In some places, this jumps to as high as 7.5 percent. How high is your "car tax"? Motor vehicles used on public highways exempt. This can get quite confusing for people who travel from one part of the state to another, as you might never know how much you are going to pay in tax. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Washington, D.C. doesn't charge sales tax on cars, either. Michigan also exempts residents of the District of Columbia and ten non-reciprocal states from sales taxation. Residents pay an average of $294 a year on vehicle property taxes, WalletHub says. The Ohio estate tax was repealed as of January 1, 2013 under Ohio budget laws. The state later turned around and repealed its estate tax again retroactively to January 1, 2013 Sales taxes on cars are often hefty, so you may try to avoid paying them. The good news for consumers is that New York limits its vehicle sales tax to a maximum of $725. In other words, you might pay a tax rate between 4% and 8.5% for the same car at the same sales price. New Jersey However, the state does permit local communities to assess their own local sales tax. Alaska, Delaware, Montana, New Hampshire, and Oregon don't impose any direct state sales taxes, as of 2020, while New Mexico charges sales taxes, but not on cars. If you live in or near one of the states with no sales tax on cars, take full advantage of your money-saving position. Light motor vehicles exempt but subject to state registration fee based on age. But this list is a little misleading because Alaska does allow localities to impose sales taxes, and these average 1.76%. State and Local Auto Sales Tax Rates as of 2020. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming are the exceptions because they do not tax residents’ incomes. And while 14 blue states (plus the District of Columbia, which backed President Barack Obama in 2012) have no vehicle property taxes at all, that's only true of nine red states. Personal property not taxable. Alaska has no statewide sales tax, but it allows cities and towns to levy sales taxes. These states include Hawaii with a 4.5% sales tax rate and North Carolina with a 3% sales tax rate. But the car dealer may charge their own fees, too. Maryland. To save money when buying your next vehicle, consider buying it in a state that doesn't charge sales tax. It went for Bill Clinton twice, but it has voted Republican in all of the presidential elections since. The easiest way to do so is to buy a car in a state with no sales taxes and register the car there. Buy a car in Maryland, North Carolina, Iowa, or South Dakota, and you might be able to skip the cost of sales tax on your Ford, Chevy, or Subaru. Florida only collects sales tax in the amount that purchasers would pay in their home states. But property taxes are a different story, thanks to a voter initiative way back in 1979 that capped the rate of increases. Typically, the more money a vehicle costs, the more sales tax a buyer pays. ... Real estate taxes are the fourth-highest in the country and the state has not only a gift tax, but a luxury tax. If you reside in New York, New Jersey, Florida or Texas, you are not required to pay an annual vehicle property tax. Despite the high cost of California real estate, the state ranks 17th-cheapest in real estate property taxes. 13 States with No Property Tax for Seniors/People Over 65. Buying your new car is a significant event and is one of the most expensive and longest-term purchases many people make. Alabama hasn't gone blue in a presidential election since it went for Jimmy Carter way back in 1976. As a general rule, if you live out of state, buy a car in Michigan, and take delivery there, you must pay sales tax in Michigan. Sales tax gets even more complicated for online sellers. If you don't live in or near New Hampshire, Delaware, Montana, Oregon, Alaska, or New Mexico, other states offer the opportunity to buy a vehicle without paying sales tax. The traditional home of the U.S. auto industry has gone for the Democrats in recent presidential elections, but Republicans control Michigan's Statehouse nowadays. However, if you have the dealer or seller ship or deliver your car to a location outside the state, then no sales tax is due back to Michigan. In addition, there are some states that charge less than 5% sales tax rates. Autolist is building a better automotive buying experience for everyone, by offering the best apps and the largest selection of new and used cars in the United States. Several of the states on the "no-state-income-tax list" are some of the top states for high sales or property taxes - especially Texas and Washington. Arkansas residents pay an average of $239 a year in state vehicle property taxes. As previously mentioned, there are a few states that do not charge sales tax on cars. Buy a car in Maryland, North Carolina, Iowa, or South Dakota, and you might be able to skip the cost of sales tax on your Ford, Chevy, or Subaru. For example, in New York, the state sales tax rate is 4%, but county and local taxes can boost the rate up to 4.5% more. The basic DMV fees, like the title, license plate, and registration fees, are no biggie. The state ranks 11th-lowest on the real estate tax list, and it's fifth lowest