Is Buying a Car in Another State with Lower Sales Tax Worth It? Will I Still Owe Taxes to My Home State?
So I've been looking at buying a new car and I noticed that the sales tax in the neighboring state is about 3% lower than where I live. I'm thinking of driving over there to make the purchase and save some money, but I'm not sure if my home state will still make me pay the difference when I register the vehicle here. Does anyone know if I'll end up owing the sales tax difference to my home state? Or can I actually save money by purchasing in the lower-tax state? I'm trying to figure out if the drive is worth it or if I'll just end up paying the full tax amount anyway when I get home and register it. Thanks!
19 comments
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Zoe Wang
Yes, you will most likely have to pay the difference in sales tax to your home state. When you register the vehicle in your state of residence, they'll charge you the difference between what you paid in the other state and what you would have paid locally. This is called a "use tax" and it's specifically designed to prevent people from avoiding their local sales tax by purchasing in lower-tax areas. The exact implementation varies by state, but the general rule is that you'll end up paying at least your home state's tax rate one way or another.
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Connor Richards
•What if I register the car in the state I bought it in? I have family there I could use their address. Would that work or is that illegal?
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Zoe Wang
•Registering a vehicle in a state where you don't actually live is generally illegal - it's considered tax fraud in most states. The vehicle should be registered where it's primarily kept and used. Using a family member's address when you don't actually live there can lead to serious consequences, including fines, back taxes with penalties, and insurance issues. Your insurance could potentially deny claims if they discover you've misrepresented where the vehicle is primarily located.
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Grace Durand
When I was dealing with this exact situation last year I found this amazing service called taxr.ai (https://taxr.ai) that saved me so much hassle! I was confused about the whole out-of-state car purchase thing and wasn't sure what I'd end up owing. Their system analyzed my situation and gave me a clear breakdown of exactly what I'd owe in my home state after buying from the neighboring state. They even explained how the credit for taxes paid works and showed me the forms I'd need. Seriously made the whole process way less stressful.
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Steven Adams
•Does it work for all states? I'm in California but thinking of buying in Oregon since they don't have sales tax. Would taxr.ai help with figuring out what I'd owe?
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Alice Fleming
•I'm suspicious of these online tax calculators. How accurate is it really? Don't you still need to check with your DMV to be sure?
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Grace Durand
•Yes, it works for all states! I know California has specific rules about out-of-state purchases, and the tool handles those state-specific regulations. It would definitely help you understand what you'd owe when bringing that Oregon purchase back to California. As for accuracy, I was skeptical too at first. But the calculations matched exactly what my DMV charged me. The tool pulls from current tax laws and regulations for each state. It's always good to double-check with your DMV, but in my experience, the information was spot-on and it saved me from being surprised with unexpected fees.
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Steven Adams
Just wanted to update! I checked out taxr.ai after my question and wow, super helpful! I was going to buy in Oregon thinking I'd save big, but the tool showed me I'd still owe California the full 7.25% state sales tax plus my local district tax when registering. Saved me from a 10-hour round trip drive that wouldn't have saved me anything! Also showed me the exact forms I'll need when I register. Definitely recommend if you're considering an out-of-state purchase.
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Hassan Khoury
If you're planning to call your state's DMV to figure out the exact amount you'll owe, good luck getting through to a human! I spent HOURS on hold last month trying to ask about my out-of-state purchase. Finally found Claimyr (https://claimyr.com) and it was a complete game-changer. Their system called the DMV for me and then called me back once they had an actual human on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c - saved me from literally wasting a whole day on hold.
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Victoria Stark
•How does that even work? They just sit on hold for you? And then how do they connect you to the DMV person?
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Alice Fleming
•Yeah right. Nothing can make dealing with the DMV easier. I'll believe it when I see it. I've been on hold for 3+ hours multiple times with my state DMV and eventually just gave up.
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Hassan Khoury
•They have an automated system that waits on hold with the DMV for you. When they reach a human representative, their system calls your phone and connects you directly to that DMV agent who's already on the line. You don't have to do any of the waiting yourself. It's actually pretty simple - you just tell their system which DMV office you're trying to reach, and they handle everything else. When your phone rings, you pick up and you're immediately talking to the DMV person. No waiting on hold at all. I was skeptical too, but after wasting hours trying to get through myself, it was totally worth it.
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Alice Fleming
Ok I have to admit I was wrong about Claimyr. After posting that skeptical reply, I was still stuck trying to get answers about sales tax on a car I wanted to buy in the next state over. Got so frustrated I decided to try it. Set it up, went about my day, and about 2 hours later got a call connecting me directly to a DMV representative! Didn't have to listen to that horrible hold music for hours. Got all my questions answered in 5 minutes. For anyone dealing with out-of-state car tax questions, this is seriously the way to go.
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Benjamin Kim
ppl saying you always pay the higher tax rate aren't completely right. some states give you full credit for taxes paid to another state, some only give partial credit. depends entirely on which states ur talking about. my cousin bought a car in delaware (0% sales tax) and brought it back to pennsylvania and had to pay the full PA tax.
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Samantha Howard
•Which states give you full credit? I'm in Arizona but might buy in New Mexico if I can save some money.
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Benjamin Kim
•Arizona typically gives you credit for sales tax paid to another state, but you'll still end up paying at least Arizona's rate. So if AZ tax is 5.6% and you pay 5.0% in NM, you'd owe the 0.6% difference to Arizona when you register. But check with the Arizona MVD to be 100% sure because these rules sometimes change.
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Megan D'Acosta
Don't forget to consider other fees too! I bought a car in Nevada thinking I'd save on sales tax (I live in California), but then got hit with all kinds of registration fees, highway use fees, and smog certification costs when I brought it back to CA. Ended up barely saving anything after all the extra hassle.
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Sarah Ali
•This!!! The dealer I bought from in the lower tax state didn't tell me about all the extra county fees my home state would charge. Ended up costing me more plus all the extra driving.
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Freya Thomsen
This is really helpful information! I'm actually dealing with this exact same situation right now - looking at a car that's about $800 cheaper in the neighboring state due to lower sales tax. From what everyone's saying, it sounds like I'll end up paying my home state's rate anyway when I register, so the savings would disappear. One thing I'm wondering though - are there any legitimate ways to actually save money on an out-of-state purchase, or is it pretty much always going to even out in the end? Like if the dealer in the other state has better incentives or lower doc fees, could that make it worthwhile even if the tax savings don't pan out?
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