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Do I Have to Pay a Sales Tax for Buying a Car?

Car sales include paying sales tax, unless you live in a state that has no sales tax.
Alaska is one of five states that does not charge sales tax on purchases, including automobiles.
There are five states that don't charge sales tax when buying a new car.
Oregon does not charge a sales tax when buying a car.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 05 September 2014
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In general if the state one lives in has sales tax, one will pay sales tax on the purchase of any car, including purchase of used cars from a private party. Sales tax is one of the many things that can significantly increase spending on an auto purchase. The sales tax will be calculated based on the purchase price of the vehicle and the current tax rate of the city or locality it is purchased in. As well, most people pay vehicle licensing and registration fees when they purchase a new car.

Currently, in the US, there are five states that don’t have sales tax. These are Delaware, Alaska, Oregon, New Hampshire and Montana. However, before one thinks of heading to one of these states to purchase a car, one should know that taxes will be assessed in the state where the car is initially registered. Thus if a Californian purchases a car in Oregon, he or she will have to pay sales tax when registering the car in their home state.

The only way to avoid paying the tax is by registering the car in the state where one purchases it, if the state assesses no sales tax. This is actually fairly difficult. One must have an address in the state. So if one owned two homes, one in Oregon and one in California, it would be technically possible to purchase a car in Oregon and pay no sales tax in California.

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However, people have, in the past, abused this law, and it has led to some crackdowns on vehicle licensing. It is illegal to register a car using a dummy address, for example, an address borrowed from a friend. Generally, if one has an out of state license on a new car, he or she can still be assessed a tax if he or she really lives in a state with sales tax. Further, one could be charged with tax evasion, or pay fines for not registering the car sooner, in one’s home state.

If one does happen to live in a state with no sales tax, and is planning on purchasing a car and moving to a state with sales tax, the person should purchase the car 90 days prior to moving. This means one will not have to pay sales tax when one registers the car in the new state. This is not evading the tax, but simply being sensible about when to purchase a vehicle if one is considering relocating.

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Discuss this Article

anon943972
Post 73

I am in the military and a resident of Alaska. I am purchasing a car overseas and registering the car in Alaska to be delivered stateside to drive to my next duty station. Will I have to pay taxes of the state it's being picked up in?

anon925241
Post 72

We are military Florida residents, living in Arizona. We will be purchasing a travel trailer in Arizona. Florida has a military sales tax exemption. Does this mean that we don't pay state tax because we AZ and FL have a reciprocity agreement? So does the dealer in AZ only collect the price of the trailer and not the tax?

anon340119
Post 71

I bought my car through Chase Bank and I paid sales tax. Do I have to pay tax again to register the car in New York City?

anon337092
Post 70

I bought a used boat in Alabama from a dealer and paid sales tax at that time and I am going to register the boat in my home state of Tennessee. Will I have to pay sales ax again?

anon336294
Post 68

You will still have to pay the full sales tax. It is a new purchased item.

anon330814
Post 67

I'm an Australian and I'm planning a world wide motorcycle trip. The cost for a Kawasaki 1400 GTR here is $24,000 new. The same bike in the US is $14,000. As I do not plan to stay in any country for a prolonged period, I feel rather hesitant to pay a massive tax hike.

My thoughts are to go to the US and make my way to a state where there is no sales tax, gain the longest period of a temporary registration that will allow me to tour the US, prior to freighting it to Europe. By that time, hopefully I will figure out which country will allow me to register it without taxing the hell out of it. I'd be interested in any advice you might have that would guide me in the right direction.

anon314791
Post 66

If a person wants to buy a car with cash in California and buy a way way trip permit, and have it delivered over the border and register it in another state and also pay the taxes in that state, is all he needs to show is proof of residence in that state and a license? How is it followed up on by the state/states?

