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Vehicle Sales Tax Questions

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  • kyfdx@Edmundskyfdx@Edmunds Posts: 25,898
    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: 1,218
    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: 1,218
    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: 7,601
    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: 13,585
    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), 2007 Volvo S40 (when daughter lets me see it), 2000 Acura TL (formerly son's, now mine again), and new Jetta SE (son's first new car on his own dime!)

  • 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.
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