When buying a used car in Kentucky, don’t get caught off guard by the state’s vehicle sales tax.
Kentucky's car sales tax rate is six percent of the vehicle's purchase price. Unlike many other states, Kentucky has no local sales taxes. So, 6% is the maximum you’ll pay in sales tax in Kentucky, unlike other states where local governments can tack on additional vehicle taxes over and above the state’s tax rate.
Keep reading to get the scoop on how motor vehicles are taxed in Kentucky.
Do you Pay Taxes When you Purchase a Car From a Private Party in Kentucky?
When buying a car in Kentucky, you’ll pay 6% of the vehicle’s purchase price, whether you buy from a private seller or a car dealer. Kentucky tax law does not discriminate between the two. Unless you qualify for a tax exemption (discussed below), you are required to pay tax on your vehicle purchase.
Kentucky Sales Tax vs Usage Taxes
Sales tax is a percentage of a car's purchase price owed to the state of Kentucky when you buy a car and register it in Kentucky. The use tax ensures that vehicles purchased within the state and cars brought into the state are taxed identically.
Use taxes are pretty much the same thing, but for buying out-of-state vehicles. When you purchase a car out-of-state and register it in Kentucky, the state levies a 6% use tax (the use tax rate is the same as the Kentucky car sales tax rate).
If you paid sales tax on the purchase of a vehicle in another state, Kentucky deducts that tax so that you are not taxed twice. There are four potential scenarios.
- You paid no sales tax in another state, in which case you owe the full 6% Kentucky sales tax. Let's say you bought a used car in Delaware and didn’t pay any sales tax, given Delaware's 0% tax rate. You’ll pay Kentucky ’s full 6% sales tax rate.
- You paid less than 6% sales tax in another state, in which case Kentucky charges you the difference. Let’s say you bought a used car in Missouri for $23,000. Missouri car sales tax rates are 4.225%, so you paid $971.75 (.04225 X $23,000) in Kentucky tax. When you go to register your car in Kentucky, your total tax bill will be $1,380 minus the $971.75 you already paid in Missouri, for a total tax due of $408.25 to Kentucky.
- You paid exactly 6% sales tax in Florida (the only other state with the same tax rate as Kentucky), in which case Kentucky will give you a pass.
- You paid more than 6% in the other state (for example, Tennessee levies a 7% tax on every used vehicle purchase). We wish we could tell you Kentucky will give you a refund, but no. At least they won’t charge you any more tax.
Kentucky License Plates, Title And Registration Fees
In addition to the state sales tax, you may owe other fees when buying a car and registering it in Kentucky, such as a vehicle title fee and registration fee.
Kentucky's standard license plate fee is included in the registration fee. A vanity plate costs an additional $25.
How is Used Car Sales Tax Calculated in Kentucky ?
Sales tax is a percentage of a car's purchase price owed to the state of Kentucky when you buy a car and register it in Kentucky.
If the Department of Revenue suspects that the purchase price of the vehicle was artificially decreased, they will calculate sales tax based on the car’s fair market value.
The Department of Revenue establishes what the car is worth on the open market by referring to Kelley Blue Book, NADA value, or other reliable sources on used car prices. If they conclude that the car's fair market value is greater than its purchase price, they can opt to base sales tax on the fair market value.
It is important to note that underreporting the purchase price of a vehicle in order to avoid paying sales tax is illegal.
How to Pay Kentucky Vehicle Sales Tax
Here's how to pay the sales tax owed after buying a vehicle from a private seller in Kentucky:
- To transfer ownership of the vehicle, you and the seller must complete the necessary paperwork, including the bill of sale (when you buy a used car on PrivateAuto, we provide an official Kentucky bill of sale and prompt both of you to sign it in our app at the appropriate stage of the transaction process). You'll need the following documents to transfer car ownership in a private transaction:
- The original car title.
- Proof of Kentucky insurance.
- Valid driver’s licenses or IDs
- Calculate the amount of sales tax due. Multiply the vehicle's purchase price by 6%.
- Fill out the sales tax form.
- Submit payment for all taxes and fees.
- Get payment proof from the Kentucky Department of Revenue.
- Get your registration, title, and new license plates. Once you've paid the sales tax and turned in the necessary documentation, you'll get your new registration and title for the car. The title and registration will show that you bought the car and that the sales tax has been paid. You will get your new license plates in the mail.
How to Avoid Paying Sales Tax on Vehicles in Kentucky?
Motor vehicle taxes are something you can't avoid—they are a part of our lives. You are required by law to pay tax on private used vehicle purchases in Kentucky or any other state that charges sales tax—unless you meet an exemption.