Could he not just take a fake contract to the new state showing a purchase price of any amount he wants to avoid paying the taxes? How is it legally done? I have always been told they can avoid registration but not taxes and that is with the one way trip permit. What's the truth?

anon295087
Post 64

I'm a resident of Canada, in Manitoba. We purchased a fifth wheel trailer and a secondhand car in Mesa, Az. Can we collect the sales tax back since we are not residents? Both items are here in Canada.

milpak328
Post 63

I am currently active duty military and live as a nonresident in California (where my base is at). I am actually a Florida resident with a FL drivers license and my current vehicle is also registered there.

I am looking to purchase a vehicle in either Oregon or Nevada (they have the specific ones I want) and utilize it here in California. The Florida DMV website has a specific section for military stating taxes/registration fees are exempt for out-of-state military stationed somewhere else but holding FL residency as long as I don't drive the car back in FL for the next six months.

My question is am I really tax exempt in this situation since I'm purchasing in Oregon, registering in FL, have a FL drivers license and using it in California?

In addition, am I exempt from this so-called use-tax here in California?

anon267070
Post 62

I'm buying a used vehicle from dealership in Arizona and the state of license and registration is Minnesota.The dealership wants to charge me tax. Can I pay the tax in Minnesota when I license and register it there?

anon255488
Post 61

My son is buying a truck from his Grandfather for $25. The vehicle is valued at $8,000. Will my son pay sales tax on the $25 or the actual value of the truck. We live in Indiana.

anon242616
Post 60

I have the exact same question as anon13212! How do you know its 90 days when the CA DMV is saying one year?

anon204020
Post 59

If I buy a car to ship it out of the country, do I have to pay sales taxes?

anon193522
Post 58

The author misses one point (loophole).

If you live in a state that has no sales tax and you register your car in that state, you can buy a car in any other state, whether or not that state has sales tax and not pay sales tax in the state of purchase.

All you need is proof of residency in the non-sales tax state

( i.e., a driver's license ) and get the dealer to buy you a temporary permit (usually 30 days ) from the state of purchase which allows you to drive the car out of the state and back to your non-sales tax state of "residence." Guaranteed. I've done it four times already.

anon176862
Post 57

I live in Hawaii since everything is so expensive here, I can get a better deal on the car I want to buy if I buy in Oregon. I plan to drive down to Long Beach, CA and have the car shipped right away to Hawaii. Would I pay sales tax when I register my car in Hawaii?

anon168458
Post 56

My permanent residency is in the state of Delaware (Delaware license and address). i have a second home in Arizona where I spend less than three months a year. Can I title my car in Delaware, keep it in AZ and legally avoid the sales tax?

anon163205
Post 55

I want to buy a car from a Texas dealer, provide them with a friend's ZIP code in Oregon just to get the manufacturer rebates then export it to Canada. The dealer is OK with this but I'd like to make sure I'm not doing anything illegal.

anon150792
Post 53

I want to buy a new track car (Porsche 911 GT3RS) that will never be registered in any state (will be trailered to the track). I live in CA and it makes sense to go to Oregon and buy it there saving about close to $20K in sales tax. Is this going to be a problem?

anon145465
Post 52

Response to #15: I used to live in Kentucky and was charged a tax every year based on the value of my vehicle. Obviously, it went down each year. I think they used it to finance the roads.

anon143257
Post 51

I am currently looking at purchasing a BMW X3 overseas through a military dealer. The vehicle is assembled in the states, and the dealer said he could have it shipped to San Diego CA, and I can pick it up there after I PCS.

Would I be required to pay CA taxes for 1st time registration? does CA have any tax exemptions for military members? --Leo

anon141506
Post 50

In response to 41 and subsequently 38 and 31.

When a vehicle is sold and financing is done it is required by the bank that the taxes be paid and collected, not to have a higher finance balance, but rather to make sure that there is not a tax lien placed against the bank's interest in the vehicle.

