How to Calculate Sales Tax on a New Car

by Virginia Franco
itstillruns article image

Car sales tax rates vary from state to state and even county to county. To make matters even more confusing, the price you base your calculations on can vary depending on how your state determines the car's taxable price. Depending on which tax calculation is used, your monthly payment can vary. If you are lucky enough to live in Oregon or Alaska, you are off the hook because those states do not charge sales taxes on new cars.

Step 1

Determine the price you will use to calculate your car's sales tax. The calculations will depend on the state where you reside and can be based on the total purchase price, the purchase price after you have deducted any vehicle trade-ins or even the price after any cash incentives have been subtracted.

Step 2

Itemize all the expenses involved in purchasing your new car. This includes not only the price of the car but also any transfer fees.

Step 3

Add up those expenses for which you are not responsible for paying taxes. This usually includes the costs of warranties and any other document processing fees. Subtract it from your taxable amount.

Step 4

Add up those expenses for which you must pay taxes--including the title transfer, insurance and Department of Motor Vehicles-associated costs related to getting a new license plate.

Step 5

Find out what your state's tax rate is for a new car purchase. Check to see if you live in a state where cars are considered tax-free purchases.

Step 6

Multiply the sales tax rate percentage by the price of your new car to obtain your total new car sales tax bill.

More Articles

article divider