How to Determine a Car Title Tax in Virginiaby Tom Streissguth
If you're retitling a new or used car in Virginia, there's a Motor Vehicle Sales and Use Tax in effect. The law sets the tax rate at 4.05 percent of the gross sale price or $75, whichever is greater. Virginia offers a few exemptions, and sets out some rules on private transactions, in which sellers are also liable for collecting and remitting Sales and Use Tax.
The Sales and Use Tax is based on gross sale price, which does not include trade-in credit or incentives provided by the dealer or the manufacturer. This payment comes on top of the state's registration fee, which as of 2015 had reached $40.75 for vehicles under 4,000 pounds. Virginia tacks $64 on to the sales tax amount for hybrid and electric vehicles. The sales tax is paid by the seller to the Division of Motor Vehicles at the time the vehicle is titled to the buyer. Ordinarily, car dealers add the sales tax amount to the sales contract at the time of purchase.
Exceptions to the Rule
Virginia exempts certain vehicles from sales tax, including those used by federal or state agencies or volunteer fire departments. In addition, non-resident buyers who are moving out of state and titling their cars in Virginia for the purpose of recording a lien against the vehicle are exempt, as are lenders repossessing vehicles from defaulting borrowers. Buyers must bring written proof of their exemption qualification or complete a Purchaser's Statement of Tax Exemption.
If you're moving to Virginia from another state and registering a car you already own, you don't need to pay sales tax. For vehicles purchased within the last 12 months, you must prove that sales tax was paid --otherwise you're liable for it in Virginia.
Virginia law on Sales and Use Tax also governs private transactions, in which a car dealer is not involved. The tax for these sales is based on the value assigned to the vehicle by the National Automobile Dealers Association Official Used Car Guide. If the vehicle is at less than five years old, the seller must complete an Affidavit for Procurement of Title. For older vehicles, the state wants a bill of sale, signed by both parties, that lists the vehicle identification number, date of the sale, and a description of the vehicle.