What Are Exceptions To Tennessee Sales Tax
Certain types of car sales or transfers in Tennessee are exempt from local sales tax, such as:
- Sales to members of the armed forces
- Sales or transfers between spouses or siblings, parents, grandparents, children, and grandchildren
- Sales to nonresidents of Tennessee who plan to leave the state with the vehicle within three days of buying it
- Sales to nonprofit organizations or government entities only for organizational or governmental use
- Any vehicles given as gifts
As specified by the Tennessee Department of Revenue, other exceptions to car and boat sales tax include when vehicles are:
- Transferred personally from a sole proprietor’s business to the sole proprietor
- Converted by an individual for use at their sole proprietor business
- Owned by two individuals who get the vehicle’s title issued in only one of their names
- Given as a gift in which the giver receives no benefit
- Given to a Tennessee qualified nonprofit
- Given to the federal government, the state of Tennessee, a Tennessee county or municipality, or an agency of these governments
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What is the sales tax on cars purchased in Tennessee?
The sales tax on a car purchased in Tennessee is 7%.
Do I have to pay sales tax on a used car in Tennessee?
Yes, you have to pay the standard 7% sales tax on a used car in Tennessee.
Which city in Tennessee has the lowest tax?
The city with the lowest car sales tax is Mountain City with a car sales tax rate of 8.5%.
Which city in Tennessee has the highest tax?
The city with the highest car sales tax in Tennessee is Memphis, with rates of 9.75%.
Do I have to pay sales tax on a gifted car in Tennessee?
You do not have to pay sales tax on a gifted car in Tennessee.
How much is registration in Tennessee?
Registration for a passenger vehicle is $26.50 in Tennessee.
Does a trade-in reduce sales tax in Tennessee?
Yes, a trade-in does reduce sales tax in Tennessee. In other words, be sure to subtract the trade-in amount from the car price before calculating sales tax.
How can I avoid paying sales tax in Tennessee?
Cars sold to active military members, nonresidents of Tennessee who plan to leave within three days of purchasing the car, non-profit or government organizations, and sold to family members are not subject to sales tax in Tennessee.
What Are Some Loopholes To Avoid Paying Sales Tax On Cars
Sales taxes on cars are often hefty, so you may try to avoid paying them. The most straightforward way is to buy a car in a state with no sales taxes and register the vehicle there. Only five states do not have statewide sales taxes: Montana, Alaska, Delaware, Oregon, and New Hampshire. Unfortunately, unless you register the car in a tax-free state, you will still have to pay the sales tax when you register the vehicle in its state of residence.
And using dummy addresses doesn’t fool revenue departments. If you plan to move from a state without sales taxes to one with sales taxes, it’s best to buy the car and register it for about three months before moving. That way, you don’t have to pay a sales tax on the vehicle in the new state when you re-register it.
There are some other loopholes, too. Classic cars have a rolling tax exemption. For example, vehicles manufactured more than 40 years before January 1 of the year is automatically exempt from sales tax, and vehicles used for certain types of forestry and agriculture are also used.
People who claim disability may also be exempt if they qualify for a certain placard or license plate.
Depending on the state, there are also different rules and surcharges for electric vehicles.
Finally, there may be additional vehicle tax deductions if you claim it on your tax filing, assuming it meets specific criteria. These and other deductions can help lessen the sales tax burden you have to pay when buying a car.
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How To Calculate Tennessee Sales Tax On A Car
You can calculate the sales tax in Tennessee by multiplying the final purchase price by .07%.
For example, lets say that you want to purchase a new car for $60,000, you would use the following formula to calculate the sales tax:
$60,000 x.07 = $4,200.
This means that your sales tax is $4,200 on a $60,000 purchase price.
Michigan’s Sales Tax Exemptions Are Similar To Florida’s
Typically, out-of-state residents who take delivery of a vehicle in Michigan must pay sales tax in Michigan. However, if you have the dealer or seller ship or deliver your car to an address outside the state, sales tax is only required if their state of residence requires it.
For example, if you live in Illinois, Indiana, or Minnesota, buy a car in Michigan, and have the seller or dealer deliver it to your home state, you will not pay any sales tax in Michigan. But if you decide to drive the car home to Illinois, Indiana, or Minnesota, the dealer must charge you sales tax in Michigan.
Like Florida, Michigan exempts out-of-state car buyers from sales tax when their home state has no sales tax on cars. So if you buy an American-made Ford F-150, Chevy Tahoe, or Honda Civic in Michigan but plan on getting a title and registering it in one of the tax-free states, Michigan exempts your vehicle from their sales tax.
