When you buy a car from a private seller, you’ll owe sales tax. Five states don’t charge sales tax on vehicle purchases. Individual counties and municipalities may still levy taxes in no-tax states.
Let’s break down exactly what you’ll owe, when you’ll pay it, and who qualifies for a tax-free purchase. Then, we’ll introduce you to a car payment tool that can help you stay organized and legal throughout the car purchase.
The buyer pays the sales tax in a private-party car sale. The seller typically owes no sales or income tax on the sale.
States have reciprocal tax agreements to prevent tax avoidance. If you buy a car long-distance, you’ll pay tax based on your home state’s rates, regardless of where you purchase the vehicle.
If you’re budgeting for a car purchase, don’t forget about sales tax. You can’t drive your new car legally until you’ve registered it, and you can’t register until you’ve paid the tax.
You’ll pay sales tax at your local DMV when you register the vehicle. This is different from dealership purchases, where sales tax is collected at the time of sale.
Most states give you 30 days after purchase to register your car and pay the tax. Miss this deadline, and you’ll face late fees on top of your tax bill. Even if you buy your car in a tax-free state, you’ll still pay tax when you register it in your home state.
Don’t try to dodge sales tax. The DMV takes tax fraud seriously. If caught, you’ll face heavy fines.
Sales tax is calculated as a percentage of either your purchase price or the vehicle’s fair market value, whichever is higher. The DMV uses sources such as Kelley Blue Book to determine fair market value. If they suspect you’ve artificially lowered the purchase price, they’ll calculate tax based on market value instead.
For example, if you report paying $12,000 for a car that typically sells for $18,000, the DMV will calculate your tax based on $18,000.
Most states charge a sales tax between 5% and 9% on vehicle purchases, whether you buy from a dealer or a private seller. Your total tax bill often combines state and local rates, which means the actual percentage depends on your location.
Here’s how different states handle vehicle sales tax.
If you live outside these states, you can’t avoid taxes by buying a car in them. You’ll still pay your home state’s tax rate when you register.
Hawaii, Arizona, and Nevada take a unique approach to vehicle sales tax: your tax burden depends entirely on who you buy from. When purchasing from a dealership, you’ll pay sales tax at the time of sale. But buy that same car in a private party used-car sale, and you’ll avoid sales tax.
Your vehicle’s sales tax rate starts with your state’s base rate, but that’s not the whole story. Counties, cities, and other local entities can add their own tax rates on top of the state rate, and you might face additional charges such as excise tax or use tax. Here are the base rates for all 50 states:
| State | Tax | State | Tax |
|---|---|---|---|
|
Alabama |
2% tax |
Montana |
0% tax |
|
Alaska |
0% tax |
Nebraska |
5.55 tax |
|
Arizona |
5.6% tax |
Nevada |
8.1% tax |
|
Arkansas |
6.5% tax |
New Hampshire |
0% tax |
|
California |
7.5% tax |
NewJersey |
6.625% tax |
|
Colorado |
2.6% tax |
New Mexico |
4% tax |
|
Connecticut |
6.35% tax |
New York |
4% tax |
|
Delaware |
0% tax |
North Carolina |
3% tax |
|
Florida |
6% tax |
North Dakota |
5% tax |
|
Georgia |
6.6% tax |
North Dakota |
5% tax |
|
Hawaii |
4% tax |
Oklahoma |
3.25% tax |
|
Idaho |
6% tax |
Oregon |
0% tax |
|
Illinois |
6.25% tax |
Pennsylvania |
6% tax |
|
Indiana |
7% tax |
Rhode Island |
7% tax |
|
Iowa |
6% tax |
South Carolina |
5% tax |
|
Kansas |
7.3% tax |
South Dakota |
4% tax |
|
Kentucky |
6% tax |
Tennessee |
7% tax |
|
Louisiana |
4.45% tax |
Texas |
6.25% tax |
|
Maine |
5.5% tax |
Utah |
6.10% tax |
|
Maryland |
6% tax |
Vermont |
6% tax |
|
Massachusetts |
6.25% tax |
Virginia |
5.3% tax |
|
Michigan |
6% tax |
Washington |
6.5% tax |
|
Minnesota |
6.5% tax |
West Virginia |
6% tax |
|
Mississippi |
5% tax |
Wisconsin |
5% tax |
|
Missouri |
4.225% tax |
Wyoming |
4% tax |
Your taxes are several rates and fees that fluctuate by state and county. They include the following items:
Your state’s base tax rate forms the foundation, typically ranging from 5–9%. County taxes get added on top of this. For example, if your state charges 6% and your county adds 2%, you’re now at 8%. City or municipal taxes can push that rate even higher.
