How to Calculate Vehicle Sales Tax

Buying a new car can be fun but costly.

You want that new car and all you need to know is whether or not you can afford it. Sales tax on the vehicle may add a significant amount of extra money you are going to have to finance or pay out of pocket. If you want to know the total amount the vehicle will cost before you take it for a test drive, it will be helpful to calculate the amount of sales tax you may be paying.

Things You'll Need

• Pen and paper
• Calculator (optional)

Instructions

1. Find out how much the sales tax rate is in the city and state you plan to purchase the vehicle. If you are from out of state, make sure that your source of information is aware of this. The best sources of information for the rate of sales tax you will pay is from the automobile retailer or the Department of Motor Vehicles.

2. Determine the purchase price of the vehicle. Multiply the purchase price by the sales tax in decimal form. If the purchase price of the vehicle is $21,500 and the sales tax you will pay is 6.2 percent, your equation will look like this: 21,500 x 0.062 = $1,333. So $1,333 is the amount of sales tax you would pay.

3. Make sure you place the decimal point in the correct position when calculating the amount of sales tax. Take the percentage and divide it by 100, or simply move the decimal place two places to the left. For example, 5.0 percent would be entered as 0.05; 13.0 percent would be entered as 0.13 and 13.2 percent would be entered as 0.132.

Tips & Warnings

• Many automobile retailers will tell you over the telephone what the sales tax rate is. The sales tax may change from city to city, however, so if you are crossing city boundaries, make certain to ask again.

• If you are purchasing a vehicle in one state and you reside in another state, you may have to pay sales tax on the vehicle in the state you reside in, whether or not you pay it in the state you purchased the vehicle in. Make sure that if you reside in another state, you check the rate and rules for your home state also.

• In many states, if you live in one city but you purchase the automobile in another city, you pay sales tax based on the rate charged in the city you live in.

• Some state Department of Motor Vehicles agencies have a calculator online. For example, in Arizona you can go online and calculate the amount of sales tax due even if you purchased or live in another state. You can do this using the link in Resources.

References

• Arizona Department of Revenue: Sale of Motor Vehicles to Non-Residents

Resources

• Arizona Department of Revenue; Worksheet C