use), and my credit union sent me two checks - one to me for the taxes and one to the dealer. In all cases I handled the taxes and title myself. I guess a certain amount of trust is needed as in some cases I could have not done the title correctly. Often the MSO will already be filled out by the dealer (to limit mistakes or intentional changes). In all cases the dealer relied on my knowledge of my state and local rates and fees. If a customer does not know this info the I am not sure how they expect the out of state dealer to know it :)

    Usually the bulk of the tax burden can be easily found so this large amount could be included in the deal, then let the customer worry about the smaller fees and such.
  • jwilliams2jwilliams2 Posts: 861
    Our lenders always required us to handle the registration for all financed or leased cars. We either did it ourselves or used one of several outside vendors who specialized in this.

    We had to provide copies of the registration paperwork to the lenders in order to get funded, and we did a lot of out of state sales. So we never had a problem with rolling in the taxes, as the dealership paid them to the State involved and then included them in the amount financed.
  • Hi,

    I live in Alabama. I purchased/financed a car in georgia. When I went to my local DMV to get the cars registration/tag they informed me that the dealership charged a 7% sales tax when my state only charged 3%. She then informed me that the state will send me a refund for the difference. Now I had wanted in line forever, and it was very busy to I just said "oh ok" and left. Now, I don't know if that money is mine to keep or go back to the dealership or what. Also, I'm trying to figure up the difference. Is it the percentage on only the sale price of the car or after the finance charges are factored in or what? Totally confused any help is appreciated!
  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 796
    Total sales tax in Georgia is calculated based on the total selling price of the vehicle MINUS any trade-in allowance (if applicable). Finance charges don't factor into the tax calculation.

    You should start by contacting the dealership where you purchased the vehicle. Ask to speak to someone in the business office and you just might find someone willing to help....but probably not! =(

    The next step would be to contact the Georgia Dept of Revenue and explain your situation. Here is a link to their Sales & Use Website, including some forms that might help you- GA DOR

    I am a resident of Georgia and I have purchased my last two vehicles in Tennessee. In both cases, the dealer didn't charge any Sales Tax and had me sign forms stating that I was an out-of-state resident. I also had to sign sworn statement that I would be immediately transporting the vehicles to Georgia and registering them there.

    Before I could purchase a Georgia tag, I had to visit the nearest DOR office and pay the applicable Sales Tax rate for my county- (6%). The county tag office required proof that the tax was paid before they would register the vehicle.

    Good luck!
  • 99s7099s70 Posts: 1
    I believe the above reference is outdated. Section 6 Line 4 of ST-556 now refers to the buyers tax rate.
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