Additional fees don’t affect your tax rate directly, but they’re calculated as a percentage of your purchase price, effectively increasing your total tax burden.
Unless you live in a true no-tax state, you can’t legally avoid paying vehicle sales tax. Don’t fall for common tax-dodging schemes; they often end badly.
Some legitimate tax exemptions do exist:
Don’t try to dodge tax by reporting a lower purchase price. The DMV checks your reported price against market values, and if they suspect underreporting, they’ll calculate your tax based on the vehicle’s fair market value. Be smart and budget for sales tax as part of your purchase. It’s unavoidable for most buyers.
You can’t avoid sales tax, but you can make your private-party purchase smooth and secure with DealNow.
Private-party car purchases involve multiple steps—you need a bill of sale, title transfer documentation, and proof of purchase price for tax purposes. DealNow keeps everything organized and legal. Find your dream car, and enjoy a start-to-finish transactional workflow that includes instant, no-limits payment from your mobile device.
Here’s how it works:
Whether you found your car on Craigslist, Facebook Marketplace, or through word of mouth, DealNow provides the secure infrastructure to close the deal. You get instant digital payments, proper documentation, and a guided process that protects both parties.
The buyer pays the sales tax, not the seller. You’ll pay this tax to the Department of Motor Vehicles when registering your vehicle, not at the time of sale. NY requires proof of tax payment before you can complete your vehicle registration and get your license plates.
Unless you qualify for specific sales tax exemptions, you have to pay the sales tax when you buy a car in California. California has strict vehicle taxes and registration requirements. Even buying from another state won’t help; you’ll pay California tax when registering. Legitimate exemptions include cars for farming operations, vehicles for nonprofits, and transfers between immediate family members.
With licensed vehicle dealers, you pay sales tax as part of your purchase agreement at signing. The dealer collects the motor vehicle sales tax along with your sale price and any additional payments like auto loans. For private party sales, you handle tax payments at the DMV during vehicle registration and transfer of ownership. States typically give you 30 days to complete registration and tax payment. The method of payment (credit card, physical cash, etc.) doesn’t affect your tax obligation, but it must be paid before you can get your vehicle title and evidence of registration.
You can’t avoid Illinois vehicle sales tax unless you qualify for exemptions. Legitimate partial exemption claims include: transfer between domestic partner or spouse, active duty service members, qualifying purchases for nonprofit organizations, and certain commercial truck or motor carriers.
Don’t try manipulating the sales price or claiming false exemptions. Illinois verifies every tax exemption request and checks reported prices against current market values.
Vehicle sales tax exemptions vary by state but commonly include:
All exemption claims require official verification and supporting documentation.
Those who sell personal vehicles don’t owe sales tax or income taxes on the sale. The vehicle buyer handles all sales tax payments when registering the vehicle. You might face capital gains tax if you sell above your original purchase price.
When calculating your profit for tax purposes, you can deduct the cost of improvements and major mechanical components (not regular maintenance costs or brake replacements). Keep receipts for these improvements because they reduce your taxable income if you sell your car at a profit. Cash payment versus other payment methods doesn’t affect your tax obligations.
Selling your vehicle doesn’t qualify for tax credits on your income tax return. The IRS treats personal vehicles differently from capital assets—you can’t claim a capital loss if you sell below your original purchase price. The only tax filing requirement comes if you sell for a profit above your purchase price plus improvement costs. This isn’t a tax credit but a taxable income you must report. Trade-in value and monthly payments don’t factor into tax calculations for personal vehicle sales.
All vehicle buyers must pay applicable state and local sales taxes when registering a vehicle in the US, regardless of citizenship status. You’ll need acceptable documents such as a certificate of title, evidence of registration, and proof of identity when completing the standard transaction at your local motor vehicle office. The vehicle registration fees and title fees apply equally to citizens and foreigners. Some states might require additional documentation or a tax clearance certificate from foreign buyers.
DealNow is the easiest way to close your own vehicle deal, anytime. It’s the safe and simple way to avoid fraud, sign documents, and instantly transact, all in one app.
