When buying a car from a dealer or a private seller, it’s crucial to consider all associated costs, not just the price of the vehicle. Other costs to consider include registration and ownership fees, along with the unavoidable: taxes.
Sales tax, use tax, and various other taxes may apply when you purchase a vehicle. The exact amount depends on where you live and the car’s total cost. Remember, you generally pay taxes and registration fees based on where you title/register the car, not necessarily where you buy it.
Sales Tax
Just like any other purchase, a car purchase is subject to sales tax. Sales tax is added to the sale of most goods and services in the United States, and usually helps fund public services. This tax is calculated based on the vehicle’s price before any additional fees are added. The sales rate varies by state, and there may be additional rates based on the county or jurisdiction you’re in.
For example, California’s statewide sales tax rate is currently set at 7.25%. However, additional district taxes may apply, adding 0.10% to 1% to the overall sales tax, and some residences may be subject to more than one district tax.
As of June 2026, the following states do not impose a statewide sales tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Although the above states don’t require sales tax on car purchases, other taxes or fees may still apply, and buyers generally owe tax based on where they register the vehicle, not simply where they buy it. For example, Delaware requires a 5.25% document fee based on the purchase price or current NADA average trade-in value, whichever is higher.
In general, sales tax can significantly impact the total cost of your new vehicle, so it’s important to build it into your budget when starting the shopping process.
Who Pays Sales Tax When Selling a Car Privately?
When you buy or sell a car privately, the buyer is responsible for any applicable sales tax. The tax amount, along with any associated fees, will be collected at the time of title transfer and registration.
RELATED: Things to Know About Taxes When Selling a Car
Excise Tax
Another tax to be aware of when buying a car is the excise tax. Some states, regions, and municipalities may levy an automotive excise tax to help fund infrastructure projects like road maintenance. In some cases, the dealer or retailer pays the tax to the government agency, but those costs are transferred to you as the buyer. Other jurisdictions may collect the excise tax when the vehicle is registered.
Excise tax rates are typically lower than local sales tax rates. In Massachusetts, registered motor vehicles are subject to an annual excise tax of $25 per $1,000 of assessed value, billed by the community where the vehicle is usually garaged.
Vehicle Use Tax
Some states charge a use tax or vehicle excise tax when a vehicle is purchased out of state and then titled or registered locally. The rate and terminology vary by state, and local taxes or credits for taxes paid elsewhere may apply.
Here are the rates in a few states that impose a use tax, excise tax, or sales tax on vehicles purchased outside state lines:
- California — 7.25%
- Kentucky — 6%
- Louisiana — 5%
- Maryland — 6.5%
- Michigan — 6%
- Oklahoma — 3.25%
- Oregon — 0.5%
Rates and regulations on use taxes can vary depending on how you plan to use the vehicle. Counties and municipalities may levy additional taxes when you buy a car. Contact your local DMV if you need clarification of all fees before purchasing.
Property and Ad Valorem Tax
Some states also impose a property tax on vehicles in place of (or in addition to) a standard sales tax. Owners usually pay this fee upfront or during the annual registration renewal. The property tax rate varies by state and is assessed as a percentage of the vehicle’s value.
Some states also charge an “ad valorem” — Latin for “according to value” — tax at the point of sale. If you’re required to pay annually, the levy plays a part in how much it costs to drive and maintain your car year after year.
In some cases, the value-based portion of an annual vehicle property tax may be deductible if you itemize federal deductions. IRS rules require that deductible personal property taxes be based on value and charged annually, and that overall state and local tax deductions are subject to federal limits.
Visit our Car Buying Information Center when you’re looking for a new or used car, have questions about financing and affordability, or want to compare the latest models.
Editor’s Note: We have updated this article since its initial publication. Chantel Wakefield contributed to the report.
What about “documentation” fees? Several states, including Pennsylvania where I am, allow dealers to tack on a documentation fee to cover their paperwork costs! Seriously? I’ve had two different dealers tell me that the state of Pennsylvania “mandates” this fee. It’s a complete lie. I even checked it on PA’s official penndot site. It’s an optional fee dealers are permitted to charge, but it’s definitely not mandated. It’s also negotiable and it’s capped by the state at $474.
If the vehicle is titled and registered in new jersey, you pay the sales tax in new jersey.
If vehicle purchased in Connecticut and used in NJ is there a “use tax? Also is there a property tax or a sales tax imposed ? Is it annually?
thanks for reading, Claudette. Tax is paid to the state where the car is registered. If the car has a Connecticut registration, there is no need to be concerned about New Jersey’s car sales tax rate, which is 6.625%. If you regularly garage the car in New Jersey, you might consider transferring the registration. You only pay a registration fee, not the NJ sales tax, if you transfer the existing registration from Connecticut to New Jersey.