What tax do you pay when you buy a car?

The taxes you pay when buying a car depend on where you live and how you buy it. In most places you’ll owe a general consumption tax (such as sales tax or VAT) at purchase, plus registration or road taxes, and sometimes a luxury, emissions, or import duty. Below is a region-by-region guide to what typically applies and how it’s calculated.

United States

In the U.S., car purchases usually incur state and local sales or use tax, title and registration fees, and possibly special surcharges. What you pay depends on your state, locality, vehicle type, and whether you buy from a dealer or a private party.

• Sales/use tax: Typically 0%–10%+ combined, based on where you register the vehicle. If you buy out of state, you normally owe “use tax” in your home state upon registration.
• Taxable amount: Usually the purchase price minus any trade-in value accepted by the dealer; manufacturer rebates are often taxable in many states, while dealer discounts reduce the taxable price.
• Title, registration, and plate fees: Set by the state; some states also add county or city fees.
• Excise or special fees: Some states impose additional EV fees, weight fees, or local transportation surcharges.
• Federal gas guzzler tax: Applies to certain new low-MPG passenger cars (not trucks/SUVs); generally embedded in the sticker price.
• Credits/incentives: The federal Clean Vehicle Credit (for qualifying new EVs up to $7,500, and used EVs up to $4,000) can be transferred at the dealership at point of sale (since Jan. 1, 2024). Most states tax the vehicle’s price before federal credits; some offer separate state rebates or sales tax breaks.

Check your state DMV or department of revenue for exact sales tax rates, whether trade-ins reduce the taxable base, and any EV or local add-ons. States like Oregon, New Hampshire, and Montana have no general sales tax, while others have significant local add-ons.

United Kingdom

In the UK, tax at purchase mainly involves VAT and Vehicle Excise Duty (VED), alongside registration fees and, for imports, possible customs duty. Dealer-sold used cars may be handled under VAT margin rules; private-party used sales generally don’t carry VAT.

• VAT: 20% on most new cars (usually included in the advertised price). Used cars sold by dealers may use the VAT margin scheme; private used sales typically have no VAT.
• VED (car tax): Payable on first registration with a first-year rate based on CO2 emissions (“showroom tax”), then a standard annual rate. From April 1, 2025, electric cars are no longer VED-exempt and pay the same standard rate as many other cars.
• First registration fee: A one-off DVLA fee (commonly £55) on new registrations.
• Import duty: Usually 10% on cars from countries without a trade agreement/rules-of-origin compliance; VAT also applies on imports.

For accurate costs, review the latest HMRC and DVLA guidance, especially CO2-based first-year VED bands and any changes affecting EVs from April 2025 onward.

Canada

Car taxes in Canada are a blend of federal and provincial systems. You’ll pay GST or HST, plus provincial sales taxes where applicable, and potentially the federal luxury tax and provincial green or luxury surcharges.

• GST/HST/PST: Either HST (in harmonized provinces) or GST (5%) plus PST/RST, depending on province. Private sales are often taxed at registration.
• Federal Luxury Tax: Applies to vehicles above a set price threshold; calculated as the lesser of 10% of the total price or 20% of the amount above the threshold (in effect since Sept. 1, 2022).
• Provincial fees and surcharges: Registration, plate, tire stewardship fees, and in some provinces additional luxury or CO2-related charges.
• EV incentives: The federal iZEV rebate (up to $5,000 for eligible EVs) is applied at point of sale; several provinces stack additional rebates or PST relief.

Because rates vary widely by province and vehicle price, confirm with your provincial ministry of transportation/finance and your dealer’s bill of sale.

Australia

Buying a car in Australia usually involves GST, state or territory stamp duty, and possibly the federal Luxury Car Tax (LCT) if the vehicle price exceeds annual thresholds. Registration and CTP insurance are separate costs collected by states/territories.

• GST: 10% included in the price of new cars and dealer-sold used cars.
• Stamp duty: Levied by each state/territory, typically based on price and sometimes on fuel efficiency/emissions.
• Luxury Car Tax: 33% on the portion of the price above the LCT threshold (a higher threshold applies to fuel-efficient vehicles). Thresholds are indexed annually.
• Registration and CTP: State/territory-based fees due at registration.

Check your state or territory revenue office for exact stamp duty brackets and confirm whether your vehicle crosses the current LCT threshold.

European Union (overview)

Across the EU, VAT and country-specific registration taxes are common. The precise mix varies by member state and often reflects emissions policy.

