How to Find Out How Much Sales Tax One Owes on a Car
Anytime an individual is considering buying a new car, he or she should be aware of all the costs associated with buying a car. One major component often overlooked is the sales tax. Not only is it important to know how to find out how much sales tax one owes on a car for budgeting purposes, but some dealers will take advantage of unsuspecting buyers by overcharging on tax.
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Instructions
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Calculating Sales Tax on a Car
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Contact the local department of motor vehicles to find out whether the tax rate is based on where the car is bought or where the car is registered. Once that information is determined, find out what the tax rate is in that area. If the DMV cannot help you, call the state department of taxation.
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Ask the DMV or Department of Taxation if there are any additional taxes required for the car being purchased. For example, some areas have extra taxes on luxury vehicles or trucks.
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If the tax is based on the retail value of the car, research the value of the car. This can be done through a number of online sites, two of the most reputable being Edmunds.com and kbb.com (Kelly Blue Book). If the tax is based on the sales price, find out what the car is selling for.
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Determine which extra items are taxable. For example, in most areas, warranties are not taxable. Add the taxable items to the sales price or retail price (whichever is used) to determine the total taxable amount.
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Multiply the total of the taxable amount by the tax rate to calculate the sales tax. For example, if the total taxable amount is $12,000 and the tax rate is 5 percent, the total tax would be $600.
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Tips & Warnings
Have a cell phone and the tax office's phone number when purchasing a vehicle in case there are questions about the taxes being charged. Auto sales tax is deductible under the stimulus package. Even buyers in states that do not have a sales tax can deduct fees charged by state or local governments at the time the vehicle is purchased.
Beware of unethical car dealers attempting to charge more tax than is required. Check each invoice to make sure the tax is calculated correctly.
