Texas car sales tax rates vary based on the city or county you live in. When you purchase a car, you'll need to know due dates for vehicle taxes and how rebates, incentives, and trade-ins are taxed in Texas.
Sales and Use Tax Rates
In Texas, there are several motor vehicle taxes that, if applicable, every resident must pay, and they are:
- Sales tax: According to the Texas Department of Motor Vehicles, any person that buys a car in Texas owes the government a motor vehicle sales tax. The sales tax for cars in Texas is 6.25% of the final sales price. The Texas Comptroller states that payment of motor vehicle sales taxes has to be sent to the local county's tax assessor-collector's office by sending a signed copy of the Application for Texas Title and/or Registration form (Form 130-U).
- Use tax: Per CarsDirect, besides the sales tax, Texans must pay what is known as a use tax. This tax is 6.25% of the sales tax, minus any credits for use or sales taxes that the individual has paid in other states. The Texas Comptroller also says that any Texas residents (new or established) and anyone that does business in the state must pay this tax.
- New resident tax: If a vehicle is being brought to Texas from a different state or country by a new resident, EverQuote says that a $90 new resident tax will need to be paid in place of the use tax.
Each city and county within the state of Texas has its own rate of car taxation. You can visit the website for Texas taxes to figure out the applicable rates in your area. Once on the site, you will need to specify the county and city that you live in. After you have the tax rates for your area on CarsDirect, you can multiply them by the value of the vehicle. Then, add up state, city, and county taxes to determine your total car sales tax.
According to the Sales Tax Handbook, on average, the DMV fees for a new car purchased in Texas add up to around $851, including plate fees, registration, and the title. In addition to the DMV fees and taxes that must be paid after purchasing a vehicle, EverQuote states that dealerships can also charge a documentation (or doc) fee to cover the cost of preparing and filing the sales tax documents, sales contracts, etc. Doc fees aren't regulated by the Texan government, so they can vary by dealership and vehicle. The Sales Tax Handbook says that the average documentation fee in Texas is around $135.
Standard Presumptive Values
If you bought a vehicle from a private party in Texas, or you bought one from a private party out of state and then brought it into Texas, EverQuote says that you will need to calculate your sales tax using the Standard Presumptive Value, also known as the SPV. The Texas Department of Motor Vehicles states that in Texas, the SPV estimates a vehicle's worth based on sales that are similar in the state. You can determine a used vehicle's SPV by using the SPV calculator on the Texas Department of Motor Vehicles website. In order to find your vehicle's standard presumptive values, you'll just need to enter the odometer reading (except for motorcycles) and vehicle identification number (VIN) into the calculator.
EverQuote explains that if you purchased the vehicle for less than the standard presumptive value, you can pay sales taxes on a certified appraisal amount for the car. You'll just have to make sure that a licensed motor vehicle dealer or a licensed insurance adjuster performs the appraisal within 20 business days of the vehicle's purchase.
Here is a list of vehicles from the Texas Department of Motor Vehicles that aren't subject to taxes calculated using the standard presumptive value:
- Vehicles swapped in an even trade
- Motor vehicles given as a gift
- Vehicles sold by a storage facility or mechanic
- Abandoned or salvage vehicles
- Off-road motor vehicles (all-terrain vehicles (ATVs) and dirt bikes)
- Vehicles that are 25 years old or older
- Motor vehicles purchased at a foreclosure or governmental auction
- Vehicles bought from licensed dealers
- New vehicles
Vehicles Sales and Use Tax Due Date
The Texas Comptroller says that if a motor vehicle has a gross weight of 11,000 pounds or less, the car dealership collects the sales tax at the point of purchase. Until the person purchasing the vehicle pays this tax to the dealership, they consider it the buyer's debt. Once paid, the dealer sends the tax money to the respective county's tax assessor-collector. If the individual purchasing the vehicle is buying it from a private party, they will need to send the applicable vehicle tax to the county's tax collector themselves by following these basic guidelines:
- If it's a private party purchase, they must satisfy the motor vehicle tax within 30 days of the purchase.
- If someone purchases a vehicle outside of Texas and then brings it into the state, the purchaser must pay the new resident use tax or motor vehicle use tax within 30 days of the purchase.
- In the case that an active duty member of the military purchases a vehicle in Texas, they will have 60 days from the day they bought the car to pay the taxes.
- When a dealer in Texas doesn't collect the taxes owed on a vehicle that weighs more than 11,000 pounds at the point of purchase, the buyer has 30 days to send the money owed.
- If a vehicle is being given as a gift or even exchange, Texas residents must pay the sales and use taxes at the time of the title transfer.
How Are Rebates and Dealer Incentives Taxed?
According to the Sales Tax Handbook, in order to encourage sales, a lot of car dealerships will offer manufacturer rebates or cash incentives on a vehicle's sticker price. For instance, a cash rebate of $2,000 may be offered on a car that costs $12,000, meaning that the buyer will have an out-of-pocket cost of just $10,000. In Texas, all vehicle purchases are taxed after incentives and rebates have been applied to the asking price, meaning that in this hypothetical situation, the buyer would only pay taxes on the final vehicle cost of $10,000.
How Are Trade-Ins Taxed?
A majority of dealerships allow you to trade-in, or exchange your old car for a credit that is put towards the price of a new car. For example, you could trade-in your current car for a $6,000 credit that can be used towards a $14,000 new vehicle. This would result in an out-of-pocket cost of of only $8,000. In Texas, the value of trade-ins aren't subject to a sales tax, meaning that the taxable price of your new car would be $8,000.
Sources:
https://www.salestaxhandbook.com/texas/sales-tax-vehicles
https://www.everquote.com/texas/buying-selling-autos/used-car-taxes-fees/
https://www.txdmv.gov/standard-presumptive-calculator
https://comptroller.texas.gov/taxes/motor-vehicle/sales-use.php
https://www.carsdirect.com/car-pricing/how-to-calculate-texas-car-tax
