How Much are Used Car Sales Taxes in Rhode Island?

When buying a used car in Rhode Island, don’t get caught off guard by the state’s car tax. Rhode Island has a 7% statewide sales tax on vehicle purchases.
Sales tax in Rhode Island is 7% of NADA clean retail book value or purchase price, whichever is greater. Unlike many other states, Rhode Island doesn’t have local taxes; 7% is the most you’ll pay in tax on your vehicle purchase.

Keep reading to get the full scoop on Rhode Island vehicle sales taxes.

Do you Pay Taxes When you Purchase a Car From a Private Party in Rhode Island?

When buying a vehicle in Rhode Island, you are subject to sales tax, whether you purchase it from a private seller or a car dealer. Rhode Island's tax law does not discriminate between the two.
large_Taxes_6_05749ef090 (1).webp
Unless you qualify for a tax exemption (discussed below), you are required to pay tax on your vehicle purchase.

Sales Tax vs Use Tax

Sales and use tax are similar. Each is a percentage of a car's purchase price owed to the state of Rhode Island when you buy a car and register it in Rhode Island.

Sales tax is for cars purchased within the state.
Use tax is for cars purchased outside the state and brought into the state for registration.

The vehicle use tax ensures that vehicles purchased within the state and cars brought into the state are taxed identically.

Use taxes apply to out-of-state purchases. When you purchase a car out-of-state and register it in Rhode Island, the state levies a 7% use tax (the use tax rate is the same as the Rhode Island car sales tax rate).

If you paid sales tax on cars purchased in another state, Rhode Island deducts that tax so that you are not taxed twice. There are four potential scenarios.

1. You paid exactly 7% sales tax in Tennessee, in which case Rhode Island will give you a pass.
2. You paid no sales tax in another state, in which case you owe the full 7% Rhode Island use 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 Rhode Island’s full 7% use tax rate.
3. You paid less than 7% sales tax in another state, in which case Rhode Island charges you the difference. Let’s say you bought a used car in Massachusetts for $23,000. Massachusetts car sales tax rates are 6%, so you paid $1,380 (.06 X $23,000) in Massachusetts tax. When you go to register your car in Rhode Island, your total tax bill will be $1,610 minus the $1,380 you already paid in Massachusetts. You can expect to pay $230 to Rhode Island.
4. You paid more than 7% in the other state (for example, Kansas levies a 7.3% tax on every used vehicle purchase). We wish we could tell you that Rhode Island will give you a refund, but no. At least they won’t charge you any more tax.
Image highlighting DealNow by PrivateAuto

Rhode Island Registration, Title and License Plate Fees

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

To register your vehicle at the Rhode Island Motor Vehicle Department (MVD) branch office, you must show proof of valid vehicle insurance. The first time you register a passenger vehicle, you will need to do the title transfer, which will cost you $52.50.

The registration fee for passenger vehicles is based on the weight of the vehicle. Registration fees range from $30 to $48, plus a $15 DOT annual surcharge.

Rhode Island's standard license plate fee is $32.50. A vanity plate costs an additional $68.50.

For more info on Rhode Island’s license plate fees, visit the official Rhode Island DMV page.

How is Used Vehicle Sales Tax Calculated in Rhode Island?

Sales tax is a percentage of a car's purchase price owed to the state of Rhode Island when you buy a car and register it in Rhode Island. The use tax ensures that vehicles purchased within the state and cars brought into the state are taxed identically.
If the Rhode Island Division of Taxation office suspects that the car price was artificially decreased, they will calculate sales tax based on the car’s fair market value, or the retail price of vehicles.

The Division of Taxation office establishes what the car is worth on the open market by referring to Kelley Blue Book value, 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 Rhode Island Car Tax

After buying a car from a private seller, you will pay the sales tax. Here is how to do it:

1. 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 Rhode Island 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:
2. The original car title.
3. Proof of valid car insurance.
4. Valid driver’s licenses, ID or passport.
5. Calculate the amount of sales tax due. Multiply the vehicle's purchase price by 7%.
6. Submit payment for all taxes and fees.
7. Get payment proof from the Rhode Island Division of Taxation office.
8. 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.

Can I Avoid Paying Sales Tax on Cars in Rhode Island?

Motor vehicle taxes are something you just can't avoid—they are a part of our lives. You are required by law to pay sales tax on vehicle purchases in Rhode Island, unless you meet an exemption.

Sales Tax Exemptions

Here are some sales tax exemptions for used car purchases in Rhode Island:

Motor vehicles and adaptive equipment for people with disabilities.
Motor vehicles sold to nonresidents that are not registered in Rhode Island.
Farm vehicles.
Motor vehicles and adaptive equipment to certain veterans.

Is Buying a Car from a Licensed Dealer Better?

Some Rhode Island residents mistakenly believe that buying a car from a licensed dealership saves money. The opposite is true: going to a Rhode Island dealer costs you more money, and it's a pain—unless spending 3 hours in a Rhode Island dealership is your idea of a good time.

Dealerships charge documentation fees above and beyond all the other Rhode Island 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). The average documentation fee in Rhode Island is $300.
Used car dealerships typically charge higher prices. 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 cars from a private seller on PrivateAuto, you avoid the doc fee and get lower prices.

Rhode Island 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 (7%) and the vehicle's price.

Buy or Sell a Car Online With PrivateAuto

Untitled design - 2023-10-31T060714.961.png
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 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 10 easy steps to selling your vehicle in Rhode Island:

1. Gather the required documents for selling a car in Rhode Island
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 title

Rhode Island Vehicle Sales Tax FAQ

Which state has the cheapest tax on car purchases?

The states with the cheapest car tax are Alaska, Delaware, Montana, New Hampshire, and Oregon, with a tax rate of zero. Nevada has a zero tax rate on private-party car sales, though not on dealership purchases.

With the exception of the above states, all US states charge sales tax on private-party car purchases. Oklahoma, North Carolina, Colorado, and Alabama charge 4.5% or less vehicle sales tax.

How much does title transfer cost?

Do you need a VIN check in RI?

How to transfer an out-of-state title?

What is the NADA clean retail book value?