Used Car Sales Tax Guide

For most US residents, sales taxes are a fact of life, and private party car purchases are no exception.

Most states charge anywhere from 5% to 9% sales tax on the sale of motor vehicles. These percentages are calculated from the purchase price of a vehicle when it exchanges hands. Used car sales tax is levied at the same rate as new car sales tax.

In addition to the sales tax, expect to pay additional fees on the purchase of a vehicle. These vary by state, and can include the registration fee, license plate fee, and additional taxes or levies.

Who Pays the Tax on a Private Car Sale?

In states that charge sales tax, the buyer always pays the tax. Additionally, the buyer will pay the title transfer fee, registration fee, and any other taxes or fees charged by their state, county, or city. For example, some states and localities may charge a motor vehicle excise tax, sales or use tax, or other miscellaneous taxes and fees.

Do You Pay Sales Tax on a Used Car From a Private Seller?

Yes, you will pay sales tax when you buy a used car from a private seller. Sales taxes apply equally to private and dealership vehicle purchases. Also to new and used vehicles alike. If you live in a state that charges sales tax, you will pay sales tax, regardless of who sold you the car.

Vehicle Sales Tax By State

Each state sets its own sales tax, with a few states opting not to charge sales tax at all. Here are the vehicle sales tax rates by state. Note that the rates below are statewide and that cities, counties, or other entities can still charge their own sales taxes in addition to the statewide sales tax.

Also, the following rates do not include any sales and use tax, excise tax, or other state and local taxes.

States With No Car Sales Tax

The following states do not charge a statewide sales tax, although local sales taxes can still apply.

Used Car Sales Tax Calculator

Our handy used car sales tax calculator can help you figure out how much you’ll owe in taxes when you buy a car in your state. Just plug in your vehicle’s purchase price and your tax rate. If you live in an area that charges a local tax on top of the state sales tax, add the two rates together.

For example, if you live in Alameda County, California, you’ll add the California sales tax rate (7.25%) to the Alameda County sales tax rate (3%) and enter the total (10.25%) into the calculator.

How to Avoid Paying Sales Tax on a Used Car?

Vehicle sales taxes can add up fast, so it’s no wonder that many people want to avoid paying them. Unfortunately, unless you live in a state that doesn’t charge auto sales tax, you’re probably stuck paying them. Here are a few ideas on how to minimize (or possibly get out of) paying sales taxes on your used vehicle purchase.

Buying in (or Moving to) Another State

Many people think that they can travel to a state that doesn’t charge sales tax, buy their car, and bring it home to their state. That doesn’t work. You pay taxes based on the state in which the car will be licensed and registered, not on where you purchased it.

If you move to a state that has no sales tax—and to a county and city that don’t charge auto sales taxes—then you’re scot free. However, moving is probably a lot more expensive than just paying the tax in the first place.

Purchasing Before Moving

If you live in a state with a low (or no) sales tax and are planning to move to a state with higher sales taxes, just buy your vehicle before making the move. Register it in your current state, then after the move, re-register it in your new state.

Get a Better Deal

Sales taxes are paid on the purchase price of the car, so getting a better deal translates to less taxes paid. Here are some tips to getting the best used car deal possible.

• Avoid dealers. Buying a used car from a private seller almost always gets you a better deal than going to a dealership (including online dealerships such as Carvana). Car dealers need to make their spread from buying low and selling high. By cutting out the middleman, you can often save a bundle on a used car purchase. PrivateAuto connects you directly to private vehicle sellers and does not take a cut of your transaction. Nor do we charge a transaction fee.

• Offer less than the asking price. Where most online used car marketplaces only allow you to accept the seller’s asking price, PrivateAuto also allows you to make offers on vehicles as you browse. Sellers can then accept, reject, or counteroffer. When a seller accepts your offer, the magic happens.

• Have cash on hand, or be pre-approved for an auto loan. Sellers prefer a buyer with verified funds. When you create your PrivateAuto profile, we allow you to verify funds so sellers will be more likely to choose to sell to you. Don’t have the funds? You can apply for used vehicle financing right within our app. When approved, your profile will show that you have verified funds.

• Lowball listings that have been active for a long time. If a car has been listed for a while and is not selling, the owner may be open to accepting a lower offer—especially if your PrivateAuto profile shows that you have verified funds.

Sales Tax Loopholes and Exemptions

Different states have different exemptions for vehicle sales taxes. If you qualify for an exemption, you are not required to pay sales tax on your vehicle purchase. The following are some of the exemptions that some states offer: check with your state’s Department of Revenue (or equivalent department) to see what exemptions they offer.

• Farming vehicles. If a vehicle is used strictly for farming, your state may offer a tax exemption.

• Zero-emissions vehicles. Some states, such as New Jersey, give sales tax exemptions for vehicles that don’t produce emissions.

• Church vehicles. If a church purchases a vehicle, it may be exempt from sales tax.

• Historic vehicles. If you have a classic car or other historic vehicle, it may not be subject to sales tax in your state.

• Keeping it in the family. In some states, if a vehicle sale is between immediate family members, it may be exempt from sales tax.

• Disability or veteran status. Some states offer sales tax exemptions for certain disabilities (Nevada offers an exemption for the blind) or for disabled veterans or their surviving spouses.

• Gifts. Gifting a car may provide sales tax exemption in some states. If you live in a state that has a gift exemption—and a car owner who wants to gift the vehicle to you—then this is a way to transfer ownership without incurring sales taxes.

• Autonomous vehicles. Self-driving cars aren’t widely available, but if you do happen to purchase one, it may be exempt from sales tax.

Don’t Fake a Low Purchase Price

Don’t negotiate a “side offer” with the vehicle seller so that the paper amount of the sale is less than the vehicle’s market value. Your state’s Department of Motor Vehicles, Department of Revenue, or other government body will calculate taxes owed based on the vehicle’s market value. You’re likely to get busted when you go to take care of your vehicle registration.

That said, if you’re able to negotiate a $45,000 vehicle down to $39,000 fair and square, you shouldn’t have a problem. If you make a side cash offer to a seller so that the same $45,000 vehicle shows on paper that you paid $10,000, you’ll probably have a problem.