Michigan also exempts residents of the District of Columbia and 10 non-reciprocal states from sales taxation. These states are Oklahoma, Arkansas, West Virginia, South Dakota, Nebraska, North Carolina, South Carolina, Georgia, Mississippi, and Maryland. Because these states impose a use tax, which serves the same purpose as a sales tax, Michigan allows exemptions to protect purchasers from being taxed twice for a single sales transaction.
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What About Special Circumstances
Because US state tax laws vary so much, shoppers must consider any special circumstances when buying a car in another state. For example, most states provide tax credits for the trade-in of another vehicle. However, seven states do not offer tax credits in this circumstance: California, Michigan, Virginia, Hawaii, Kentucky, Maryland, and Montana.
Additionally, if you buy a used car instead of a new one, you must still pay a sales tax. You don’t need to pay the tax to the vehicle dealer or private party when buying the used vehicle, but it must be paid when registering with the motor vehicle registry in your home state. Some states, such as California, charge use taxes when you bring in a car from out-of-state, even if you’ve already paid the sales tax on the vehicle.
In Oklahoma, the excise tax is 3.25% of the vehicle’s purchase price when first registered. Some states charge annual excise fees for vehicles or a fee whenever you renew your registration.
Can I Save Money On Sales Tax By Buying A Car In A Different State
If you live just across the border from a state with little or no sales tax, it might be tempting to buy your car out of state to save money on sales tax. While there are other reasons to consider buying a car out of state, you will not save money on sales tax by buying a car in a state with low or no sales tax. You must pay the sales tax for the state you will register your car in, which is the state you live in. However, there are a few legal ways to avoid paying sales tax on a car.
Check out which states are the best to buy a car in.
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How Do You Calculate Sales Tax In Tennessee
Generally, the maximum upon which the local option sales or use tax will apply is $1,600 dollars times the local tax rate. For example, if the county has a 2.25% local option tax rate, the local tax calculation would be 2.25% * $1,600 = $36.00. Some counties have different rates, and a few have lower maximum amounts.
Taxation Of Car And Boat Sales
Typically, automobile and boat sales in Tennessee are subject to sales or use tax. The few exceptions to this rule are when vehicles or boats are sold:
- between spouses, siblings, lineal relatives or spouses of lineal relatives *
- between spouses as a result of divorce
- from a sole proprietors business to the sole proprietor personally, or by an individual converting his/her vehicle to their sole proprietor business
- vehicles jointly owned by individuals who get the vehicles title issued in only one of their names
- as a gift* from one individual to another without any kind of consideration
- directly to a Tennessee qualified nonprofit entity and
- directly to the federal government, the state of Tennessee, Tennessee county or municipality or an agency of these governments.
More information on sales and use taxes related to car and boat transfers may be found here.
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How Much Is Sales Tax For A Car In Tennessee
Sales tax for a car in Tennessee includes a state sales tax, a county or city sales tax, and a single article tax. Your sales tax total depends on if you have a car to trade in, where you buy the car, and if you qualify for any tax exceptions. Car sales tax in Tennessee applies to all road vehicles, whether bought new or used from a private party or a licensed dealer.
There are two ways to calculate the vehicle purchase price in order to apply the 7 percent state sales tax. If you don’t have a trade-in, then the purchase price is the amount you agree to pay prior to any rebates or incentives. If you have a trade-in, then the purchase price is the amount remaining after applying your old car’s trade-in value to your new car’s price. As confirmed by the SalesTaxHandbook, Tennessee doesn’t tax the value of your trade-in vehicle.
Local sales tax varies by location. The maximum charge for county or city sales tax in Tennessee is $36 on the first $1600 of a car’s purchase price. A single article tax is another state tax to consider when purchasing a car. It’s a 2.75 percent sales tax that’s applied to the car’s purchase price when it’s over $1600 but not more than $3200. Single article taxes for purchases over $3200 are capped off at $44 according to the Knox County Clerk’s office.
What Is The Sales Tax In Tennessee 2022
2022 List of Tennessee Local Sales Tax Rates. Tennessee has state sales tax of 7%, and allows local governments to collect a local option sales tax of up to 2.75%. There are a total of 307 local tax jurisdictions across the state, collecting an average local tax of 2.614%.
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How To Calculate Sales Tax On A Car In Tennessee
How Much Is Total Sales Tax?
How do you calculate sales tax on vehicles?
