How does sales tax work?

[Tastycakes]

Is this how it works?

I trade my car in for a new one. 

I owe $17k and get $17k for it, paying it even.

I buy a new car for $19k

Taxable amount is $2k?

[Watchmann]

Depends on the state.  Some tax the difference, some tax the whole amount.  Just depends where you are and how greedy your state is.

[Anonymous]

The taxable amount of any vehicle purchase is the amount of the purchase.  This would be $19k in your case.  You already paid tax on the car you're trading in but you still have to pay tax on the new purchase.  The tax depends on the state you live in.  Here in FL, the tax on a car is regular sales tax like any other purchase in the state (7%).  In FL, the sales tax would be $1,330.00.  In a state like VA (I believe the sales tax on a car is 3%) the tax would be $570.00, but in VA you have to pay a yearly personal property tax on vehicles, motorcycles, and watercraft.

[MattH]

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@Anonymous wrote:
The taxable amount of any vehicle purchase is the amount of the purchase.  This would be $19k in your case.  You already paid tax on the car you're trading in but you still have to pay tax on the new purchase.  The tax depends on the state you live in.  Here in FL, the tax on a car is regular sales tax like any other purchase in the state (7%).  In FL, the sales tax would be $1,330.00.  In a state like VA (I believe the sales tax on a car is 3%) the tax would be $570.00, but in VA you have to pay a yearly personal property tax on vehicles, motorcycles, and watercraft.

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Also, if you live in State A which has a high percentage and buy a car in neighboring State B which has a lower tax, in many cases State A will make you pay them the difference (a policy intended to discourage people from buying in the lower-tax place).

[Anonymous]

Most, but NOT all states do it the exact way you describe....

Your best bet to find out if your state is one of them is to check out the DMV website for your state.

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 Also, if you live in State A which has a high percentage and buy a car in neighboring State B which has a lower tax, in many cases State A will make you pay them the difference (a policy intended to discourage people from buying in the lower-tax place).

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On the above comment, not likely at all in most states.  However there can be some "fees" to recoupe a small difference (for example in TX it is $90, in Vegas it is $0)

Message Edited by 1111mel on 10-16-2008 10:51 PM

[Tastycakes]

Ok so it works like that at the dealer but what if I sell it privately?  Do I get the same tax credit?  Hmm I should call the DMV one of these days.