The customer has the right to put the amount down and not finance it in, that is their choice. A dealer is required to collect taxes if the vehicle is being driven out of the dealership or if it is financed. If the customer wants to buy the car/truck for cash and not drive it but rather ship it to the home state, then no tax has to be collected.

anon134907
Post 49

You pay sales tax only once on the sales price before rebates or down payment. You pay in the state where the tax rate is lowest.

anon130220
Post 48

I'm looking to buy a car in florida. The dealer said I must pay florida tax and then i can be issued transfer tag to drive it home to Maryland, but I will have to pay Md tax and reg. in MD as well? why? would I pay taxes twice, but if they ship it i don't have to pay florida tax? anyone know?

alnasairi
Post 47

I live in Dubai- United Arab Emirates. If I would like to import a car from ( Ex. Ohio )to Dubai, do I need to pay any sales tax? if not how can I refund my tax? Can anyone please walk me through it? I can't get a clear answer. I simply don't know which door to knock at. Thanks.

anon120173
Post 46

Is there a sales tax reimbursement when buying a new SUV Vehicle in Florida and exporting it on to the Bahamas? What is Florida's sales tax return on exported cars??

anon119990
Post 45

I'm in California. Is there a minimum reported purchase price when registering a car bought from a private party? Perhaps I have found a really "great deal" just like Peter Minuit (the guy who bought Manhattan from Native Americans for about $24)! If the government recognizes Manhattan being sold for $24, what can they say about me purchasing a car for $24?

anon113860
Post 44

I am buying a car in florida. they said I had to pay tax and tags on the msrp of 17,990, instead of the cash price of 14,300. I am shipping it to ky for taxes and tags. Arizona said i had to buy a 90-day tag for 100.00 but I'm shipping it here to ky also. I need help asap.

anon108473
Post 42

I am resident in Delaware, which has no sales tax. However I am planning to buy a car in New Jersey. Does anyone know if I will still have to pay the New Jersey tax? I have to register the car in Delaware, by the way. Thanks.

anon105377
Post 41

To respond to 38, which was responding to 31.

31 was talking about the amount that the dealer makes off your interest when financed.

Think of it this way. If you were lucky enough to get a 0 percent APR loan, then it wouldn't make a difference when the taxes were paid. On the other hand, if you were to finance the sales tax you would be charged interest on that amount, too.

If you financed an extra $3,000 in taxes for 72 months, you could pay $500 more to the financial institution. Part of that is kicked back to the dealer.

anon105179
Post 40

I came across this page doing some web work for GM and I thought it might be helpful let you all know that GM has a military discount available to active duty members and Reserves.

They have a Facebook page that aims to bring military families together to share their experiences.

anon105029
Post 39

I am buying a car in Maryland and it will be registered in NJ by the dealer. Where will I pay tax? Only NJ or MD as well?

anon102303
Post 38

To response 31, that money goes to the state not the dealership.

anon100787
Post 37

If I buy my car from the leasing company and I resell it within a day in Ca., I understand that the sales tax only has to be paid once. Is this correct?

anon87568
Post 36

I won a bid on a used car in california at a dealer and want to bring it to new mexico and register it. can I get a temp registration for transport? Tax on cars are 50 percent less here than in calif.

anon85520
Post 35

Anyone in the military who purchases a car stateside will need to *register* it either in their state of residence or duty location. Now, if you buy from a dealer, sales tax can also be paid in the location (state) you purchase the car, meaning you should consider this when you're a resident of one state, stationed in another and looking to purchase somewhere else. ***Pay the least amount of sales tax.*** Each state's sales tax rates is different so, for example, avoid buying in TN if you can cross the border and buy in KY. In any of these instances, wherever you register the vehicle you will need to *save* and show the paid sales tax reciept....or pay upon registration. If you buy from an individual, it's on honor that you will put the right amount down for the purchase price when you register. While you may get away with putting less than you paid down simply due to the volume of business and they can't audit everyone....it is very simple to catch if they happened to look at you.

anon80616
Post 34

I am buying a car overseas through the military car sales program. I want to know when the car gets stateside do i have to pay tax on it or if I'm exempt because I'm active duty. If so, which state doesn't charge tax.

anon79556
Post 33

All right I have a question. I recently decided to purchase my lease vehicle. In the meantime, while the bank and the leasing company finalizing the paperwork, I decided to go with a new car.

