Getting a New Car? Here's What To Know About Sales Taxes.

When buying a vehicle, Utah car buyers can expect to pay at least three types of sales tax. Officially, these are known as (1) state sales & use tax, (2) local sales & use tax, and (3) county option sales tax. But it doesn’t necessarily end there. This is because cities and/or counties may collect additional taxes to support their public transit, highways, hospitals, or zoos, to name a few. This means that your location in the state impacts the amount of sales tax you pay on a new car.

So, when it's time to buy a car, how much sales tax will you end up paying? The rate charts on the Utah State Tax Commission’s website can help answer this question. These charts break down the current sales tax rates by city and county. Keep in mind that if you buy from a dealer, taxes will be based on the city and county where the dealership is located. If you buy from a private party, however, taxes will be based on the city and county where you register the vehicle.

Buying From a Private Party

If you’re buying from a private party, you’ll pay sales tax when you go to register the vehicle at the Division of Motor Vehicles (DMV). Be sure to take along the bill of sale, which should disclose the net purchase price of the vehicle. To determine how much sales tax you'll need to pay, the DMV will multiply the net purchase price by the applicable sales tax rate. If you don’t have a bill of sale, the DMV will calculate the tax based on the vehicle’s fair market value.

For more information on what constitutes an acceptable bill of sale or how a vehicle’s fair market value is determined, visit DMV.Utah.gov.

Buying From a Dealership

If you’re buying from a dealer, certain parts of your transaction will be taxable and others won’t. Aside from the price tag of the vehicle itself, you may be taxed for other items or services you’re charged for at the time of purchase, such as dealership fees, extended warranties, and documentation fees. Some items are not taxable, such as gap coverage charges, manufacturer’s rebates, Utah safety inspection fees, or county emission testing fees. As you’re purchasing a vehicle, the dealership should provide you with paperwork outlining everything you’ll being charged for, which items are taxable, and the total tax amount you'll pay.

To learn more about what items are taxable and nontaxable, visit Tax.Utah.gov.

Trade-Ins

In many states, including Utah, you can get a tax credit when trading-in a vehicle. For instance, say you’re trading your car for a new one that costs $30,000. The seller offers you $10,000 for the old car. This gives you a net purchase price of $20,000 (the net purchase price is the purchase price of $30,000 minus the trade-in value of $10,000). Because of Utah’s trade-in tax credit, you’ll only be required to pay sales tax on the net purchase price of $20,000 and not on the original purchase price of $30,000.

Leased Vehicles

Sales tax will be due on any down payment you make when leasing a vehicle in Utah. Taxes will also be deducted from each of your monthly lease payments. This means you'll only pay taxes for as long as you lease the vehicle rather than paying a lump sum of sales tax on a vehicle that you may or may not own a few years down the road.

Takeaway

Navigating the various sales taxes on a vehicle purchase can feel a bit overwhelming, but understanding how each tax type applies to your transaction will help you prepare. Whether you’re buying from a private party, purchasing through a dealership, trading in an old vehicle, or leasing, knowing the nuances of Utah’s tax requirements can save you from surprises as you're making your purchase. If you have any questions about Utah taxes and how they apply to vehicle purchases, contact the DMV or visit them online at DMV.Utah.gov.

NOTICE: Tax requirements and procedures in Utah may have changed since this article was published. Contact the Division of Motor Vehicles of the Utah State Tax Commission or visit them online for the most up-to-date information.