What’s the Car Sales Tax in Each State?
Buying and owning a vehicle is a significant investment. From the moment you purchase a new vehicle to the time you replace it, it will cost you money. Even after purchasing the car, you must pay for recurring expenses like maintenance, repairs, gas, insurance, and possibly an extended warranty.
But before you even leave with the car, there are several fees associated with buying it. One of the most overlooked expenses of buying a car is the sales tax.
Most states in the U.S charge sales tax on cars. What buyers rarely realize is that the sales tax can be a major expense. Imagine paying 8% sales tax on a $15,000 car, that's an additional $1,200 you have to spend without even considering DMV and documentation and registration fees. However, the car sales tax varies by state, and some states don't even charge tax.
In this post, we will break down the car sales tax by each state.
Table of Contents
- States with No Sales Tax
- States with Minimum Sales Tax
- States with High Sales Tax
- Car Sales Tax by State
- How Is Sales Tax Calculated on a Car Lease?
- Can I Save Money on Sales Tax by Buying a Car in a Different State?
- Can I Get a Sales Tax Credit for my Trade-in?
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States with No Sales Tax
There are some states that do not charge any sales tax on cars. The states with no car sales tax include:
States with Minimum Sales Tax
Next up are the states that have minimum sales tax rates below 5%. The minimum sales tax states are:
- Alabama - 2%
- Colorado - 2.9%
- Hawaii - 4%
- Lousiana - 4%
- Missouri - 4.23%
- New Mexico - 4%
- New York - 4%
- North Carolina - 3%
- Oklahoma - 3.25%
- South Dakota - 4%
- Virginia - 4.15%
States with High Sales Tax
The remaining states have the highest sales tax, all 7% or above. The high sales tax states are:
Car Sales Tax by State
In the table below we show the car sales tax rate for each state.
|South Carolina||5.00% (or $500)|
How Is Sales Tax Calculated on a Car Lease?
You must pay sales tax when you lease a car. In most states, you pay sales tax on the monthly lease payment not the price of the car.
Sales tax for a leased vehicle is calculated based on the state’s tax percentage and the cost of the lease payments.
Imagine that your monthly lease payment is $500 and your state’s sales tax on a leased car is 6%. $500 X .06 = $30, which is what you must pay in sales tax each month. Therefore, your total monthly lease payment would be $500 + $30, or $530 with sales tax.
Can I Save Money on Sales Tax by Buying a Car in a Different State?
If you live just across the border from a state with little or no sales tax, it might be tempting to buy your car out of state to save money on sales tax. While there are other reasons to consider buying a car out of state, you will not save money on sales tax by buying a car in a state with low or no sales tax. You must pay the sales tax for the state you will register your car in, which is the state you live in. However, there are a few legal ways to avoid paying sales tax on a car.
Check out which states are the best to buy a car in.
Can I Get a Sales Tax Credit for my Trade-in?
In many states, you can get a sales tax credit based on the value of your trade-in. Depending on the amount of your appraisal, you may be able to get more money trading to the dealership than selling your car on your own.
We've created a calculator that will tell you the tax credit amount and help you determine whether it's better to trade-in to the dealership or to sell your car privately.
Tax information and rates are subject to change, please be sure to verify with your local DMV.
Frequently Asked Questions
Is there a sales tax when buying a new car?
Most states require a sales tax when purchasing a new car. The sales tax ranges from 0% to 11.5% depending on which state the car will be registered in.
Are there states with little to no sales tax on new cars?
States like Montana, New Hampshire, Oregon, and Delaware do not have any car sales tax. While states like North Carolina and Hawaii have lower sales tax rates below 5%.
What states have the highest sales tax on new cars?
States with some of the highest sales tax on cars include Oklahoma (11.5%), Louisiana (11.45%), and Arkansas (11.25%). States with high tax rates tend to be above 10% of the price of the vehicle.
Does the sales tax amount differ from state to state?
The minimum sales tax varies from state to state. Some have no sales tax while some states have high sales tax rates above 10%. The amount you pay in sales tax will depend on where the car is registered, not where it was purchased.