Do sales taxes apply to used cars?
As a general rule, sales taxes that apply to new vehicles also will apply to used vehicles, though the rules vary by state. Though there are states that technically do not levy a sales tax on new or used vehicles (or any products in a handful of states), they may have use taxes, highway use fees, ad valorem taxes, document fees or other such charges based on a vehicle's value or age.
Whatever they are called in your state, they basically amount to the same thing: You have to take money out of your pocket and give it to a government agency when you purchase and/or register a vehicle. For example, North Carolina is one state that has no sales tax on vehicles, but everyone pays a one-time highway use fee of 3% when a new title is issued, plus a personal property tax assessed at the county level.
Older vehicles are exempt from sales taxes in some states. For example, Minnesota charges only a $10 fee on purchases of vehicles that are at least 10 years old and have a market value of less than $3,000 (an amount that is probably debatable on many vehicles). Georgia used to forgo
taxes on used vehicles purchased through private sales, but as of March 1, they're subject to a new "ad valorem title tax." New and used vehicles purchased from dealers also are subject to the new tax.
In Illinois, residents pay sales tax when they purchase a new or used vehicle from a dealer (the rate varies by county and community). However, if a used vehicle is purchased in a private transaction, the state assesses a flat tax based on a sliding scale of market value. Sales or transfers of ownership to family members aren't taxed, but the state collects a $15 fee.
Even in states that don't have sales tax, such as New Hampshire and Delaware, the taxman still cometh for those who buy and own vehicles. In New Hampshire, towns and villages levy registration fees based on the value of vehicles, and Delaware charges a 3.75% document fee based on the value of a vehicle.
Because tax regulations vary so widely by state and locality, individuals should check with their state revenue department or similar agency for guidance on what taxes they would be subject to. The information is usually available online.
Answered by Rick Popely on June 8, 2013 in I'm Just Wondering | Permalink