• VAT: Applied to new cars at the national rate (commonly 19%–23%). Dealer-sold used cars may use margin schemes.
• Registration/first-use taxes: Some countries levy significant CO2-based registration taxes (e.g., the Netherlands’ BPM, Ireland’s VRT, Spain’s matriculation tax).
• Annual circulation taxes: Ongoing road taxes vary by engine size, power, weight, or emissions.
• Incentives: Many countries provide EV purchase grants, VAT reliefs, or reduced registration taxes for low-emission vehicles, subject to evolving eligibility rules.

Consult your national tax and transport authorities for current VAT rates and CO2-based registration formulas, which change periodically.

India

In India, taxes on car purchases are primarily GST plus a compensation cess tied to the vehicle’s type and size, with state-level registration and road taxes added at the end.

• GST: 28% on most passenger vehicles.
• Compensation cess: 1%–22% depending on category (e.g., small cars vs. large SUVs vs. luxury/performance vehicles).
• Registration and road tax: Levied by states, often as a percentage of invoice value and varying by fuel type, engine size, and vehicle cost.
• Local levies and green cesses: Some cities/states add extra charges or provide EV concessions.

Because state charges vary considerably, review your state transport department’s schedule and confirm how on-road price is calculated by the dealer.

Other common costs and factors

Beyond headline taxes, several line items affect your “out-the-door” price and what portion is taxable.

• Documentation/dealer fees: May be taxable depending on jurisdiction.
• Destination/delivery charges: Generally taxable as part of the vehicle price.
• Trade-in credits: Often reduce the taxable base when accepted by a dealer; not applicable in private sales.
• Rebates and incentives: Manufacturer rebates may be taxable; government credits often are not applied to reduce the sales tax base.
• Private-party vs. dealer: Private sales can shift when and how tax is collected (e.g., at registration rather than at sale).

Always ask the seller to itemize the taxable and non-taxable components so you can verify the calculation against local rules.

When are taxes due and who collects them?

Timing and collection vary by jurisdiction and sale type.

• Dealer sales: Taxes are usually collected at the point of sale and remitted by the dealer.
• Private-party sales: Tax is often due when you register or title the vehicle with the government.
• Out-of-state or cross-border purchases: Use tax and import duties/VAT may be due upon entry or registration.

Confirm deadlines to avoid penalties; many regions impose late fees or interest if tax is not paid promptly at registration.

Exemptions, reductions, and incentives

Depending on policy goals, you may qualify for reduced taxes or credits, especially for EVs or mobility adaptations.

• EV/low-emission incentives: Rebates, tax credits, reduced registration taxes, or VAT/sales tax relief in some regions.
• Mobility/adaptation reliefs: VAT/GST relief for eligible disabled drivers/passengers in certain countries.
• Commercial use: Different tax treatment for business purchases, including input tax credits for VAT/GST where applicable.

Eligibility rules are detailed and change often; verify program status and caps before purchase, and ensure the dealer is registered to process point-of-sale credits where available.

What to ask your dealer or tax office

To avoid surprises, clarify these points before you sign.

• Exact tax rate and taxable base (price elements included/excluded).
• Whether trade-in value reduces the taxable amount.
• How rebates, incentives, and credits affect tax calculation and your final price.
• All government fees (title, registration, plates) and their due dates.
• Any state/province/city-specific surcharges (EV fees, congestion, luxury, green cesses).

Getting a written, line-by-line buyer’s order that separates taxes from fees is the easiest way to verify accuracy.

Summary

There isn’t a single universal “car tax.” Expect a general consumption tax (sales tax or VAT) on the purchase price, plus registration/road taxes and, in some places, luxury, emissions, or import duties. The exact mix—and whether trade-ins, rebates, and credits change the taxable amount—depends on your country, state or province, and how you buy. Check official tax and motor vehicle agencies where you live, and ask the seller for an itemized, written breakdown before committing.

How do I pay sales tax on a car in Missouri?

Missouri Sales Tax – A One-Time Tax
Sales Tax is paid to the State, usually at the Department of Motor Vehicles, when the vehicle is first purchased.

What taxes are associated with buying a car?

Property and Ad Valorem Tax
Some states impose a property tax on vehicles in place of (or in addition to) a standard sales tax. Owners usually pay upfront or during the annual registration renewal. The property tax rate can vary from state to state and is assessed as a percentage of the vehicle’s value.

What is Arkansas sales tax on vehicles?

6.5%
When making a car purchase in Arkansas, you’ll pay 6.5% of the vehicle’s purchase price, whether you’re buying from a private seller or a car dealer. Arkansas tax law does not discriminate between the two. Unless you qualify for a sales tax exemption (discussed below), you have to pay tax on your vehicle purchase.

How much is Virginia sales tax on cars?

4.15%
Virginia is required to collect a 4.15% Sales and Use Tax (SUT) at the time of titling whenever a vehicle is sold, and/or the ownership of the vehicle changes.