on ours. Montana. Here's the big surprise. A number of states include inventory as part of their TPP tax. The map below shows the states that have inventory taxes: Inventory taxes violate a number of principles of sound tax policy. I'll give away the ending right now: Those 23 states (and the District of Columbia) tied for first in our rankings -- it's hard to beat no taxes at all! Those states are North Carolina, which has a minimum tax rate of 3%, and Hawaii, which has a sales tax rate of 4.5%. This tax policy means residents of New Hampshire, Delaware, Montana, Oregon, Alaska, and New Mexico, who find and buy their dream cars in Florida don't pay sales or use taxes in Florida. Tennessee and New Hampshire, however, tax interest and dividends, although Tennessee is phasing out its tax in 2021. Delaware. But if you decide to drive the car home to Illinois, Indiana, or Minnesota, the dealer must charge you sales tax in Michigan. The tax is not transparent; few likely know that it exists. But you might be very surprised by a few of the other names on our list of states with the lowest car tax. Stock Advisor launched in February of 2002. The Hawkeye State went for President Obama in 2012, but it's really a "swing" state -- its residents are pretty closely divided, politically speaking. Registered motor vehicles exempt. It’s nearly impossible to avoid paying some form of property taxes, especially if you own real estate. Montana has been a red state in recent presidential elections, but it's really somewhat split: Republicans control the state legislature, but Governor Steve Bullock is a Democrat. In the East, they include North Carolina, South Carolina, Georgia, Mississippi, and Maryland. If your state charges sales tax, a trip across a state line to a place that doesn't tax you for your purchase might be worthwhile. Utah residents pay an average of $150 a year in state vehicle property taxes. Cumulative Growth of a $10,000 Investment in Stock Advisor, The States With the Lowest Car Tax @themotleyfool #stocks, Citizens Financial Group Inc (CFG) Q4 2020 Earnings Call Transcript. California has a national reputation as a high-tax nightmare (and to be fair, when it comes to things like sales taxes, California isn't cheap.) Residents of Alabama, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maryland, North Dakota, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Vermont, Washington, and Wisconsin pay nothing at all in state vehicle property taxes. Therefore, it's worth spending some extra time searching for ways to save some money – a lot of money, in some cases. Delaware, known for having a business-friendly climate, has no state sales tax largely as a method of attracting shoppers from neighboring states like Pennsylvania, New Jersey, and Maryland, all of which have sales taxes.Over 40% of the state's revenues instead come from corporate taxes from the many out of state companies that choose to register in Delaware. State property taxes on real estate and on cars turn out to vary widely -- and not necessarily in the ways that you'd expect. Many states that charge sales taxes at the state level also allow their local governments to impose sales and use taxes. Alabama residents pay an average of $170 a year in state vehicle property taxes. If a vehicle sales tax applies, the vehicle seller must collect the tax when the sale transaction occurs. States with progressive income tax systems. Hawaii and Wyoming residents pay 4%, and Louisiana residents pay 5%. Should You Keep Your Amex Platinum Card if You Don't Plan to Travel This Year? (Mississippi refers to its tax as an ad valorem tax, the term usually associated with property taxes.) This Regional Bank's Earnings Have Stabilized, and That's Great News for Dividend Investors, Pinnacle Financial Partners Inc (PNFP) Q4 2020 Earnings Call Transcript, Copyright, Trademark and Patent Information. Certain states require forms for CBA purchase cards and CBA travel cards. The result is that you might pay more in taxes for the same vehicle at the same sales price, depending on the city or county of the state in which you buy the car. A sales tax is an amount of money state and local governments require sellers to collect when they sell goods or services. Illinois. Now that I’ve made this sound complicated, I want to offer a light at the end of the tunnel. However, even states that don't charge a direct sales tax on a vehicle may charge a registration, document, or use tax when you go to register the vehicle. The United States uses a progressive federal tax system, which applies higher tax rates as your income increases. There are more than a handful of states with no sales tax on cars.   