What’s the Car Sales Tax in Each State? (Updated for 2023)
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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.
And that’s where our expert editors come in. With our years of experience across several states, we can help you determine what the car sales tax is in each state.
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.
Let’s break down the car sales tax by each state.
Table of Contents
- Car Sales Tax by State
- States with No Sales Tax
- States with Low Sales Tax On Cars
- States with High Sales Tax
- 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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- Frequently Asked Questions
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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)|
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 Low Sales Tax On Cars
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%
Several U.S. states offer relatively low sales tax rates for vehicles, making them potentially more affordable. Alabama and Colorado notably stand out with the lowest rates. States like Hawaii, Louisiana, New Mexico, New York, and South Dakota are close behind with only a 4% tax.
North Carolina and Oklahoma set their rates slightly lower, while Missouri and Virginia have slightly unique rates, neither reaching as high as 4.25%. However, it's important to note that local taxes can also apply and could raise the overall tax rate, making it crucial to check local rates before finalizing a vehicle purchase.
States with High Sales Tax
The remaining states have the highest sales tax, all 7% or above. The high sales tax states are:
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?
Yes, when purchasing a car, you generally must pay a state tax on cars, often referred to as sales tax. The exact amount varies based on your state's specific tax rate and the vehicle's purchase price. Certain states might also charge additional local taxes. It's important to understand these charges, as they significantly impact the total cost of buying a vehicle. Always check your state's Department of Motor Vehicles (DMV) for the most accurate information on car sales tax.
Are there states with little to no sales tax on new cars?
Yes, there are a few states that have little to no state tax on cars, especially new ones. Specifically, states like Montana, New Hampshire, Oregon, and Delaware do not impose any sales tax on cars. This includes new cars, making these locations ideal for cost-conscious buyers. Comparing the car tax by state can help you determine the most affordable locations to purchase a new vehicle. On the other hand, there are states like North Carolina and Hawaii that have relatively lower sales tax rates, typically falling below 5%.
What states have the highest sales tax on new cars?
When it comes to states with the highest sales tax on cars, a few stand out significantly. Oklahoma leads with a tax rate of 11.5%, closely followed by Louisiana at 11.45%, and Arkansas at 11.25%. These states, along with a few others, have tax rates that tend to exceed 10% of the vehicle's purchase price, a factor that considerably inflates the final cost. In other words, the state tax on cars in these states can add a considerable amount to the overall price of a new car.
Does the sales tax amount differ from state to state?
Absolutely, the amount of sales tax indeed varies significantly from state to state. Some states have chosen not to impose any sales tax, while others levy a high sales tax rate, often exceeding 10%. The amount you'll end up paying as sales tax is largely contingent upon where the car is registered, rather than where it was purchased.