- Multiply the net price of your vehicle by the sales tax percentage. Remember to convert the sales tax percentage to decimal format. For example, if your state sales tax rate is 4%, you would multiply your net purchase price by 0.04. Once you calculate your auto sales tax, youll have a fuller understanding
Tax On Rebates & Dealer Incentives
You do have to pay tax on dealer rebates and incentives. In other words, do not subtract the incentive/rebate amount from the car price before calculating sales tax.
As an example, if you are purchasing a new car for $50,000 with a $5,000 rebate, you will pay sales tax on the full $50,000 final cost of the car.
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Calculating Vehicle Purchase Price
The Tennessee state sales tax applies to the entire purchase price of the vehicle before any rebates. For example, if you buy a car for $25,000 but get a manufacturer rebate of $5,000, you still owe state sales tax on $25,000. However, if you trade in your old car toward a newer one, you only pay sales tax on your new car’s price after the dealer deducts the value of your trade-in.
Other Taxes And Fees Applicable To Tennessee Car Purchases
In addition to state and local sales taxes, there are a number of additional taxes and fees Tennessee car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the Tennessee Department of Motor Vehicles and not the Tennessee Department of Revenue.
Title Fee: Registration Fee: Plate Transfer Fee:
Average DMV fees in Tennessee on a new-car purchase add up to $241, which includes the title, registration, and plate fees shown above.
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What Is The Formula To Calculate Tax
Now, one pays tax on his/her net taxable income.
Tennessee Ev Rebates & Incentives
Tennessee offers some financial incentives to those purchasing an electric plug-in or hybrid vehicle.
This entails a $2,500 rebate on zero-emission battery electric vehicles and a $1,500 rebate on plug-in hybrid electric vehicles sold or leased by a Tennessee dealership to Tennessee residents after a claim is filed by the dealership.
This is in addition to the $7,500 rebate offered by the federal government.
Tax information and rates are subject to change, please be sure to verify with your local DMV.
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How Much Sales Tax Do I Need To Pay For A Vehicle
That depends on your home state’s laws and the state where you bought the car. For instance: As of 2020, New York has a car tax rate of 4% plus local taxes, whereas nearby Massachusetts charges 6.25%, with some local rates even higher. Knowing how much sales tax to pay when purchasing a vehicle also helps you to know when asking for financing from a lender.
Some states have reciprocal tax relationships, meaning they provide credits to each other whenever their residents pay sales taxes across state lines. 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 Arizona sales tax, but not in California.
Each state’s vehicle registration agency’s website usually lists the state’s tax relationships with other states, which is worth checking before buying a car. Even if in a non-reciprocal state, it’s to avoid paying their sales tax if you give the car dealer proof that you’re going to register your car in a state where you claim residency.
What Is Exempt From Tennessee Sales Tax
Several examples of items that are considered to be exempt from Tennessee sales tax are medical supplies, certain groceries and food items, and items which are used in the process of packaging. These categories may have some further qualifications before the special rate applies, such as a price cap on clothing items.
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Vehicle Title And Registration
Applicants will need to submit the following:
For New Vehicles:
- Manufacturers Statement of Origin
- Copy of current registration
- *In order to transfer your current license plate, the new vehicle must be titled exactly as the previous vehicle
- If a dealership has mailed your paperwork to the County Clerks office for processing, please have your tracking number so that we will be able to find your information.
- For Pre-Owned Vehicles:
- Odometer Disclosure Statement, if applicable
- Title If the vehicle is purchased from an out of County dealer, the customer is required to pay the County Wheel Tax Fee
- Copy of current registration
- *In order to transfer your current license plate, the new vehicle must be titled exactly as the previous vehicle
- If a dealership has mailed your paperwork to the County Clerks office for processing, please have your tracking number so that we will be able to find your information.
Individual Purchase:
- Sales tax will be collected on purchase price of vehicle less trade-in, if any
New Residents or Those Relocating to Williamson County:
- Out of State Title
- Most current Out-of-State Registration
Fee – $68.75 includes regular auto license plate, title, and wheel tax
Fee – $54.75 includes regular auto license plate fee and wheel tax
Fee – $17.50
Payment Methods Accepted:
- Personal, in-state check payable to
- *The County Clerks office does not accept American Express
Note: All lease vehicles require a Power of Attorney from the lessor.
Williamson County Clerk
How Much Sales Tax For A Car In Tennessee
Whether you buy a new or used car in Tennessee, you must pay sales tax on the purchase unless it is exempt. Vehicle sales are subject to the Tennessee state sales tax and an additional single-article tax depending on the sales price of the vehicle. Since the sales tax also includes county or city taxes, the overall rate varies depending on where in the state you buy your vehicle. Most counties have an online calculator to help you understand the taxes you owe on your purchase.
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