Breaking Down Car Sales Tax Cost

Some drivers who just purchased a new or used vehicle may be wondering about car sales tax cost. This additional fee is something a dealer does not always work into the equation, since car sales tax money is due directly to the state Department of Motor Vehicles. Here are some basics on figuring out your car sales tax liability.

What Is Auto Sales Tax?

Most states have an auto sales tax that is a straight percentage of the sale price. For example, a 2% on a sales tax on a $5000 purchase would come to exactly $100. However, many states have higher sales tax percentages like 4% to 6%.

Who Do I Pay Auto Sales Tax To?

It's important to note that the buyer always pays the car sales tax of their state of residence. Regardless of where they purchased the vehicle. Expect your state DMV to require sales tax when you go in to register the vehicle.

Auto Sales Tax in Private Party Deals

Whether you buy from a dealer, or directly from the seller through a used car classified ad, the DMV will require the buyer to have a bill of sale for the vehicle at the time of registration. This will show the sale price, and the DMV representatives will use it to assess sales tax. Since in the past, some buyers and sellers agreed to report a lower sale amount than the actual cash transaction, some states now require the sale price to be linked in some way to a blue book value for the vehicle.

To learn more about car sales tax and all the other financial details around and your used car purchase, try the CarsDirect site, where visitors can find a wide range of information about everything related to your next vehicle purchase.