North Carolina also repealed its estate tax on January 1, 2010, then it reinstated it a year later. Returns as of 01/20/2021. Montana is 21st in WalletHub's rankings of states with the lowest real-estate property taxes, but residents pay an average of just $85 in state vehicle property taxes. States that do not charge a sales tax include New Hampshire, Oregon, Delaware, Montana and Alaska. Do your research, find the vehicle you want, and make your best deal. But some states are nicer than others regarding local tax exemptions for specific demographics, like senior citizens. There are five states without sales taxes: Montana, Alaska, Delaware, Oregon and New Hampshire. Nonresident buyers must apply for their exemption when the sale occurs. It's 19th cheapest when it comes to real estate property taxes, according to WalletHub, and it's a solid 10th on our car tax list. Residents of Arkansas, Mississippi, and West Virginia who buy cars in Florida must pay motor vehicle sales tax to their government because their states don't give credit for taxes paid to the state. Tax your car, motorcycle or other vehicle using a reference number from: a recent reminder (V11) or ‘last chance’ warning letter from DVLA; your vehicle log book (V5C) - it must be in your name 32 of 50 states, plus the District of Columbia, follow the federal example and employ their own version of a progressive income tax system. If the sale is through a dealer, the buyer gives the form to the dealer. The states with no income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. The Tar Heel State is pretty inexpensive when it comes to property taxes, relatively speaking. It is true that Alaska has no state sales tax to speak of. Income Tax Range: For the 2020 tax year, Mississippi's lowest tax rate is 3% (on taxable income from $3,001 to $5,000), and its top rate is 5% (on taxable income of … Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes. A trip to Delaware or New Hampshire might mean no sales tax at purchase time. When you use a government purchase card such as the "GSA SmartPay" travel card for business travel, your lodging and rental car costs may be exempt from state sales tax. If you live somewhere like New Mexico or New Hampshire and buy a car or SUV there, you won't have to pay any sales tax on it. Nearly all states have an income tax, ranging from 1-13%. And while 14 blue states (plus the District of Columbia, which went for President Obama in 2012) have no vehicle property taxes at all, that's only true of nine red states. While it's not. Then, there’s the vehicle sales tax — and yes, this applies to private-party sales too. It is possible to completely set up the purchase over the phone and just go pick up your car. People who live in states that don't charge sales tax on used or new cars can use their home state's tax laws to their advantage in Florida. And it's fourth on our car-tax list: California residents pay an average of $149 a year in state vehicle property taxes. Hawaii. This form states the buyer's intent to license the purchased vehicle in their home state within 45 days of the purchase date. Properly called the Commonwealth of Kentucky, the Bluegrass State is just one of four U.S. states constituted as a "commonwealth." Then, congratulate yourself on how much you saved by being in the right place at the right time. Idaho. For example, if you live in Illinois, Indiana, or Minnesota, buy a car in Michigan, and have the seller or dealer deliver it to your home state, you won't pay any sales tax in Michigan. Everybody wants a lower tax bill. Arkansas ranks an inexpensive eighth on WalletHub's list of the states with the lowest real estate property taxes, and it's eighth in our car tax rankings, too. To compute state sales taxes on motor vehicles in most states, multiply the purchase price of the vehicle by the tax rate that applies. Personal property not taxable. In the West, these states are Oklahoma, Arkansas, West Virginia, South Dakota, and Nebraska. Four states — Delaware, Montana, New Hampshire and Oregon — have no statewide sales tax, or local sales taxes, either. Whether the transaction is through a dealer or a private individual, the buyer must fill out and submit Form DR-123, Affidavit for Partial Exemption of Motor Vehicle Sold for Licensing in Another State. States Without a Sales Tax Only five states don't impose a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. State Sales Tax:0% Local Sales Tax:1.78% The Last Frontier is one of only five states to charge zero sales tax, and is one of two 0% sales tax states that allow local municipalities to levy a sales tax (the other is technically Montana). That makes it a mixed bag when it comes to taxes: Michigan is an expensive 44th in WalletHub's rankings of states with the lowest real estate property taxes, but Michigan residents pay an average of just $110 a year in state vehicle property taxes. At least 15 states authorize local governments to impose their own taxes or fees and rental car companies add on charges for off-site rentals, airport fees, and insurance coverage. You pay a maximum of 6%, Florida's state sales tax rate, which saves money for you. (Can you name the other three?) In total, more than 40 states levy a charge on rental cars, either by imposing an additional excise tax, daily fee, or both. **​86T = ​No trade-in tax credit. If you purchase a car in Oregon and then register it in CA then … Additionally, many states with low sales tax have higher income taxes.. 