Vehicle Sales Tax Questions

Kirstie_H · September 2004

Based on recent conversations, it looks like we need a separate discussion to cover sales tax questions. Do you pay where you buy, or where you live? How can you calculate what you'll owe? Can you finance the tax? Let's post our questions and answers here.

See Also: Simple Car Finance Calculations

davidkeith37 · September 2004

I am purchasing within the next two weeks either a Hyundai Santa Fe or Mitsubishi Outlander both the very most basic model.I will most likely purchase the vehicle in Phoenix AZ as the Hyundai dealer in Tucson would not take my interest in looking at a new vehicle seriously. Will deal via the internet or over the telephone. I live in Cochise County, about 140 miles from Phoenix. I have had one quote from a dealer which was $15,644 base price, $1,323.00 tax $299.00 Documents, and $342.38 Lic. After some corrections was told the out the door price was $17,529.07. Are those four items, base price, tax , documents, and licsense the total of costs that a resident of this county in this state will pay? I realise that it will have to be reregistered in one year. Am I overlooking anything?

tornado25 · September 2004

Although I can't comment specifically on who lives where, what I can tell you is for YOU, the WHERE you buy it, in most cases, is irrelevant to where you LIVE.

That is I live in Town A, WI and buy a car in Town B, WI, in a different county, 30 miles away. Doesn't matter. The tax I pay is based on where I live and where the car will be garaged.

In most cases, that difference is only "Does my county have a sales tax and the county where I bought it does not"? This is NOT, really, a big issue to consider when buyer either vehicle, IMO.

volvomax · September 2004

In Arizona the sales tax is determined by where you buy the car.
If you buy a car in Phoenix you pay 8.1 %, if you buy a car in Scottsdale you pay 7.95%.

As far as the Hyundai is concerned, you'll pay the selling price, sales tax, license fees, and the doc fee. Thats it.

bobst · September 2004

We live in Virginia, just across the border from Maryland.

When we bought cars in Maryland, we paid sales tax to Virginia. That's how it works around here.

alfox · September 2004

a MA resident who buys a car anywhere and registers it in MA pays sales tax to MA - no matter who else you paid.

gtahobe · September 2004

No matter who else you paid? Ouch?

I live in Ohio (6.5%) and purchased in Indiana (6.0%). I paid 6.0% in Indiana at the time of purchase. When I went to get my Ohio Certificate of Title, I paid an additional .5% (6.5% due to Ohio, minus 6.0% credit as paid to Indiana, I think they call this reciprocity?).

If the Indiana tax where 7.0%, I would have paid 7% to Indiana and owed no additional tax to Ohio (nor would I have received the extra 0.5% back).

Cheers.
Gtab

kyfdx · September 2004

My guess is... that Indiana rebates that amount to Ohio..

I bought my M-I-L, who lives in Indiana, a car in Ohio.. Paid $zero sales tax to Ohio.. They gave her a non-resident title, and she paid the tax in Indiana, where she lives..

Without the rebate, I can't see Ohio letting Indiana keep that money...

I know it doesn't work that way between Ohio and Kentucky.

regards,
kyfdx

alfox · September 2004

have reciprocity where if a MA resident buys a car out of state they sell it without sales tax, and issue only a temp plate until you can get home and register in your home state. I had a car die in NY years ago and that's how it worked.

If you move into MA from another state, and can show that you complied with that state's sales tax laws when you bought the car, they do not charge sales tax in MA. The laws are designed to prevent people from going to NH to buy a car, for example, to avoid MA sales tax.

robr2 · September 2004

Further since in New England it's pretty easy to cross borders to do anything, most dealers have the paperwork for the surrounding states. When I bought a car in NH, the dealer had all the MA forms ready to go. I moved my plate to the new car and had 48 hours to go to the Registry and pay my tax and transfer the plate.

kyfdx · September 2004

Yes.. that is my understanding of reciprocity also... That the state allows you to buy the car WITHOUT paying sales tax, then you pay it in your home state..

Sales tax in Kentucky used to be a LOT more than Ohio... And all the dealerships in KY near the state line would advertise: "If you do not live in Kentucky, you do not pay Kentucky sales tax".

akangl · September 2004

All this talk of sales tax and buying cars is making me VERY glad I live in Alaska. We don't have a state sales tax.........yet.

robr2 · September 2004

My understanding that it may happen soon.

