How to Calculate and Pay Texas Car Sales Tax
Understand the key factors that determine the tax you'll owe on a vehicle purchase in Texas, ensuring a compliant and smooth titling process.
When purchasing a new or used vehicle in Texas, the state imposes a motor vehicle sales tax on nearly every transfer of ownership. The purchaser is responsible for paying this tax, whether the vehicle is from a dealership or a private individual. The amount due is calculated based on the vehicle’s taxable value and is remitted to the county tax assessor-collector’s office.
Calculating the Taxable Value of a Vehicle
The statewide motor vehicle sales tax rate is 6.25 percent. For purchases from a licensed dealer, this rate is applied to the taxable value, which is the total sales price of the vehicle less the value of any trade-in. Cash down payments, manufacturer rebates, or financing arrangements do not lower the sales price for tax calculation purposes.
For example, if a vehicle is purchased for $30,000 with a trade-in allowance of $10,000, the taxable value is the $20,000 difference. This results in a sales tax of $1,250 ($20,000 x 0.0625).
The dealer collects this tax from the buyer at the time of purchase. The dealer then remits the tax to the county tax office along with the necessary title and registration paperwork.
Tax Rules for Special Circumstances
Private-Party Purchases
Transactions between private individuals use the same 6.25% tax rate, but the taxable value is determined differently than in a dealership sale. For these sales, the tax is based on the greater of the actual sales price or a state-calculated amount known as the Standard Presumptive Value (SPV).
Gifted Vehicles
When a vehicle is given as a gift, the recipient pays a flat $10 gift tax instead of the standard sales tax. To qualify, no money or other consideration can be exchanged for the vehicle, and the transfer must be a genuine gift.
New Texas Residents
Individuals moving to Texas with a vehicle from another state pay a one-time $90 New Resident Tax instead of the 6.25% motor vehicle use tax. To be eligible, the vehicle must have been previously registered in the new resident’s name in their former state or country.
Even Trades
When two individuals trade vehicles of equal value without any additional money changing hands, a $5 tax is assessed on each person involved in the trade.
Exempt Transfers
Certain vehicle transfers are exempt from sales tax. These often involve transfers between close family members, like a parent to a child or between spouses. Exemptions may also apply for vehicles purchased primarily for agricultural use.
Required Documentation and Tax Forms
The primary document for all vehicle title and registration transactions is Form 130-U, Application for Texas Title and/or Registration. This form, available on the Texas Department of Motor Vehicles (TxDMV) website, is used to calculate and report the sales tax due. You will need the full names and addresses of the seller and buyer, the sales price, and the Vehicle Identification Number (VIN).
For private-party sales, the Standard Presumptive Value (SPV) is a value determined by the TxDMV for used vehicles to establish a minimum taxable amount. Buyers can look up a vehicle’s SPV on the TxDMV website using the VIN and mileage.
For a private sale, the tax is calculated on the greater of the sales price or 80 percent of the vehicle’s SPV. For example, if a vehicle’s SPV is $15,000, 80 percent of that value is $12,000. If you bought the vehicle for $10,000, the tax is based on the $12,000 value. If you paid $13,000, the tax is based on the $13,000 sales price.
If you purchase a vehicle for less than 80 percent of its SPV, you can pay tax on a certified appraised value instead. The buyer must obtain a certified appraisal on the state-required form and submit it with Form 130-U. The tax will then be based on the appraised value, as long as it is not less than the actual purchase price.
Paying the Tax and Titling Your Vehicle
After completing Form 130-U, the tax payment and paperwork must be submitted to your local county tax assessor-collector’s office. This payment must be made within 30 calendar days from the date of purchase to avoid penalties. For active-duty military members, this window is extended to 60 days.
When you visit the county office, you must bring a package of documents, including:
- The completed and signed Form 130-U
- The vehicle’s title properly signed over by the seller
- Proof of current liability insurance
- A bill of sale, which serves as proof of the purchase price
At the office, you will pay the calculated sales tax along with other required fees for the title and registration. Once the payment is processed and the paperwork is accepted, the county will process your application for a new Texas title and registration in your name.