If you are interested in purchasing a used car in the state of California, then you should understand the associated car sales tax. Whether you are purchasing your used car, truck, SUV, or van from an auto auction in California, a dealership or a private seller, there will be a sales tax levied on the purchase. Here is what you need to know about sales tax on used cars in California.
What Is the Car Sales Tax in California?
The state sales tax on a car purchase in California is 7.5%. Therefore, you will be required to pay an additional 7.5% on top of the purchase price of the vehicle. Let’s say you are going to purchase a used truck from a dealership. The purchase price of the truck is $30,000. The sales tax will be 7.5% of the $30,000 price. That means that you will have to pay a total of $2,250. That brings the final purchase price of the used truck – including tax – to $3,225.
How to Calculate California Sales Tax on a Used Car
You can calculate the sales tax in California by multiplying the final purchase price by .075%. Going back to the example in the previous paragraph. You can take the purchase price of the used track at $30,000 and multiply that price by .075. The equation will look like the following:
$3,000 x .075 = $225
When is Sales Tax Exempt in California?
The following events are exempt from the sales tax on used cars in Cali:
- You receive the vehicle as a gift from a relative such as a parent, spouse or child, grandparent/grandchild.
- You buy the used car in another state and bring it into the state of California within 12 months.
- You receive the vehicle in a divorce.
- The vehicle was inherited
- You receive the vehicle from an individual’s revocable trust.
- A court judgement provided it to you
Car Sales Tax for Trade-Ins in California
If you are purchasing your used vehicle at a dealership, then there is a chance that you are trading in another vehicle. Therefore, you may be wondering if the trade-in value is subject to the 7,5% sales tax. The answer is that the trade-in value is not subject to sales tax.
As an example, let’s say you want to purchase a used SUV at a dealership for $50,000. You are trading in your current SUV which the dealership gives a value of $10,000. That means the taxable amount on your used SUV purchase is now $40,000.
Tax on Rebates & Dealer Incentives
There is no sales tax on dealer rebates and incentives. So, for example, if you are purchasing a new SUV for $60,000 with a $5,000 rebate. You will pay sales tax on the $55,000 sales tax. However, you don’t have to pay sales tax on the $5,000 rebate. This also applies to dealership incentives.
Used Car Sales Tax on Private Sales in California
If you are purchasing your vehicle from a private party in California, then you may wonder if you need to pay the sales tax on the purchase. The answer is that all used car purchases are subject to the 7.5% sales tax. This tax is payable to the California Department of Motor Vehicles. Ultimately, it is the buyer of the vehicle who needs to pay the sale tax.
Note that once you have purchased your vehicle from a private seller, you have 30 days to pay your sales tax to the California Department of Motor Vehicles.
Understanding Used Car Sales Tax in California
Because the purchase of a used vehicle is a large transaction, you should know the associated sales tax. Remember that sales tax applies to dealerships and private party transactions. Be sure to consider the possible 7.5% sales tax that you may have to pay during the purchasing process.