How Much Is Sales Tax on a Car in Texas?
Demystify Texas vehicle sales tax. Get clear insights into how car purchase taxes are determined and paid in the Lone Star State.
Understanding Texas vehicle sales tax is important for car buyers. This financial obligation applies to most new and used vehicle acquisitions. Familiarity with these requirements helps buyers prepare for the total cost of ownership and ensures compliance.
Texas Vehicle Sales Tax Rate
Texas imposes a state-level sales tax on motor vehicle purchases. The general sales tax rate for vehicles in Texas is 6.25% of the taxable value. This rate applies uniformly to both new and used vehicles acquired within the state. While some local jurisdictions may have other fees, the sales tax percentage remains consistent across Texas.
Determining the Taxable Value
The base amount on which vehicle sales tax is calculated in Texas depends on the transaction. For most purchases from a licensed dealer, the sales tax applies directly to the vehicle’s agreed-upon purchase price.
For private-party sales, the calculation introduces a specific valuation method known as Standard Presumptive Value (SPV). The SPV is a value assigned to a motor vehicle by the Texas Department of Motor Vehicles (TxDMV), reflecting its worth based on similar sales in the Texas region. Sales tax in these transactions is calculated on the greater of the actual sales price or 80% of the vehicle’s SPV. This system helps prevent underreporting of sale prices to reduce tax liability. Buyers can find the SPV for a specific vehicle on the TxDMV website by entering the Vehicle Identification Number (VIN) and odometer reading.
The value of a trade-in vehicle can reduce the taxable amount of a new vehicle purchase. When a buyer trades in an existing vehicle as part of a new purchase, the sales tax is applied only to the difference between the new vehicle’s price and the trade-in allowance. For example, if a vehicle is purchased for $30,000 and a trade-in is valued at $10,000, the sales tax would be calculated on $20,000. This tax benefit applies when the trade-in is part of the same sales transaction and transferred directly to the seller.
Special Considerations for Sales Tax Calculation
Certain situations modify the standard sales tax calculation for vehicles in Texas. For vehicles received as a gift, a nominal $10 gift tax applies, rather than the full 6.25% sales tax. This specific tax rate is applicable only if the gift is from an eligible family member, such as a spouse, parent, child, or sibling, or from a decedent’s estate. Both the donor and recipient must complete a notarized Affidavit of Motor Vehicle Gift Transfer (Form 14-317) to qualify for this reduced tax. If the transfer does not meet the criteria for a qualifying gift, it is treated as an ordinary sale, and the standard sales tax based on the vehicle’s SPV may apply.
When a vehicle is purchased outside of Texas but brought into the state for use, Texas motor vehicle use tax is owed. This use tax is 6.25% of the sales price. Texas provides a credit for any sales or use tax already legally paid to another state, a U.S. territory, or Puerto Rico on that vehicle. This dollar-for-dollar credit means the amount of tax paid elsewhere can reduce the Texas use tax liability. New residents bringing a vehicle into Texas that was previously registered in their name in another state pay a flat $90 new resident tax in lieu of the 6.25% use tax.
Sales tax on leased vehicles in Texas is handled differently compared to purchased vehicles. The lessor, which is the leasing company, is responsible for paying the 6.25% motor vehicle sales tax on the full value of the vehicle at the time of purchase and titling in Texas. Subsequent monthly lease payments are not directly taxed for sales tax purposes. This means the tax is paid upfront by the lessor, rather than incrementally by the lessee.
Paying Vehicle Sales Tax
Once the vehicle sales tax amount has been determined, the payment process involves specific steps and deadlines. Vehicle sales tax in Texas is paid at the county tax assessor-collector’s office in the county where the vehicle will be registered. This is the designated point for completing title and registration procedures.
The timeframe for payment is within 30 calendar days of the vehicle purchase date. For vehicles purchased out-of-state and brought into Texas, the 30-day period begins from the date the vehicle enters the state. Active-duty military personnel have an extended period, 60 calendar days, to pay the tax and complete registration.
To complete the payment and titling process, several documents are required, including:
The signed vehicle title
A completed Application for Texas Title and/or Registration (Form 130-U)
Proof of identity and residency
Proof of Texas auto insurance
An inspection certificate may also be necessary depending on the county. While a dealer handles tax collection and submission for new vehicle purchases, private-party buyers are responsible for calculating and remitting the tax themselves at the county office.
Failing to pay the vehicle sales tax within the specified timeframe can result in penalties. A penalty of 5% of the tax due is assessed if payment is made 1 to 30 days after the due date. If the payment is delayed by more than 30 days, the penalty increases to 10% of the tax due. There may also be additional penalties for late title application, potentially reaching up to $250. These penalties are statutorily mandated and cannot be waived.