How Much Is Sales Tax on a Car in Tennessee?
Navigate the complexities of vehicle sales tax in Tennessee. Learn what you'll pay beyond the sticker price for your new car.
Purchasing a vehicle in Tennessee involves understanding several financial obligations beyond the sticker price. One of the most significant costs is sales tax, which applies to both new and used car purchases from dealerships or private sellers.
Tennessee Sales Tax Rates for Vehicles
Tennessee applies a state sales tax rate of 7% to the net purchase price of a vehicle. For example, a $20,000 car would incur $1,400 in state sales tax.
Local sales taxes also apply. Counties and cities in Tennessee can impose a local sales tax of up to 2.75% on the first $1,600 of a vehicle’s purchase price. This local tax is capped at $36.
Tennessee also features a “single article tax.” This 2.75% tax applies to the portion of the purchase price between $1,600.01 and $3,200. This adds a maximum of $44 to the tax burden for vehicles priced over $3,200. The total sales tax on a vehicle in Tennessee combines the 7% state tax, the capped local tax on the first $1,600, and the single article tax on the subsequent $1,600 increment.
How Vehicle Sales Tax Is Calculated
Calculating sales tax on a vehicle in Tennessee begins with identifying the taxable base, which is generally the agreed-upon purchase price of the vehicle. The 7% state sales tax is applied directly to this net purchase price.
Trade-ins significantly affect the sales tax calculation. Tennessee law permits the value of a trade-in vehicle to reduce the taxable amount of the new purchase. This means you pay sales tax only on the difference between the new vehicle’s price and your trade-in’s value. For instance, if you purchase a $25,000 car and trade in a vehicle worth $5,000, the sales tax would be calculated on $20,000.
Manufacturer rebates and cash incentives from dealerships do not reduce the taxable purchase price. Sales tax is still applied to the original, pre-incentive price of the vehicle. Any extended warranties or service contracts purchased alongside the vehicle are also subject to sales tax, but they are taxed separately from the vehicle’s price at the combined state and local rates. This ensures all components of the transaction are appropriately taxed according to their classification.
Other Taxes and Fees on Vehicle Purchases in Tennessee
Beyond sales tax, several other mandatory government charges are associated with buying and registering a vehicle in Tennessee. These charges are distinct from sales tax but are necessary to legally operate a vehicle on public roads. Understanding these separate fees provides a complete picture of the total cost.
One notable charge is the Tennessee Motor Vehicle Privilege Tax, often referred to as the “wheel tax.” This tax is levied at the county level and varies significantly by location, with some counties charging $40 or $50 annually, while others may not impose it at all. This fee is typically added to the annual vehicle registration cost. Certain exemptions exist for this tax, such as for disabled veterans with a 100% permanent, total disability or former prisoners of war.
When titling a vehicle in Tennessee, a title fee is incurred. This fee is approximately $13.00. An additional fee of $11.00 per lien is imposed if there is a loan on the vehicle, as this notes the lien on the vehicle’s certificate of title. These fees ensure proper ownership records are maintained by the state.
Standard registration fees are also required. The regular state registration fee for passenger vehicles is around $29.00. Some counties may also require an emissions test before a vehicle can be registered, incurring an additional fee. Dealer documentation fees, if itemized, are generally considered part of the sales price for tax purposes.