1. Like Florida, Michigan exempts out-of-state car buyers from sales tax when their home state has no sales tax on cars. In a private sale transaction, the buyer provides the exemption form to the private tag agent or tax collector when purchasing the vehicle's temporary tag. Louisiana. Bill Clinton's home state is a pretty deep shade of red these days, and it shows on the taxation front -- at least when it comes to state property taxes. If you live in a state with a sales tax rate higher than Florida, such as New Jersey, California, and Tennessee, Florida gives you a partial exemption. Kentucky is 18th-lowest in WalletHub's real estate property tax ranking, and it's ninth on our list with an average vehicle property tax of $286. They don't like property taxes: Alabama has the second-lowest real estate property tax, and the sixth-lowest car tax. One way to accomplish that might be to live in a state with no income tax. With half of U.S. states charging a personal property tax on vehicles based on vehicle value, the average annual vehicle property tax cost is $423. John Rosevear is the senior auto specialist for Fool.com.   New Jersey phased out its estate tax ending in 2018. States With No Sales Tax on Cars. It's not a huge amount, but it's not zero, either. Ten states tax inventory, with four additional states having partial taxes on inventory. Centrally Billed Account (CBA) cards are exempt from state taxes in EVERY state. A computer search found at least 16 states that impose statewide motor vehicle taxes or fees based on a vehicle ' s value, but only Kansas and Mississippi refers to their tax as a property tax. When buying cars in Florida, Alabama residents pay only 2%, and Colorado residents pay 2.9%, their state's respective sales tax rates. Additionally, Oregon charges its dealers a vehicle privilege tax of .005% of the retail price of a new vehicle that has less than 7,500 miles on it; this tax is usually passed on to the buyer. Arizona, Georgia, Hawaii, and Nevada do not levy tax on private party purchases. And while 14 blue states (plus the District of Columbia, which went for President Obama in 2012) have no vehicle property taxes at all, that's only true of nine red states. The Tax Foundation, an independent think tank, weights local sales taxes and adds them to statewide sales taxes. These states include Montana, Delaware, Oregon, and New Hampshire. Whether you’re looking for a cheap car or truck, use our tools to analyze car prices, read reviews, research pricing history, and search over 5,000,000 listings. You must determine in which states you have sales tax nexus , and then figure out what to charge buyers in that state (or states.) State property taxes on real estate and on cars vary widely, and not necessarily in the ways you'd expect. There are some states that don’t charge sales taxes on cars. Personal property not taxable. SUMMARY . While it's not much of a surprise that "red" states (the ones that voted Republican in the 2012 presidential election) tend to have lower real estate property taxes than the "blue" states that voted Democratic in 2012, it sometimes works out the other way around when it comes to vehicle property taxes. Also, while there is not a state sales t… The Beehive State is about as red as a state gets -- Utah hasn't gone to the Democrats in a presidential election since 1964, and recent elections have not been close. As of January 1, 2016, the average local sales tax rate in Alaska was 1.78%, maki… The result? John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007. These states may also charge a tax on vehicles bought out of state or bought from dealers out of state. Where You Register the Vehicle: You can only avoid this tax if you purchase the car in a no sales tax state and then register the vehicle in that state as well. So if you buy a Ford F-150, Chevy Tahoe, or Honda Civic in Michigan, but plan on titling and registering it in one of the sales tax-free states - such as Alaska, Delaware, Montana, New Hampshire, Oregon, or New Mexico – the state of Michigan exempts your vehicle from its sales tax. Not surprisingly, Utah's state legislators have a light hand with the property-tax hammer. If you don't live in or near New Hampshire, Delaware, Montana, Oregon, Alaska, or New Mexico, other states offer the opportunity to buy a vehicle without paying sales tax. Sales taxes differ from excise taxes, which are flat-rate taxes you pay when you buy something such as motor vehicle fuel, or the materials to make a product. Because these states impose a use tax, which serves the same purpose as a sales tax, Michigan allows exemptions to protect purchasers from being taxed twice for a single sales transaction. Iowa residents pay an average of $230 a year in state vehicle property taxes. These states are Delaware, Montana, New Hampshire, and Oregon. Market data powered by FactSet and Web Financial Group. Motor vehicles subject to license tax exempt. However, some of these states charge use taxes, which serve the same purpose as sales taxes. No two states are alike when it comes to taxes. These out-of-state residents end up paying tax in Florida at the sale and paying again in their home states when they license their vehicles at the DMV. A recent analysis by WalletHub.com showed that the average red state resident pays a vehicle property tax of $238, while the average levy in blue states is actually a bit lower at $212. You asked which states impose a statewide property tax on motor vehicles. 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