If you sell a car, is the buyer liable for state and local sales tax on it? Usually, the answer is yes, but under certain circumstances sales tax may be waived. The specific qualifications for a tax waiver differ by locality, so it's important to check out your state's Department of Motor Vehicles website to find out who can waive auto sales tax and what sorts of documents are required to document the waiver.
Religious, Charitable or Nonprofit Buyers
If the buyer is a tax-exempt organization, such as a church, charity or other registered nonprofit group, the tax on the auto purchase may be waived. In most states, such buyers need to have obtained a Certification of Exempt Status and provide the number of that certificate when applying for a title on the vehicle. Some states, such as Texas, allow this waiver only for religious organizations, or for buses or commuter vans.
If the purchaser is an out-of-state resident, and will use the vehicle exclusively outside of the state, some states allow the buyer to waive sales tax. In addition, sales tax may be waved if tax on the vehicle has already been paid to another state. Buyers need to document these facts in their registration application to claim the tax waiver.
If the vehicle is being transferred from one member of a family to another, some states allow the sales tax to be waived. The family relationship must be documented in the registration applications. States often specify which family members may transfer vehicles without tax.
Certain Business Vehicles
Some states exempt certain vehicles from sales tax if they will be used exclusively for certain business purposes. For instance, many states exempt trucks that will be used solely as common-carrier vehicles. Motor vehicles that have been modified for specific farm uses may be reclassified as farm equipment and may be exempt from state sales tax. In most cases, the nature of the vehicle's use must be specified on the registration application to claim this exemption; in some states buyers may need to use special registration forms for business-use vehicles.
- Wisconsin Department of Transportation: Title/License Plate Application
- Texas Comptroller of Public Accounts: Motor Vehicle Taxes
- California State Board of Equalization: Sales and Use Taxes: Exemptions and Exclusions
- Florida Highway Safety and Motor Vehicles: Florida Motor Vehicle, Mobile Home And Recreational Vehicle Dealers’ Handbook
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