If you buy a used car in the state of New York, you may need to pay a used car tax. Usually, it’s in the form of a sales tax. But the amount depends on the seller and whether the purchasing price factored in taxation.
What Is The New York Tax Policy On Used Cars?
You will be charged a sales tax of four percent on both used and new vehicles upon purchase. That is regardless of whether you buy from a dealership or an individual. In addition, you may need to pay a local or county tax of up to 4.5 percent. The tax is usually known as county use tax. Also, counties within the Metropolitan Commuter Transportation District (MCTD) may charge an additional sales tax of 0.375 percent.
For example, Pleasantville, New York, currently has the lowest local sales tax rate of four percent. So, that means if you buy a used vehicle in the area, you will pay a total of eight percent in sales tax. On the other hand, if you were to buy the exact used car in New York City, you should prepare to pay up to 8.88 percent sales tax.
These taxes are separate from other charges, such as plate, registration and title fees. Typically, these charges add up to an average of about $74. Also, you may need to pay an additional documentation fee of about $75. The latter is to pay for the dealership’s services concerning the filing of the sales contract and sales tax documents.
What Does the NY DMV Need?
When you go to register your vehicle, the New York DMV will expect any of the following from you:
- Payment of the sales tax you owe.
- Proof that the sales tax has already been paid.
- Proof that your vehicle has a sales tax exemption status.
- It’s worth noting that even if your vehicle is tax-exempt, you must get a sales tax receipt.
Factors Affecting Used Car Tax in NY
Certain factors affect the taxes you pay when buying a used car in the state of New York. Below are some of them.
1. Who You Bought the Used Car From
If you buy a used car from a relative, such as a parent or step-parent, child or step-child, sibling or spouse, you will enjoy a sales tax exemption. However, the seller must also not be a registered auto dealer. And don’t forget to file a DTF-802 Form when you purchase your vehicle from a relative or any other individual.
If your dealer factors in the sales tax at the time of purchase, you don’t have to pay it again when registering your vehicle. However, if the auto dealer did not include it in the purchase price, you must pay what you owe during registration.
2. Rebates or Incentives Offered
If you trade in your vehicle at a dealership for another used car, you can claim a credit equivalent to the value of your old car. You can also claim any rebates offered by the manufacturer or dealership.
So, when you apply your credit or cash rebates toward the car you buy, you end up paying fewer taxes during the purchase since the overall buying price will be lower. That’s because the state of New York only charges sales tax on what you pay out of pocket.
3. Where You Bought the Vehicle
If you are in New York but buy a car in a different state, you may owe that state sales taxes. And when registering your car in New York, you must show proof that you paid those taxes so you can claim a credit to reduce the amount you owe.
However, if the state where you sourced your vehicle doesn’t have a sales tax agreement with New York, you may not be able to claim that credit. So, be careful about that.
4. Your Residency Status
If you were not a resident of New York when you bought a used car, you might be exempt from the sales tax within the state. You need to fill in and submit Form DTF-803 to enjoy your non-resident exemption rights concerning sales taxes in such a case.
5. The Fair Market Value of the Car
The fair market value of the used car you get can influence how much you will pay in sales tax. That’s because the DMV uses fair valuations for vehicles to calculate the sales tax.
However, if you buy the car below the fair market value, you may be able to claim a credit or refund for the difference in the sales tax you pay. For this reason, you need to ensure the seller's affidavit side of the DTF-802 is filled out and signed.
It would be wise to be careful concerning how much sales tax you pay whenever you buy a used car in New York. Ensure you do not withhold any money you owe so you don’t get into legal trouble and end up paying interest. But at the same time, do your due diligence to avoid paying more than you need to.
- Sales Tax Handbook: New York: Sales Tax Handbook
- Sales Tax States: Sales Tax Calculator of New York for 2021
- DMV NY: Sales tax information
- CarsDirect: How to Calculate New York Car Tax
- Department of Taxation and Finance NY: DTF-802 Form
- OCS State NY: Understanding Local Government Sales Tax in New York State
- Car and Driver: New York Car Sales Tax Calculator & NY Car Sales Tax Facts
- Department of Taxation and Finance NY: DTF-803 Form
- NYS DMV: "Fair Market Value" for sales tax calculation
I hold a BS in Computer Science and have been a freelance writer since 2011. When I am not writing, I enjoy reading, watching cooking and lifestyle shows, and fantasizing about world travels.