But don't some cities (all right the one city) and towns charge sales tax on some items?

akangl · September 2004

Some do on certain items, so far cars haven't been taxed. It will happen eventually, its just one of those things, but for now we are enjoying NOT having a state sales tax or state income tax.

weaselinsuit · September 2004

No provincial sales tax here in Alberta either....but we have the national GST of 7%. Better than Ontario I guess who pay a whopping 15%.

tornado25 · September 2004

No matter where you buy a car, you owe the tax appropriate for where you live. (I sort of emphasize that because some counties in WI have no sales tax, some counties have there own tax and in the 5 SE WI counties, there is the county tax plus additional tax for Miller Park).

So, if I buy a car in IL, I have to title/register it in WI, where I live. If (and I don't even know if they would do this) they tried to charge me sales and/or personal property tax--not sure if they have that in IL--then I would probably get that as a credit against tax owed to WI. You don't pay it to both places. IL has no legal right to the money, since you aren't a resident.

boomer1b · September 2004

Unless it went up..........

In NY sales tax just went to 8.25% in my area from 7%.

Florida has no state income tax last I knew.....

Funny tho in Fla.......You can claim a BK and still KEEP your personal home !
Quite a few of the stock market swindlers bought multi millon dollar homes in Fla. for cash.
Then filed BK and kept them and kept the $$$$ they stole!

weaselinsuit · September 2004

You're absolutely right boomer, but if you add in the GST the total is 15%. Its a rough go lol

davidkeith37 · September 2004

Thanks for the AZ specific information. If I did the numbers right the savings on the $15644.00 between Phoenix and Scottsdale sales tax amounts to $23.46.With Huyundai there are only the 4 items to consider,but do you know anything about how Mitsubishi operates? I have heard that some invoices have a line that would best translate as Dealer extra profit. That may have been a joke.

mfullmer · September 2004

While you are correct in that you pay sales tax on vehicles for where you are a resident, it's not technically correct to state "IL has no legal right to the money, since you aren't a resident". In every other retail transaction the sales tax is paid, not according to residence, but in the jurisdiction where it is purchased. If I go to California and purchase from a California retailer (anything but an automobile) then sales tax is charged at the rate of location of purchase.

I have never seen a good argument as to why a person's resident jurisdiction gets the sales tax of a transaction completed in another. Personal Property Tax/Ad Valoram yes, I understand, but the sales tax should go to the jurisdiction where the sale happens, as in all other transactions.

mfullmer · September 2004

A person who files for Bankruptcy (7) is able to keep their primary residence in ALL states.

Bankruptcy laws are both Federal and State. The Federal laws are the most liberal and and the filer has the choice to abide by Federal or State exemptions. The Federal exemptions are:

$16,150 in equity which serves as a residence
$2,575 on a motor vehicle
$8,625 in household furnishings with no single item worth over $425.
$1,075 in jewelry
$850 plus up to 2 of the unused residence exemption in any property
social security, support, unemployment benefits, welfare, VA disability and certain pension benefits.

alfox · September 2004

I don't think there is a good argument. These are just reciprocity agreements. The reason of course is money - sales tax on cars is such a significant revenue stream to a state that they cannot allow people to go out of state to avoid the tax. Since all states think the same way, it was easy to agree to reciprocity.

mfullmer · September 2004

But in that same arguement, why would that matter? If I live on the border of a state that has no sales tax I can go there for all of my purchase, which easily, yearly, add up to more than a vehicle costs (and we don't buy new vehicles every year) and not pay taxes.

I know WHY they did it but it's really a way for local (state) governments to engage in activities that are banned for normal businesses.

Why I think the sales jurisdiction should get it? The jurisdiction that "houses" the retail establishment takes on the expense of the common features of the community in which people shop. Sales tax, going to the jurisdiction where the expenses/income are accrued, only makes sense, regardless of the fact that each states wants as much money as they can get.

alfox · September 2004

but the states revenue departments obviously don't, lol.

We live next to a state with no sales tax, and MA is passing all kinds of laws trying to prevent people from shopping in NH. They have made it illegal to buy goods from an out of state source that are available in-state without paying MA the sales tax they lost. They are "encouraging " Internet retailers to report sales to MA residents, so that they can collect the sales tax. If you do buy on-line from, say, Dell Computer and fail to pay the sales tax to MA, and they find out about it they are prosecuting people for tax evasion. Hasn't been tested much yet, but that's their bizzare plan.

robr2 · September 2004

alfox - actually the MA tax is considered a sales and use tax. So if you buy out of state and use it in state it is subject to tax. I wouldn't be suprised to discover that's how it is in most states.

Further, MA added last year to the state income tax return a place to list all purchases made outside the state that you owe the 5% on. If you put down zero when you made taxable purchases and then sign the return, you are technically guilty of tax fraud.

kyfdx · September 2004

robr2 has it pegged exactly.. Most states have a "use tax" in addition to the sales tax.. By law, you have to pay a "use tax" on anything you purchase out of state...

