Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. In the states with property tax on cars, is there a sales tax when they are purchased?
A. Sales tax and personal property taxes are not the same, and many states do charge both.
In Virgina, for example, an automobile purchase incurs a 4.15% Motor Vehicle Sales and Use Tax, or SUT, according to the state’s Department of Motor Vehicles.
In addition, the state charges an annual personal property tax based on the resale value of the car. The tax rate varies among local municipalities, but the effective tax rate in the state is 4.05%, according to a report from WalletHub. The tax also changes from year to year, as the vehicle’s value depreciates.
About half of U.S. states charge personal property taxes on cars, the report found. Of these states, Virginia has the highest property tax on automobiles, while Louisiana has the lowest, 0.10%.
In Connecticut, the sales and use tax is 6.35%, or 7.75% for vehicles over $50,000, according to the state. The effective personal property tax rate there is 2.60%, WalletHub found.
Some states charge sales tax and local municipalities can add an additional percentage for themselves. California, for instance, has a 7.25% sales tax but cities or counties may tack on 1% or 2%, according to the state’s Department of Tax and Fee administration.
California’s annual personal property tax rate is 0.65%, according to WalletHub.
There are several states that don’t charge sales tax on vehicles. Some of those, including Delaware and Oregon, are also free of personal property taxes.
However, if non-residents purchase a car in a state without sales tax, they will be expected to pay the appropriate taxes when registering the vehicle in their home state.
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