What Is the Tax Rate on a Vehicle in Tennessee?
Navigate the various taxes and fees involved when purchasing or owning a vehicle in Tennessee. Understand your financial responsibilities.
Acquiring a vehicle in Tennessee involves financial obligations beyond its purchase price. These costs encompass various taxes and fees, contributing to the total expense of ownership. Understanding these components is important for budgeting and ensuring compliance with state regulations. This overview clarifies the charges associated with vehicle purchases and ownership in Tennessee.
State Sales Tax on Vehicle Purchases
A primary financial consideration for vehicle purchases in Tennessee is the state sales tax. This tax applies to both new and used vehicles, whether bought from a licensed dealership or a private party. The statewide sales tax rate for motor vehicle purchases is 7% of the vehicle’s total purchase price. This rate is applied directly to the agreed-upon price.
The 7% rate is multiplied by the vehicle’s purchase price. If a trade-in vehicle is part of the transaction, the sales tax is calculated on the net purchase price after the trade-in value has been deducted. Dealerships are responsible for collecting and remitting this tax to the state. For private party sales, the county clerk’s office collects the tax when the new owner registers the vehicle.
Tennessee also imposes a “single article” sales tax. This additional state tax is 2.75% on the purchase price between $1,600.01 and $3,200. The maximum amount collected from this single article tax is $44. For a vehicle costing $3,200 or more, this tax is capped at $44, in addition to the standard 7% state sales tax on the full purchase price.
Local Sales Tax and Vehicle Registration Fees
In addition to the statewide sales tax, vehicle purchases in Tennessee may be subject to local sales taxes imposed by counties and municipalities. These local sales tax rates vary by location, generally ranging up to 2.75%. The local sales tax applies only to the first $1,600 of a vehicle’s purchase price. This local tax is capped, with the maximum charge often around $36, depending on the specific local rate.
Separate from sales taxes, vehicle registration fees are an annual cost required to legally operate a vehicle in Tennessee. These recurring charges vary based on the county of residence and the type of vehicle. The standard state portion of the annual registration fee for passenger vehicles is $29. Many counties also levy a “wheel tax,” an additional fee added to the annual registration.
The total annual registration cost, including any county wheel tax, can range significantly. For example, the combined annual registration and wheel tax can be approximately $81 to $116 for a standard passenger vehicle, depending on county fees.
Electric and hybrid vehicles face additional annual fees to offset lost fuel tax revenue. For all-electric vehicles, an additional annual fee of $200 applies, increasing to $274 from January 1, 2027. Hybrid electric and plug-in hybrid electric vehicles incur an additional annual fee of $100. These fees are paid to the county clerk’s office when registering or renewing vehicle registration.
Vehicle Title Fees and Other Charges
Beyond sales taxes and annual registration, one-time administrative fees are associated with vehicle ownership and transfer in Tennessee. A mandatory vehicle title fee is assessed when ownership is transferred or a new title certificate is issued. The state fee for issuing a certificate of title is $5.50, and the fee paid to county clerks for processing title applications is $8.50. This results in a total title fee, often listed as $13 in many counties, combining the state and county portions. This fee is paid once per ownership transfer.
Other charges may apply depending on the financing and circumstances of the vehicle. If a vehicle is financed, a lien notation fee of $11 is charged to record the lien on the certificate of title. If a title is lost or needs to be replaced, a duplicate title fee of $5.50 is required. Fees for specialty license plates, which offer customized designs or support specific causes, also incur varying costs beyond standard plate fees. These administrative charges are fixed fees for specific services related to vehicle documentation.