So now, I have received the new title with a check addressed to DMV for the sales tax but I will be giving the vehicle to the dealership tomorrow for my new one. So basically I owned the new one per se for seven days.

Do I still have to pay the 2k tax on it or do I fill out a form and request it back since the dealer is paying off the loan i applied for and reselling it? I live in the state of NY. Ugg

Sally20
Post 32

I am purchasing a car next month. i am a first time buyer and i have no idea what i will have to pay besides the price of the car? Will i have to pay the taxes at the dmv or at the dealer?

anon73386
Post 31

When you buy a car from a dealer, you do not have to pay taxes there. It is a lie if they tell you that you have to.

If you are financing a car and they are telling you this, it is because they want the price of taxes in the final amount to finance so they can make more money off of you. All dealers get a cut of the profit of full amount financed by any financial institution the dealer finds for you.

You have the right to not pay the taxes at the dealer, however, you will have to pay them when you get your new plates. Either way, you will have to pay them in the end.

anon73370
Post 30

I don't know about your states, but I do know that in Colorado, if you buy a car from out of state, you have the option to pay your states taxes right there, or wait till you go to register it and get your final plates. If you do a personal buy from someone, you shouldn't pay taxes till you go to plate it in your state, then you pay for everything.

anon73152
Post 29

Commenter #28: Buy a piece of crap car to get you through the next month. Then buy a new one when you move. Buying a junker might be cheaper than the tax on the car you want to buy (if you are looking for something nice, unlike me.)

anon71785
Post 28

Lets say that I buy a car in California and pay sales tax, and then move to NH within a month's time (Don't tell me not to buy it for one month, because it's becoming very difficult without a car), do I get the sales tax back when I register the car in NH or can I apply for a sales tax refund from IRS as NH do not have a sales tax on cars?

anon68511
Post 27

i am on active duty in the army. i bought a vehicle last week in kentucky. i was charged sales tax. is it true that ky exempts sales tax for active duty?

anon67803
Post 26

I'm a student in Oregon, but my permanent address is in california. Am i able to use my dorm address to register a car if i purchased it in Oregon to avoid the sales tax?

anon67636
Post 25

I believe CA requires me to pay taxes on a vehicle I purchased in MI six months ago, where taxes are lower. Can I contend this, as the car was bought to replace one that was totalled?

I feel this proves I'm not trying to abuse the tax rates the same as waiting 12 months to register the vehicle does. Yes? No?

anon59337
Post 22

Bought/ordered a car from the overseas sales program while on deployment. I am about to receive the car from the dealer here in CA. All the paperwork is dated October, 2008. Do I have to pay sales tax in CA if that is where we will be operating the car?

anon57934
Post 21

Here's the way it worked in the several states that I have been in. Wherever you buy your car, that dealer is normally required to charge you state and local taxes at his rate. Sometimes that can be exempted if you don't take personal delivery, and instead have the car shipped.

A private party is not required to collect sales taxes.

Now, when you register your car in your state, they normally will give you credit for any sales taxes you paid to another state, and charge you the difference. They won't credit you back if you paid more. Normally, when you move somewhere, that becomes your residency.

That doesn't apply if you are in the military. Since the military requires you to be there, you may keep a residency in another state during your time in the military. So, if you are stationed in CA, and are a resident of Alaska, if you buy a car in CA from a dealer, he is going to charge you sales tax.