You can see how this would create chaos when it comes to sales taxes on cars.. Car dealers that border another state would never be able to sell a car to an out-of-state resident, if that resident then had to pay a use tax when he registered the car in his home state. Everyone would be driving to NH, OR, or FL to buy their cars otherwise..

I think the system they have now is the best.. Pay the tax on cars where you live... It may be different, but it makes good fiscal sense.

regards,
kyfdx

alfox · September 2004

a fast growing thread, top-10 for sure, lol.

gsdavis · September 2004

Can someone help me in figuring out sales tax. Sales tax in NC is 3% I had a price for an Avalanche for $30000. When I went to the dealership, they changed the numbers to $30500 and then took the additional $500 off at the end. I had a trade valued at $6500. The dealership then applied the tax to the difference and then took the $4000 rebate after adding the tax to the difference. They then took the $500 dealer cash at the end. I seems to me that the tax should not have been applied until after the rebate. (30500-6500-4000). Am I wrong. I thought they were trying something so I got up and left.

CarMan@Edmunds · September 2004

Hi gsdavis. In most states customer cash incentives are taxable, while dealer cash incentives are not because they are considered manufacturers' price adjustments. So for example, sales tax would be calculated on the vehicle that you are considering before the $4,000 customer cash was deducted, but after the $500 dealer cash was. You should be able to find out more informaiton your state's specific tax laws by visiting the following Web sites: North Carolina Department of Revenue and North Carolina Division of Motor Vehicles.

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secretariat73 · September 2004

I live in NH, a state without sales tax, but I am thinking about moving to another state (don't know which state yet). I am also thinking about getting a new car relatively soon, and would like to do it here because of the tax situation. However, when I moved several years ago from NY to Kentucky, I had to show proof of a sales tax payment on my car that was equal to or greater than it would have been in KY (no problem, since I moved from a place with 8.25% to 6%). But, if I were to do that this time, I'd get socked with a huge use tax. Anyway, does anyone know what states do or do not have the "use tax" penalty for the cars of incoming residents? I'd hate to have an extra $1000 to pay right after spending big bucks on relocation.
Steven

alfox · September 2004

primarily because of NH's tax situation. However, it would be taxed one-time at ~5% of current fair market value (as determined by them), so each model year of age based on when you registerred it in MA would reduce the sales tax.

Note that the MA municipality you moved to would also charge you a personal property (excise) tax equal to about 2.5% of the fair market value (as determined by them)... each year, forever!

bensmom243 · September 2004

Actually, we moved from NH to MA this summer. If you can show that the car was registered in NH (or other state) for at least 6 months and that you complied with the local registration laws and fees, you do not have to pay sales tax to register in MA. So the moral of the story is go shopping for a new car NOW!!

Good Luck!

alfox · September 2004

Really? That is good to know. I stand corrected, thanks.

CarMan@Edmunds · September 2004

That's great information, bensmom243. Thanks for taking the time to share your experience with everyone. Get movin' and pick up a new vehicle ASAP, secretariat73

and make sure to let us know if you have any questions about doing so.

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hilbert · October 2004

I think your discussion has pretty much answered this question. Nonetheless, I would be grateful if someone with specific knowlegde about NY can clarify the following for me. Thanks in advance.
I live in New York. If I buy in another state say Delaware,
(i) Can I get the same level of service and warranty froom a Dealer in New York as if I bought from him/her?

(ii) Is it unadvisable to drive a new vehicle from Delaware to NY (because of Break-in requirement)

(iii) Do I have to pay NY tax after I come in New York or do I pay Delaware tax.

Would be grateful if someone can clarify any/all of these.
Thanks a ton.
Hilbert

CarMan@Edmunds · October 2004

Hello Hilbert. Theoretically one can have their vehicle serviced at any dealership that sells that particular brand, regardless of where they purchased it. Having said this, some dealers provide customers who purchased their vehicles at their location with preferential treatment, especially if they suspect that you purchased from a competitor just to get a lower price and are having your vehicle serviced at their location because it is more convenient.

I personally don't think that there is anything wrong with purchasing a new vehicle in Delaware and driving it up to New York in terns of breaking it in, however I really don't see any reason to do so. Even though Delaware does not charge sales tax, but you can not avoid paying tax on your new vehicle by purchasing there. When you go to register your vehicle in New York, you will be required to pay your home state's sales tax on it.