Kentucky Car Sales Tax Exemptions
Here are some sales tax exemptions for used car purchases in Kentucky:
- The vehicle buyer is a education or charitable organization
- The vehicle is for the local, state, or US government
- The buyer is military personnel
- The vehicle is repossessed
Is Purchasing a Car from a Dealer Better?
A lot of people mistakenly believe that buying a car from a Kentucky dealer saves money. The opposite is true: going to a Kentucky dealer costs you more money, and it's a pain—unless spending 3 hours in a Kentucky dealership is your idea of a good time.
- Dealerships charge documentation fees above and beyond all the other Kentucky taxes and fees you have to pay (the other taxes and fees are exactly the same whether you buy from a dealer or a private seller, by the way). An average documentation fee in Kentucky is $450.
- Used car dealerships charge higher prices on cars. Their business model is based on buying low and selling high to generate the spread that keeps them in business. To get the best deals, skip the middleman and go directly to private sellers.
We do admit that dealers bring a certain amount of convenience that you don’t traditionally get when you buy from a private seller. In fact, that’s why we exist. PrivateAuto gives you dealer-like convenience in the palm of your hand while allowing you to transact peer-to-peer with regular folks like yourself.
By shopping for used vehicles from private sellers on PrivateAuto, you avoid the doc fee and get lower prices.
Kentucky Sales Tax Calculator
If you're in the market for a used vehicle, you'll want to calculate the applicable sales tax. With PrivateAuto's used car sales tax calculator, calculating sales tax has never been easier. This free online car sales tax calculator calculates the amount of tax you must pay on a used car purchase based on your tax rate (6%) and the vehicle's price.
Our innovative platform connects buyers and sellers and gives them all the tools to complete the deal, from in-app financing to secure messaging to integrated payments. You can also schedule a test drive and negotiate the price without ever disclosing your personal information.
Here’s how you can sell your car in Kentucky with a few simple steps:
- Gather the required paperwork for selling a car in Kentucky
- Register on PrivateAuto and get verified
- List your car
- Set your terms
- Vet incoming offers
- Choose a buyer
- Schedule a meeting
- E-sign documents
- Get paid, instantly
- Transfer title
Vehicles Sales Tax in Kentucky FAQ
How do I calculate the sales tax in Frankfort, KY?
To calculate the vehicle sales tax in Frankfort (or any sales tax in Kentucky), follow these steps.
- Find out Kentucky's sales tax rate (6% of your vehicle’s purchase price)
- Turn the percentage into a decimal and multiply it by your vehicle’s purchase price ( .06 X vehicle’s purchase price)
Does Kentucky have excise taxes?
Kentucky does have excise taxes on certain goods and services. Excise taxes are levied on the manufacture, sale, or consumption of specific items. Some common examples of goods and services subject to excise taxes in Kentucky include:
- Tobacco products
- Motor fuels
- Telecommunications services
- Insurance premiums
How are car trade-ins taxed in Kentucky?
When you buy a car, you can trade in an old one and put the value of it toward the price of the new one. For example, if your trade-in value is $2,000, that amount will be taken off your bill.
In Kentucky, trade-ins are not taxed. The tax rate will be applied to the net price of your new car, which is the amount remaining after your trade-in credit has been subtracted.
What is the Kentucky Transportation Cabinet?
The Kentucky Transportation Cabinet is in charge of maintaining and improving the Commonwealth of Kentucky’s transportation infrastructure, which includes 27,438 miles of road, 160 licensed airports, 23 public transportation systems, and the registration of 2.7 million licensed drivers and 3.4 million vehicles each year.
How do I change my name on my Kentucky driver's license and voter registration after getting married?
To change your name on your Kentucky driver's license and voter registration after marriage, follow these steps:
- Get a certified copy of your marriage license as proof of your name change.
- Visit your local county clerk's office with the marriage license, your current driver's license, and your Social Security card.
- Complete the necessary forms to update your name on your driver's license and voter registration.
- Pay any applicable fees for the new driver's license.
- Update your insurance card as well as the name on your ID.
How can I find a used car for sale near me?
PrivateAuto is the best place to sell or buy a used vehicle.
Here is how you can find your dream car in just a few simple steps:
- Browse used vehicles for sale on PrivateAuto.
- Look at the top of the page for the "Filter by Location" button. There, you will enter your location.
- Set a search radius, such as 25, 50, or 100 miles.
- You can make your search even more specific by choosing more filters, such as the year, the price range, the trim, etc.
- When you click "Search," a list of all the vehicles that match your search criteria will appear.