You can also mitigate taxes by registering a car in a state with lower tax rates. Unfortunately, unless you register the vehicle in the sales-tax-free state, you still have to pay the sales tax when you register the car in your home state. The easiest way to do this is to buy a car in a state with no sales taxes and register the car there: Montana, Alaska, Delaware, and New Hampshire. Vehicle sales taxes are usually a significant part of the total cost of the vehicle, so you may try to avoid paying them. These fees are in addition to the sales tax you must pay. Some states charge annual excise fees for cars or a fee whenever you renew your registration. And in Oklahoma, you must pay an excise tax on the car's value when you register it. Also, some states, such as California, charge use fees when you bring in a car from out-of-state, even if you've already paid the sales tax on the vehicle. However, California, Michigan, Oklahoma, Virginia and District of Columbia don't do this. Most states provide tax credits for trade-ins - that is when you give your old car to a dealer to cover part of the cost of a new car. state tax laws vary so much, there are many individual circumstances that buyers should take into account when buying a car in another state. You may be able to avoid paying sales tax in that state if you give the dealer proof that you intend to register your car in your home state, such as your driver's license.īecause U.S. This is true if you visit a non-reciprocal state. Usually this tax relationship is listed on the DMV site, so if you are considering purchasing a vehicle across state lines, make sure to check it first. For example, Arizona has reciprocal tax agreements with Oregon, Virginia, Indiana, and California so if a California resident buys a car in Arizona, they may be exempt from paying the sales tax in Arizona, though they have to pay it in California. Some states have reciprocal tax relationships, meaning they provide credits to each other whenever their residents pay sales tax across state lines. This gets complicated when you purchase a vehicle out of state. This is an important convenience since your local DMV will not allow you to register your car without a bill of sale showing your sales tax was paid or a proof of exemption when one applies. When you buy a car, regardless of what state, the dealer collects the tax and remits it to the tax agency on your behalf to ease the burden of trying to do so yourself. Depending on where you live and where the dealer is located, the way taxes are calculated and collected can be complicated. In some cases, finding the right car can lead you to a dealer that is out of state. Because of websites like and, “window shopping” online is common for people who are eagerly trying to find the new or used car they want at the right price.
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