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nonjth13 · October 2004

New York's emission regulations are the same as California's. It is possible that the vehicle you plan to buy might not be legal to register in NY. You should check this out with NY DMV. You will have to pay NY tax.

1racefan · October 2004

Are Doc Fees typically taxed? I have had prices quoted to me in the past where the Doc Fee is taxed, and where it isn't. I was just wondering if this is something that is typically taxed or not.

hilbert · October 2004

Thanks Car_man and Nonjth 13.

I am sorry for not replying earlier. If I have to pay the tax I might as well buy in New York.

Thanks.

CarMan@Edmunds · October 2004

Hi 1racefan. I believe that since doc fees are often nothing more than a way for dealers to add additional profit to deals, they are considered to be part of a vehicle's price and are taxable.

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CarMan@Edmunds · October 2004

You're welcome, hilbert.

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gerber · October 2004

Hi all, great info here. (Even if a bit tough to negotiate at times :P) Anyway, I have a question for you car buying experts!

I live in NC and am reworking my contract with my company. As part of the new contract I am switching from a company vehicle to a car allowance. The company is going to essentially give me my current vehicle to use as a down-payment.

It is a '01 Hyundai XG300 with 63000 miles in good condition. I figure it will bring in the neighborhood of $7,000 as a down payment. Here is where things get tricky.

Do I:
A) Buy the car from the company for $1.00 (consideration) and pay the tax on Bluebook or however they come up with it?

The problem here is, I am paying tax to just roll the car over into a down payment anyway... seems to me there is a better way.

I could buy the car for $4000.00 or so (but not actually pay - CFO stuff) and pay tax on less than bluebook.

Still paying tax here to just roll it over into a DP.

C)Is there a way for my company to sign the vehicle over to the dealer as my down payment? Would this have income tax implications?

Note* I think there may be some way to recalim taxes if you buy/sell a vehicle within a certain time frame. IE I buy the vehicle for X and pay 3% of X in tax. Than I turn vehicle over into a down payment and get the 3% back from the State. Can anyone please steer me in the right direction?

Thanks much in advance!
G.

enya18 · October 2004

Okay this might be a dumb question but, when leasing a car- I understand that I should negotiate the purchase price first, then the leasing details. My question is, does the dealer add tax to the purchase price OR the monthly payments? I hope not both!

Thanks!

CarMan@Edmunds · October 2004

That's not a silly question at all, enya18. Different states use different methods for calculating sales tax on leased vehicles. There are three main methods of doing so (I suppose that you could say that there are four if you count the states that don't charge sales tax at all). In the first, the state taxes the payment and down payment. Most states, including Florida, Georgia, Missouri, Connecticut, and California use this method. The second way is to tax the entire selling price of the vehicle. This is how sales tax is calculated on leases in states like Illinois, Texas, and now Ohio. Lastly, some states only tax the depreciation portion of leases. This is tax is calculated on leased vehicles in New Jersey. If you let me know what state you are in, I would be more than happy to try to give you an idea of how sales tax is calculated on leased vehicles there.

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enya18 · October 2004

I am in the State of Florida. Specifically, I plan on leasing the '04 Acura TSX. Thanks for your help!

CarMan@Edmunds · October 2004

You're welcome, enya18. I believe that Florida charges sales tax on the payment and down payment of leased vehicles, rather than based upon the vehicle's price like it is done in many other states. You may be able to find out more informaiton on this subject by visiting one of the following Web sites: Florida Department of Highway Safety & Motor Vehicles or MyFlorida.com - Taxes.

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scooterz · October 2004

Well, it's not exactly an overseas delivery, but an expat or international delivery meaning I purchased a new US Spec car in Europe, and will drive it there for 5 months, then Volvo will ship it to a dealer in PA. When I register it, I will have to pay 6% sales tax. My question is, on what amount? Is it considered a used car? Or do I pay the tax on my actual purchase price or on a typical US price if purchased in the US? Thanks for your help.

rroyce10 · October 2004

..... You pay the taxes on the purchase price in PA ..

Terry.

CRJ · October 2004

I am considering assuming someone's lease on an Infiniti G35 Coupe. Can someone tell me if I will have to pay sales tax on the remaining lease amount when I register the car in my name? I live in NY state. I am thinking I won't since the tax has already been payed and I am just taking over the lease. Just want to be sure. Any thoughts?

rroyce10 · October 2004

....... New owner .. new tax .......

Terry.

scooterz · October 2004

Thanks Terry for your response. So, I am assuming that I need to show the DMV proof of how much the purchase price was when I go in to register the vehicle. Do you know of any specific documents that will be required?

Vehicle Sales Tax Questions

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