Understanding Used Car Sales Tax in Tennessee: Rates, Calculations, and Fees
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If you are looking to purchase a used car in Tennessee, it helps to understand the ins and outs of Tennessee used car sales tax — a combination of state, local, and additional taxes that can impact the total price of the vehicle you are buying. This guide will help you navigate everything from purchase price to dealer fees to tax rates and registration fees so that you can plan more effectively and avoid sticker shock. It can also help you when it comes to Tennessee car insurance research and budgeting. Tennessee auto insurance is required when driving in the Volunteer State!
Introduction to Tennessee Used Car Sales Tax
Tennessee charges a general state tax that amounts to 7% of your vehicle's total purchase price. Additional local and county taxes vary by location. The vehicle's sales price includes the vehicle, any document and processing fees, business taxes, manufacturer rebates, down payments, and "any accessory that is already attached to the vehicle and included on the bill of sale," such as running boards and upgraded wheels. All of this can bump your initial estimate of sales tax on a used car in Tennessee significantly higher.
What Is the Single Article Tax in Tennessee?
This special tax is a local tax that is applied to the first $1,600 of the sales price of a used car or other forms of personal property. This 2.75% tax is levied in addition to used car sales tax in Tennessee. For items that cost more than $1,600, you would initially pay a 2.25% local sales tax on the first $1,600 and a 2.75% single article tax on the next $1,600 of the purchase price.
Example: Calculating Your Tennessee Used Car Sales Tax
If you are considering the Tennessee used car sales tax for a private sale, it will help to see an example in action for a motor vehicle transaction.
For instance, if you purchased a vehicle for $40,000, including documentation and registration fees, here is how taxes would be assessed on that car:
- $40,000 x 7% state tax = $2,800
- $1,600 x 2.25% local sales tax = $36
- $1,600 x 2.75% single article tax = $44
Total taxes = $2,880
If you had a rebate of $7,500, you would apply the same equations based on a $32,500 purchase price. If you have questions about used car sales tax, you can talk with your local county clerk or motor vehicle clerk, who can provide additional clarification and tax-related resources.
Additional Fees to Expect
There are additional fees to keep in mind when making a vehicle purchase in Tennessee. You will pay about $250 for the vehicle title, registration, and license plates. If you are purchasing your used car from a dealership, you can also expect to pay about $500 in document fees. Fees can vary by county and by dealer.
Tax Rules for Trade-In Credits and Private Sales
Tennessee also has special rules for trade-in credits and private sales. If you are trading in a car for partial payment or credit for another car, you will pay taxes on the net difference between the sales price of the new or used article sold and any credit actually given for the used article accepted in trade.
In other words, if you trade in your current vehicle for a $5,000 credit, then purchase another used car for $12,000, you will pay taxes on the $7,000 difference. The same goes for used cars purchased via private sales from a previous owner.
Tax Exemptions for Used Car Purchases
You can find a number of noteworthy tax exemptions when making a used car purchase in Tennessee.
You will be exempt from paying taxes when you are being given a car as a gift, if you are a member of the armed forces, if you are selling or transferring a vehicle among family (spouses, parents, siblings, grandparents, children, and grandchildren), or if you are not a resident of Tennessee and intend to leave the state in your used car within three days of purchase.
Resources for Accurate Tax Information in Tennessee
The Tennessee Department of Revenue is your best source for the latest and most accurate tax information in Tennessee. You can find forms, compliance information, guidance, educational materials, and other resources on everything related to taxes in the state. County clerks and motor vehicle clerks are also good resources if you have questions about used car sales tax in Tennessee. Your accountant can also help with tax questions.
Find Affordable Car Insurance in Tennessee Today
If you are looking for cheap car insurance in Tennessee, you can search, review, and compare auto insurance quotes online to find the best deal for your driving needs. Visit EverQuote to find affordable car insurance options today.