How Much are Used Car Sales Taxes in Alabama?

Buying a used car in Alabama can be a great way to save some money, but don’t forget the state’s 2% sales tax, levied on the vehicle’s purchase price. Not terrible, compared to other states like California with its 7.25% sales tax, but not nearly as good as zero, like Oregon.
The tax is 2% of your vehicle's purchase price. On top of that, you may owe local taxes as well. Also, don’t forget to factor in registration fees and the costs of a title transfer in Alabama.

Keep reading to get the full scoop on Alabama motor vehicle sales taxes and fees.

Do You Pay Taxes When You Buy a Car From a Private Seller in Alabama?

When making a car purchase in Alabama, you’ll pay sales tax, whether you buy from a private seller or a car dealer. Alabama's sales tax law does not discriminate between the two. Unless you qualify for a tax exemption (discussed below), you have to pay tax on your vehicle purchase.
In addition to the 2% state tax, you may owe local sales taxes on your vehicle purchase.

How Local Vehicle Sales Tax Works In Alabama

Many Alabama municipalities and counties charge local sales taxes.

Depending on where you live in Alabama, you could end up paying between 0.50% and 6.75% local sales tax on top of the state’s 2%.

See a complete list of all Alabama city and county sales tax rates on this official resource.

Alabama's Local Sales Tax Example

You're in Midway, and you find a stunning Ford Raptor for $30,000.

Midway's sales tax is 3%, and Bullock County has a tax rate of 1.75%. This means you'll owe a total sales tax of 6.75%—$900 in city tax ($30,000 multiplied by .03), $525 in county tax ($30,000 multiplied by 0.0175), and $600 ($30,000 multiplied by .02) in state tax. You owe a total tax bill of $2,025 on that Raptor.
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Understanding the Tax Basis of Vehicle Sales

Car sales tax is levied on the purchase price of the vehicle. Unless the purchase price is suspiciously low, the value is assumed to be the car's purchase price.

Some people have the bright idea of negotiating an artificially low purchase price and then paying the difference in a side transaction. Do not attempt this; the Alabama Department of Revenue (DOR) is ahead of you.

The DOR establishes what the car is worth on the open market (its fair market value, or FMV) by referring to the Kelley Blue Book, NADA value, or other reliable sources on used car prices.

If the Department of Revenue establishes that the car's fair market value is significantly greater than its purchase price, they can opt to base the tax on the NADA assessed value.

Note that underreporting the purchase price of a vehicle in order to avoid paying sales tax is illegal.

What is the Use Tax?

The use tax is a percentage of a car's purchase price that is owed to the state of Alabama when the vehicle is brought into the state for registration.

When buying an out-of-state you will have to pay a 2% use tax (the same rate as the sales tax) when you register the car in Alabama. On top of that, you may owe local sales taxes as well.

If you paid sales tax on car purchases in another state, Alabama deducts that tax so that you are not taxed twice. There are two potential scenarios (leaving out local taxes for simplicity).

1. You paid no sales tax in another state. Let's say you bought a used car in New Hampshire and didn’t pay sales tax, given New Hampshire's 0% tax rate. You’ll pay Alabama's 2% use tax.
2. You paid more than 2% in the other state (for example, Georgia levies a 6% tax on every used vehicle purchase). We wish we could tell you that Alabama will give you a refund, but no. At least they won’t charge you any more tax.

How to Avoid Paying Sales Tax on Vehicles in Alabama?

Vehicle taxes are something you just can't avoid—they are a part of our lives. Here are the only two ways we know of for you to avoid paying sales tax on a vehicle purchase.

1. Move to a state that doesn’t have a vehicle sales tax and buy a car there.

2. Qualify for a sales tax exemption in Alabama.

Alabama Vehicle Sales Tax Exemptions

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Most states offer exemptions for government vehicles, religious organizations, military personnel, and other categories. For a full list of Alabama sales tax exemptions, check with your DOR office.

License Plates, Title, And Registration Fees in Alabama

In addition to vehicle sales taxes, you owe other fees when buying a car and registering it in Alabama, such as a registration fee and a car title transfer fee.

To register your vehicle at the Alabama county treasurer’s office, you must show proof of car insurance. First-time passenger vehicle registration costs between $23 and $105, plus the $15 title fee.

Alabama's standard license plate’s cost $23. Personalized license plates cost $50.

Is Purchasing a Car from a Dealer Better?

Many people believe that buying a car from a Alabama dealer will save them money. Actually, going to an Alabama dealer is more expensive.

Dealerships charge documentation fees above and beyond all the other Alabama 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 Alabama is $485.
Used car dealerships usually have higher prices. Their business model is built around buying low and selling high to generate the spread that allows them to stay in business. To get the best deals, avoid the middleman and deal directly with private sellers.

We admit that buying from a dealer provides a level of convenience that is not typically available when buying from a private seller. That is, after all, why we exist. PrivateAuto gives you dealer-like convenience while also allowing you to transact with regular people like yourself.

When you buy a used car from a private seller on PrivateAuto, you avoid the doc fee and get a better deal.

Alabama Car 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 vehicle sales tax calculator calculates the amount of tax you must pay on a used car purchase based on the combined state and local sales tax rate in Alabama (2%) and the vehicle's price.
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Sell or Buy a Vehicle Online With PrivateAuto

We are the only transactional marketplace where you can buy and sell used vehicles easily and conveniently.

Our innovative platform connects buyers and sellers and gives them all the tools to complete the deal, from in-app car financing to secure messaging to integrated payments via our banking gateway, PrivateAuto Pay. You can also schedule a test drive and negotiate the price without ever disclosing your personal information.

Here are the steps to sell your used vehicle in Alabama.

1. Gather the required paperwork for selling a vehicle in Alabama
2. Register on PrivateAuto and get verified
3. List your car
4. Set your terms
5. Vet incoming offers
6. Choose a buyer
7. Schedule a meeting
8. E-sign documents
9. Get paid, instantly
10. Transfer vehicle title

Alabama Used Car Sales Tax FAQ

How to register an out-of-state vehicle in Alabama?

To register an out-of-state vehicle in Alabama, you'll need to submit the following to your nearest Alabama Motor Vehicles Department (MVD) within 30 days of moving:

1. Original title
2. Proof of Alabama insurance
3. Last registration from the previous state (if applicable)
4. Payment for all applicable fees

To have the VIN number and mileage certified, you must bring the vehicle in when registering.

What paperwork do I need to sell my car privately in Alabama?

Which state has the lowest tax rate?

How do you protect yourself when buying a car privately?