A Complete Guide on Car Sales Tax by State

A Complete Guide on Car Sales Tax by State

Buying a vehicle can be an exhilarating experience. First, you zero in on a particular make and model. Then you decide on options and the ever-important shade of paint. Then you locate a seller who offers you the best service, price, and support after the sale.

It sounds easy. But even if you negotiate a purchase price thousands lower than you'd expected, when you sign the papers, there might be a significant additional cost jumping off of the page. 

Car sales tax can add thousands upon thousands of dollars to your vehicle purchase. What appeared to be a great deal could turn into an average one when calculating car sales tax.

But car sales tax rates vary by state – some even charge none at all – so it may pay off to live in a state that goes easier on your wallet. 

Let's explore what you'll pay when you buy a car, including the highest and lowest sales taxes by state.

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The hidden costs of buying a car

When a car catches your attention, and the asking price seems within reach, it can seem too good to be true. Maybe you've dreamt of a vehicle for some time, and a specific example hits the market and is finally within your budget.

But the problem is the sales price will have hundreds or possibly even thousands of dollars in extra fees and taxes. Let's take a look at the most common expenses and how much you can expect to pay.

First up is state sales tax, which varies across the country. On a $30,000 vehicle, you could be paying anywhere from $0 in Alaska to more than $2,000 in California. 

Next is getting the car registered, which also ranges in price depending on where you live. Some states charge a flat registration fee, while others base it on a car's year of manufacture, value, or weight. 

Having auto insurance is a requirement in every state except Virginia and New Hampshire, though it's a good idea to have it wherever you live. Like other automotive-related expenses, auto insurance rates vary widely depending on the coverage you select, your driving history, and the type of vehicle insured. 

Many sellers charge documentation fees to compensate them for the time spent filling out paperwork. While some states put a cap on how much a seller can charge, it's good to know what you'll be paying before closing your deal.

If you're buying a used car, the previous owner will need to transfer the title to you. Transferring the title is an essential step because it indicates you're the vehicle's legal owner. As with most other administrative actions when buying a car, you'll need to pay a fee.

Certain states charge a property tax that's calculated based on your vehicle's market value. So in simple terms, the more costly your new car, the more you'll have to pay. 

Wouldn't it be easier if someone took care of details like tax, title, and registration for you? When you buy from Shift, you get a smooth transaction from start to finish. Shift's website has a large selection of fully inspected cars located across the country that are ready to go. The website is user-friendly, and you'll be able to find various makes and models to suit your needs and budget. And Shift also offers in-house financing, making it a one-stop shop for your used car needs. 

Vehicle sales tax by state

Though there are several costs associated with purchasing a vehicle, state sales tax is usually the highest. Here are the states with the highest and lowest sales tax rates:

Six states top the list, with sales tax rates above 7 percent. California, Indiana, Kansas, Nevada, Rhode Island, and Tennessee are where you'll pay the most sales tax on a vehicle purchase. Nevada leads the group with an 8.25 percent sales tax rate.

Of the remaining states that charge sales tax on a car purchase, 11 states charge approximately 4 percent or less. Alabama, Colorado, Hawaii, Louisiana, Missouri, New Mexico, New York, North Carolina, Oklahoma, South Carolina, and Virginia have the lowest rates among states that charge sales tax. Of those states, the most frugal sales tax is levied by Alabama, at 2 percent. 

Five states charge no sales tax at all when you buy a car. So if you live in one of them, you could be in for an excellent deal. The states that charge zero sales tax on vehicle transactions are Alaska, Delaware, Montana, New Hampshire, and Oregon.

Can you save money buying elsewhere?

Maybe you live next to a state that charges no car sales tax, like Oregon. It seems like it would be good to find a car there, drive over the state line, and sign the papers, apparently without paying sales tax. 

The problem is, you'll have to pay car sales tax where you end up registering your car, which is probably your home state. 

No matter where you live, you'll get a great deal on a used vehicle from Shift. You'll get a fair, no-haggle price driven by machine learning algorithms and tons of data. Shift also offers best-in-industry service contracts, so your vehicle will continue running smooth, mile after mile.

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State sales tax credits and exemptions

However, you can lower your tax burden in a couple of different ways. 

If you're buying an electric car, both federal and state tax credits and incentives are available. While you can't apply them at the time of purchase, they'll make up for the sales tax you pay down the road. At the state level, credits and exemptions vary, so be sure to perform your due diligence before buying. 

If you're buying a classic car manufactured before 1973, you're exempt from car sales tax, so you can let the miles roll on by without financial worry. 

And if you happen to be moving to a state that has no car sales tax – like Alaska or Montana – within 90 days of purchase, you won't have to pay. 

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Car sales tax by state in summary

Unless you live in one of the select states that charge no sales tax on automotive purchases, it's an inconvenient addition to the price of a car. And though there are methods to avoid sales tax or help with the cost – like buying classic cars or electric vehicles – most people will have to pay it by and large.

Knowing your state's car sales tax rate before you buy can help you understand ahead of time what you'll owe, and you can use this information to negotiate a lower selling price before signing the papers.

Shift's expertise in selling used cars and trucks will make for a great buying experience no matter what state you call home. In some markets, a Shift concierge will drive to your door, allowing you to take a test drive before making your decision. Shift provides this without cost or obligation, so you put your money toward the vehicle you end up choosing. 

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Author
Shift Editorial Team