How Different States Tax Car Sales

How much does your state charge in sales tax for car sales? This is something you’ll want to know when you head to the dealership to buy a car from them.

If you buy from a private seller you won’t pay this tax until you register the car, but you will pay it at some point. That is, provided your state charges a tax on car sales at all. Some states don’t and that’s something to consider as well. This tax varies by state and is part of the process of buying a car that you need to be aware of.

Paying Cash? Sales Tax is a Big Deal

If the asking price of a vehicle seems like its within the amount you want to spend, you’ll want to step back for a minute and ask one question. That question is, “how much is the sales tax?” Each state charges a different rate and it can add up to as much as $2,000 on a vehicle that costs $30,000. This is the amount for this price in California, but if you live elsewhere you might pay a lot less. In fact, buying a car in Alaska won’t cost you a dime in sales tax.

Registration Fees: What Are Those Costs

Even if you’re lucky enough to avoid the sales tax for car sales because you live in a state that doesn’t tax this purchase, you’ll have to pay the registration fees. In some states, this fee is a flat rate while other states base it on the model year, value, or weight. This fee is required if you want to legally drive on the roads in your new vehicle. That amount you thought you had to pay for your new car is quickly dwindling with all of these fees.

48 States Require Car Insurance

To have a registered vehicle legally on the road, you’ve got to have the car and driver covered by at least collision insurance. This is often referred to as liability insurance. This is the minimum requirement to legally drive the car everywhere except Virginia and New Hampshire. If the vehicle you choose is financed, the financing company also requires you carry full coverage auto insurance. This protects their interests in case of an accident. Car insurance costs also vary from state to state, vehicle to vehicle, and from one driver to another.

Dealership Fees Add to the Sales Tax

Car sales at a dealership can become an expensive venture for the customer. While a private seller won’t likely charge you’re a documentation fee for time spent filling out paperwork a dealership certainly will. On top of the sales tax for car sales that you pay, you’ll pay this fee when you buy from a dealership. Thankfully, some states cap the amount that a seller can charge for this fee. You can try to negotiate this fee out of the deal, but it will likely show up again somewhere else in the deal.

Really, Now I Have to Pay a Title Fee

Yes, title fees are part of car sales in every state. Regardless of whether you buy the car from a private seller or a dealership, you’ll pay a fee to transfer the title into your name. You’re now the legal owner of the car and will pay this fee to have a title that shows this fact. The fees continue to add up, making it seem more and more like public transportation could be a much better option for you instead of buying a car.

And Now We Talk About Property Tax

There are taxes upon taxes upon taxes. We are taxed to death in this country and the property tax for your car is another one that you’ll pay. Almost all states charge some form of property tax for car sales and these taxes are based on the market value of the car you drive. The more valuable your vehicle is, the more you’ll pay in properly taxes. This is just another one of those fees you can’t get around when you want to buy a car. If you planned to buy a car using cash, you might end up financing the fees associated with this purchase.

How Much Will You Pay?

The state sales tax for car sales varies from one locale to another. We’ve already highlighted differences for California and Alaska, but you should know which states to the list and where you could get a better deal on this tax. The states that all charge more than 7 percent for this tax are:

• California
• Indiana
• Kansas
• Nevada
• Rhode Island
• Tennessee
• Nevada

Moving to the bottom part of the list, there are some states that charge less than 4 percent for this tax. These states are:

• Alabama
• Colorado
• Hawaii
• Louisiana
• Missouri
• New Mexico
• New York
• North Carolina
• Oklahoma
• South Carolina
• Virginia

To get a really good deal, the states that don’t charge any sales tax for car sales are:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

How Can You Pay Less in Taxes?

While it won’t be an immediate difference, if you buy an electric car from an automaker that still qualifies for the full Federal EV Tax Credit, you’ll receive a tax credit of $7,500 when its time to file next year. Some states offer a credit for buying an electric or hybrid car as well. This is one way to make up for the sales tax you pay when you buy a vehicle.

It’s a Taxed World, Deal With It

That might sound a little harsh, but we all face it. The old saying is the only certainties in life are death and taxes. While you’re above ground, you’ll pay taxes and fees for almost everything you buy. If you’re blown away by the taxes for a car, wait until its time to buy a house. Those taxes and fees are insane. Until that time, put a little extra away to cover the fees and sales taxes you’ll pay for the car sales you experience.