Individuals living in North Carolina can quickly find the information they need to begin planning tax payments on their automobile for the year. If you are new to the state of North Carolina, or are just purchasing a vehicle for the first time, you can quickly assess your own tax responsibilities using a few simple strategies.
In addition to standard sales tax and the various fees associated with a car purchase, car owners in North Carolina will be required to pay a yearly property tax based on the appraised value of their vehicle. Failure to pay this property tax could result in severe penalties and fines.
Understanding Vehicle Property Tax Laws
Taxes on automobile purchases are nothing new, and can be found throughout the United States. In the state of North Carolina, the traditional sales tax paid on automobiles is supplemented by an annual vehicle property tax payment, which is derived from the current value of the car. The North Carolina Department of Motor Vehicles (DMV) is responsible for the bulk of the processes that are undertaken in order to ensure that every vehicle owner in the state has the information they need to plan their automobile taxes accordingly.
Collecting Annual Vehicle Property Tax
The state government tasks local county officials with the responsibility of collecting the annual vehicle property tax from vehicle owners. In order to do so, they must first consult with the DMV in order to obtain a complete listing of individuals who have registered a vehicle in the state. This information is used not only in order to ensure that all vehicle taxes are accounted for, but also to assess the value of individual vehicles and the relevant taxes applied to them.
Identifying Vehicle Tax Rate Variations
Depending upon the specific county a vehicle is registered in, individual property tax rates for vehicles may change. Regardless of where a vehicle is registered, however, the state of North Carolina has adopted a comprehensive policy of taxing vehicles at 100 percent of their appraised value. This means that, no matter what the property tax rate per county may be, 100 percent of the current appraised value of the car will be taxed rather than just a portion. Depending upon the particular county in question, your vehicle's value may be re-assessed at different points throughout the year.
Although specific counties may have different property tax rates for automobiles, the North Carolina DMV will require you to pay the tax rate associated with your current address, regardless of whether or not you have lived in that specific county all year. The North Carolina DMV will not prorate your vehicle property taxes due to in-state relocation.
When to Pay Vehicle Taxes
Once county assessors have determined the value of a vehicle and the appropriate tax bracket associated with it, they will send a bill to the vehicle owner approximately 60 days before the current registration expires. Once the bill is received, the vehicle owner can either choose to pay the property tax within the 60 days prior to renewing registration or apply for a deferment, which will grant an additional 60 days for payment.
That being said, this scenario only applies if an individual has owned the vehicle in question for the entire year. In the event that a car has been purchased at some point during the year, their tax burden will be prorated to specifically reflect the amount of time that they have actually owned the car. For example, if you purchased a vehicle in October, you will likely only be assessed approximately 25 percent of the annual property tax typically assigned to a vehicle of similar worth. This process helps ensure a degree of fairness and allows vehicle owners to not spend money needlessly on taxes that do not accurately reflect their vehicle ownership.
Evaluating NC Car Sales Tax
Sales taxes will also apply to any car purchase you make. Although the process of assessing annual vehicle property taxes may seem somewhat complex, the NC vehicle sales tax is relatively straightforward. The state government currently assesses a 3 percent sales tax rate, calculated from the purchase price, on all vehicles purchased from a dealer. This tax will apply regardless of whether or not the vehicle is new or has previously been used. However, if you buy a vehicle from an independent seller, your tax burden will be 3 percent of the value of the vehicle, rather than the purchase price. Unlike the annual property tax payments, sales tax will only ever be charged at the time of purchase.
Although not literally a "tax," individuals purchasing a car in North Carolina will also have to pay a host of fees, including those related to registration and car title. Much like sales tax, these fees will only have to be paid at the time of purchase and will not be recurring.
Assessing Possible Fines and Penalties
It is quite important to point out that individuals who, for whatever reason, elect not to pay the property taxes associated with their vehicle will likely be subjected to significant fines and penalties. Given the fact that these taxes are part of your statewide tax obligation, the government of North Carolina has the ability and legal right to impose a set of fines based on the length of time your payment is overdue. In more severe situations, the state government can request that your car registration renewal be blocked until your delinquent property taxes have been paid. Once the DMV has imposed this block, it can only be removed by county officials after showing proof that all tax obligations have been satisfied.
As a general rule, you should never attempt to "escape" property tax payments through nonpayment. The records maintained by the DMV will ensure that any attempt on your part to dodge tax payments will quickly be identified by the relevant authorities. Although it may be frustrating to pay NC car sales tax and other expenses, the size of your tax bill will only get larger through nonpayment. As mentioned previously, some deferral options are available for individuals who need to spread their property tax payments out over an extended period of time.
Resolving Questions or Concerns
If you have additional questions about your vehicle property taxes, it is in your best interest to speak directly with a state tax expert or financial adviser. Representatives from the DMV will also be able to help you address any concerns you may have.
As a result of these taxes and the various other expenses associated with vehicle ownership, some individuals think twice before purchasing an overly expensive automobile. This yearly expense has significant repercussions with respect to long-term financial planning for many car owners across the state.
- North Carolina: Taxes
- North Carolina: Vehicle Property Taxes
- North Carolina Department of Revenue: Frequently Asked Questions
- North Carolina DMV: Tag and Tax Together
- Pender County NC: Tax Assessing
- DMV.org: Car Registration in North Carolina
- National Automobile Dealers Association. "NADA Data 2019: Midyear Report," Page 19. Accessed March 26, 2020.
- Maine Bureau of Consumer Credit Protection. "Downeaster Common Sense Guide: Auto Buying and Financing," Page 3. Accessed March 26, 2020.
- U.S. Department of Transportation, Federal Highway Administration. "Average Annual Miles Per Driver by Age Group." Accessed March 26, 2020.
- U.S. Energy Information Administration. "Weekly Retail Gasoline and Diesel Prices." Accessed March 26, 2020.
Ryan Cockerham is a nationally recognized author specializing in all things innovation, business and creativity. His work has served the business, nonprofit and political community. Ryan's work has been featured at Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.