If you buy from an individual, or from Oregon with no sales tax, then you won't be charged at the time of purchase. Now, when you register it in Alaska, you wouldn't pay sales tax, since they don't have any. Just being in the military doesn't exempt you from sales tax. It just allows you to register a car in a state where you don't live (i.e. your residency) and if that state doesn't have a sales tax, then you don't have to pay, assuming you didn't already pay the dealer at the time of purchase.

anon52485
Post 20

anon51942, do you realize you just advised people on a public forum to commit fraud? Hopefully, your post is truly anonymous.

anon51942
Post 19

When buying from a private party, always make sure you agree to two prices, one to put on the transfer, and one that you actually pay them. The last couple of times I've bought a car, we've put less than half the actual purchase price down for sales tax purposes.

anon49451
Post 18

jane: Most states will give you a tax "credit" for the value of the totaled vehicle. Delaware for example will deduct what your insurance company said the value was from your sales price before calculating tax. Some states do not give a credit at time of purchase but a "refund" may be issued by the state or even your insurance company. It all depends on the state you live in.

Submitted by a finance MGR in MD

anon49450
Post 17

ANON41591: I'm a finance manager at a MD dealer; how your tax is figured is based on the rules of your state. For example, in MD you are taxed on the selling price of your vehicle- before rebates or cash for clunkers. There is a deduction for your trade value but your vehicle would not qualify for the discount if you used the clunkers program. PA taxes after deducting both trade and rebate. Hope that helped!

anon48262
Post 16

I am a Mississippi resident and bought a car from a dealership in Florida. I had to pay sales tax in Florida, then when I registered it in Mississippi, had to pay Mississippi sales tax. Why?

anon46906
Post 15

I purchased my car three years ago and registered in Alaska, then in Mississippi, Now, moving to Kentucky, they said I have to pay taxes of 6 percent. Is this right?

anon42892
Post 14

My husband is active military and we live in VA. I am leasing a new car - is there any benefit (no sales tax or other) of getting the car in his name instead of mine - we both have excellent credit?

anon41591
Post 13

i bought a new car with a sticker price of 21,160. they took off 4,000 for a factory rebate,and 1400 from the dealer and 4,500 for cash for clunkers. My question is at what point do they figure the sales tax on?

ncecali
Post 12

I'm a California resident in the military stationed in Alabama and purchased a 1969 Chevelle in Alabama (from a licensed dealer) that has not been registered since 2003. Will I have to pay the fees for the expired registration? And will I have to pay sales tax on the vehicle if the dealer did not assess a sales tax?

anon31159
Post 11

I was charged sales tax on a BMW in VA when I leased the vehicle three years ago. At lease-end, I am thinking of purchasing the vehicle but the price that they quoted me to purchase includes sales tax again. Is this legal?

johnt55
Post 10

So, I'm a Calif resident who buys a new car in Oregon where there is no sales tax. Wouldn't I be registering the car as a used car with a lower value?

anon29126
Post 9

Can I get sales tax return after purchasing a new car in California?

anon25367
Post 8

Same question, but I live in the Netherlands, do I only need a Delaware (mail forward address)? to register. I am using the car for extended vacations in the US.

anon20067
Post 7

Do military members have exemptions to sales tax on the purchase of a new car? For example, I am a resident of Alaska and currently stationed in Virginia. Am I exempt from VA sales tax since my home of record state does not charge sales tax? Thanks!

anon18901
Post 6

If I purchase a used car in California but export it to a country outside the US, do I still have to pay the Sales tax? Thank you

anon13212
Post 5

How do you know about the 90 days residency? I am being told by CA DMV that it is a year, so suddenly it looks like I owe big time. Help?

ddulguun
Post 4

I have the same question as anon2361. I don't want to pay sales tax because I will ship the taxed item overseas. Is there any law or regulation governing this situation?

anon3856
Post 3

If I live in Canada and want to purchase a car from on the "non tax states" would this be possible, or would I be charged a tax for crossing the border?

anon2361
Post 2

I'm purchasing a car in NY, which will be taken overseas. It will not be registered in the U.S. However, I'm still being charged sales tax. I was told this was the case because there will be a lien holder (my credit union). Is this correct and is there any way to get around it legally?

jane
Post 1

if you are replacing a total loss auto that you paid sales tax on only 4 months ago, will the sales tax on the new car be adjusted? or do you still have to pay the full sales tax again.

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