## If I Buy a Car in Another State Where Do I Pay Sales Tax?

When the time comes to buy a new vehicle or a used car, you most likely want to do everything you can to save as much money as you can. However, depending on where you live, you might have a limited number of vehicles to choose from, which can make it difficult to find a great deal. One way to get around this limited pool is to shop for a vehicle in a different state. While this can help you find a bargain, it also presents some issues when it comes to paying sales tax. Knowing how to pay the sales tax on a car you bought out of state and what your exact tax obligations are will help you avoid penalties and fees and keep the overall purchase price of your out-of-state car as low as possible. 

## Why Buy a Car Out of State?

__Better Deals__ 

Perhaps the most common reason that someone will look outside of their home state for car-buying purposes is the potential for better deals. If, for example, you live in a small town and the closest big city is in a neighboring state, you will almost certainly be able to get a better deal there. Plus, demand will be lower in a more populated area, which can help drive prices down even more. 

__Larger Pool of Choices__ 

Sometimes, you will want to buy an out-of-state vehicle simply because that is where you are able to find it. If the pool of options where you live is relatively small, dealerships and private sellers might not have the exact car you are looking for. Going out of state can increase the number of choices you have and make it a lot easier to get the car you want. 

__Avoiding Dealer Markups__ 

While the demand for vehicles might be lower in bigger cities, the dealer markups might be a lot higher. In urban areas, the cost of doing business can be fairly high. Rent, payroll, insurance, and other expenses can eat into the dealership's profit margins, and that will cause much higher dealer markups. If you want to save as much money on your motor vehicle as you can, you might be better off shopping in an area that has a lower cost of living and a lower cost of doing business. 

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## Where Sales Tax Is Paid on an Out-of-State Purchase

Fortunately, it is fairly simple to pay the sales tax on a vehicle when you make an out-of-state purchase. Most of the time, you will pay the sales tax at the DMV when you go to register the car in your home state. If, however, you have already paid the sales tax at the point of purchase in the state where you bought the car, you will most likely receive a credit as long as the two states have a reciprocity agreement. When you register the vehicle in your home state, be sure to bring all the documentation, like the bill of sale and the title transfer paperwork so that the process can be worked out and you can satisfy your tax obligations without any issues. 

## State-By-State Overview: Car Sales Tax & Reciprocity

Before you decide to purchase a vehicle in a state other than the one where you live, it is a good idea to know what the laws are in each state and what you will be responsible for. By knowing what to expect, you can be ready to pay your sales tax and get the vehicle registered in the state where you plan to drive it. 

__States with No Sales Tax__

There are a few states that have no sales tax, such as Alaska, Delaware, Montana, New Hampshire, and Oregon. However, if you buy a car in one of these states and bring it back to your home state, that does not mean that you don’t have to pay any taxes. In that case, you will pay the sales tax rate determined by your own state instead of at the point of sale. 

__States with Low Sales Tax__

In addition to the states that have no sales tax at all, there are some states where the sales tax on automobiles is relatively low. States like North Carolina, New York, Colorado, Oklahoma, Missouri, and Virginia all have a sales tax rate that is below 5 percent. If you buy a car in one of these states and take it back to a state that has a reciprocity agreement, you will pay the remaining balance of what you owe on your home state’s tax rate. 

__States with High Sales Tax__

Some states have particularly high sales tax rates, which makes car buyers think that it would be a better idea to look at an out-of-state dealer. California, Indiana, Rhode Island, and Tennessee, for example, all have a statewide sales tax rate of 7 percent. However, it is important to remember that you will have to pay the remaining sales tax that you owe in the state where you register the car, so you will most likely not end up saving any money by the time all is said and done. 

__Limited Reciprocity Exceptions__

Some states have reciprocity agreements with other states to ensure that purchasers do not end up paying double taxes. However, these agreements might apply to some states but not to others. Because of this, it is important to know what agreements your home state has with neighboring states and whether or not you will have to pay taxes twice before you make the purchase. 

## How the DMV Handles Out-of-State Purchases

When you purchase a car, you will have to register it at the DMV and get a new title with your name listed as the sole owner. This is also where you will pay any sales tax that you might owe, as well as registration fees, license plate fees, and out-of-state title transfer fees. When you go to the DMV, you will have to submit a bill of sale, the title, proof of insurance, and your driver’s license to start the registration process. From there, the DMV will determine what, if anything, you owe regarding state sales taxes and whether or not there are reciprocity agreements with the purchase state. You will also find out if you need to have any emissions testing or emissions inspections done, a safety inspection, or if you are responsible for any use tax to drive the car on the highway. 

## Buying From a Dealership in Another State

If you want the process of buying a car out of state to be as easy as possible, purchasing from a dealership is going to be your best bet. A dealership will know all the different agreements that the state has with other surrounding states and what the process is like for individual buyers. In many cases, the dealership will handle all the registration and title processes for you, so all you have to do is pay the sales tax and drive your car home. They will also let you know what your responsibilities are for getting a temporary registration to drive the car in the meantime, and what kind of auto insurance you need to have in each state. 

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## Buying From a Private Seller in a Different State

When buying a used vehicle from a private party in another state, the process is going to be slightly more complicated, but not by much. When it comes to private sales, you will not be responsible for any sales tax at the point of sale. Instead, you will pay the state sales tax at your local DMV. Because you will be leaving the state after making the purchase, it is important that you know what you are getting into. Always get a vehicle history report and a vehicle inspection on any car you are buying from a private seller. You should also be sure to get a bill of sale with the vehicle identification number (VIN), make, model, and year, and an odometer reading, as well as contact information for the seller. This will help things go smoothly at the DMV when you go to register the car. 

## New Cars vs. Used Cars Bought Out of State

__New Car Considerations__ 

In general, it is much easier to purchase a new vehicle out of state than it is to purchase a used one. Manufacturer warranties, for example, are generally valid across the nation, which makes it easy to get the repairs you need should an issue come up. However, you should also be sure that any car will meet the specific requirements for your home state, so you won’t run into trouble when you bring it back. Emissions requirements and other considerations are important and could end up being quite costly if you don’t meet them. 

__Used Car Considerations__

Buying a used car out of state requires a bit more due diligence since you are responsible for all the different inspections and tax obligations, as well as the documentation that is necessary. Be sure to thoroughly research what is required of you when you go to register an out-of-state vehicle at your local DMV. This way, you won’t end up having to pay more than you otherwise would or subject yourself to fines or fees when the time comes. 

## How to Transport the Car Home

Depending on your means and what kind of car you have purchased, you can either drive it home or tow it on a trailer. If you are planning on driving the vehicle home, be sure to know whether or not you need a temporary registration to do so and what your obligations are for insurance. If you are insured as a driver, you should be able to drive the vehicle without any issues, as there is usually a grace period for those who have just purchased a car. However, make sure you have a bill of sale and any other paperwork related to the purchase so you can prove that you have purchased it recently. 

## Final Thoughts

Whatever your reasoning is for buying a car out of state, it is important to know what is required of you. The last thing you want to do is pay double the sales tax or find yourself owing more money than you thought you would. By understanding the specific laws in your area and what you can expect, you can get a good deal and drive legally on the road, no matter where you live.

If I buy a car in another state, where do I pay sales tax? We find the answer! Most states levy a sales tax when you purchase a car, however, each state is different.

If I Buy a Car in Another State Where Do I Pay Sales Tax?

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