Arizona Used Car Sales Tax: What You Need to Know Before Buying
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Purchasing a used vehicle in Arizona can be exciting, but you must prepare for certain costs beyond the price. Title transfer fees, registration fees, and other charges will also impact your overall cost.
Another key cost is the Arizona used car sales tax, officially known as the transaction privilege tax (TPT). This tax is for the privilege of doing business in the state and only applies to businesses, not private parties.
Introduction: Understanding Arizona Used Car Sales Tax
The used car sales tax in Arizona is not the same for all transactions, which can make it confusing. This sales tax varies based on several factors, such as the buyer and seller's location, sale type, and local taxes.
Below, we dive into the various types of sales taxes and rates, the difference between buying at a dealership and from a private seller, out-of-state purchases, and much more.
Private Seller vs. Dealership: Tax Differences
When purchasing a vehicle in Arizona, the sales tax varies based on whether you purchase from a private party or a used car dealership.
If you purchase a vehicle from a car dealership, the dealership will pay the state TPT of 5.6% and typically pass that cost on to you. Also, remember that you’ll have to pay sales tax in the county and city the dealership is in, and each county and city has its own tax rate.
There is no Arizona used car sales tax on private party sales, so purchasing from an individual can save you a lot of money.
Transaction Privilege Tax (TPT) on Dealership Purchases
When you purchase a used vehicle from a dealership in Arizona, the dealership has to pay a 5.6% TPT for the privilege of doing business in Arizona. While the Department of Revenue doesn’t require dealers to pass this cost on to consumers, they generally do.
Fortunately, dealerships can handle the TPT at the time of purchase, so you won’t have to travel elsewhere to pay this tax. Plus, since it’s part of the vehicle’s pricing, you can roll it in with your auto financing and pay it over time along with the vehicle.
Vehicle License Tax (VLT) and Registration Fees
In addition to sales tax, Arizona charges a vehicle license tax (VLT) on every vehicle registered in the state, including those purchased through a private sale. Arizona calculates this tax based on the vehicle’s appraised value.
You pay the VLT when initially registering a vehicle and each year when you renew the registration. Arizona calculates the VLT using a formula that takes 60% of the manufacturer’s base retail price and assesses $2.80 per $100 for new vehicles and $2.89 per $100 for used vehicles.
For example, if you purchase a $30,000 new vehicle, the assessed value is $18,000 ($30,000 x 60% = $18,000). On this amount, you'd pay a VLT of $504 ($18,000 / 100 = 180 and 180 x $2.80 = $504).
You don’t pay the same VLT annually. Instead, Arizona reduces the vehicle’s assessed value by 16.25% yearly. Using our example above, the original $30,000 value would fall to $25,125 ($30,000 x 16.25% = $4,875 and $30,000 - $4,875 = $25,125), meaning the assessed value would decrease to $15,075 ($25,125 x 60% = $15,075), resulting in a VLT of $422.10 ($15,075 / 100 = 150.75 and 150.75 * $2.80 = $422.10).
On top of the VLT, you’ll also pay other fees at registration, including:
- Title fee: $4
- Air quality research fee: $1.50
- Registration fee: $8
Use Tax for Out-of-State Purchases
If you make an out-of-state vehicle purchase, you’ll still pay a 5.6% state tax. However, in this case, Arizona calls it a use tax. You may also pay a use tax for the city you live in. Fortunately, no county use tax exists.
The city use tax varies, so Arizona created a helpful use tax calculator based on your address to help you prepare for this additional expense.
If you paid tax in the state in which you purchased the vehicle, Arizona often reduces the use tax by the amount you paid.
Exemptions From Arizona Used Car Sales Tax
Arizona offers six situations where a dealership is exempt from charging TPT or can reduce the TPT on a used car sale. These exemptions are:
- Vehicle sale to an out-of-state resident with delivery occurring out of state
- Commercial vehicle sale to an out-of-state resident for interstate commerce use
- Vehicle sale to an out-of-state resident whose state doesn’t offer TPT reciprocity
- Auction sales to out-of-state residents with delivery occurring out of state
- Vehicle sale to an out-of-state resident whose state does offer TPT reciprocity
- Vehicle sale to a member of an Indian tribe who resides on a reservation
How to Calculate Arizona Used Car Sales Tax
Calculating Arizona sales tax on a used car is fairly simple. Start with the vehicle’s total purchase price and subtract any trade-in value you applied to get the taxable amount.
Now, multiply that taxable amount by your total sales tax rate, which is state sales tax plus city sales tax. This total gives you the combined sales tax you’d pay.
Compare Car Insurance Rates for Your New Used Car
Taking delivery of your new-to-you used vehicle is a great time to review your car insurance in Arizona. EverQuote makes it a breeze to secure auto insurance in Arizona with our innovative online interface.
You can use our system to compare multiple auto insurance quotes at once to find cheap car insurance in Arizona that suits your needs.