Which States Charge the Most Car Sales Tax: A Detailed Breakdown by State

When purchasing a vehicle, most buyers focus on the sticker price and monthly loan payments. However, one significant expense often overlooked is car sales tax by state—a cost that can add thousands of dollars to your vehicle purchase depending on where you live and register your car. Understanding how sales tax varies across different states is essential for making informed purchasing decisions.

Understanding Car Sales Tax Across Different States

Car sales tax rates differ dramatically from state to state, ranging from zero to over 8%. Sales tax is collected whenever you purchase or register a vehicle, whether from a dealership or private party. A critical point that many buyers don’t realize: regardless of where you buy your car, you must pay sales tax based on the state where you register it. For example, buying a car in a no-sales-tax state won’t save you money if you register it in a high-tax state.

According to recent industry data based on an average car transaction value of $48,510, certain states impose significantly higher tax burdens on vehicle purchases. This means buyers in these states pay substantially more when acquiring a vehicle compared to residents in low-tax states.

The Highest Car Sales Tax Rates by State

Nevada: Leading with 8.25% Sales Tax

Nevada holds the distinction of having the nation’s highest car sales tax rate at 8.25%. On an average $48,510 vehicle purchase, buyers in Nevada pay approximately $4,002 in sales tax alone. Beyond the tax burden, Nevada also ranks among the states with higher fuel costs, making it one of the most expensive places to buy and maintain a vehicle annually. Only one state surpasses Nevada in total first-year vehicle ownership expenses.

Kansas Ranks Second Despite Mid-Range Economics

Kansas represents an interesting case study, holding the second-highest car sales tax at 7.50%, which translates to roughly $3,638 on a standard vehicle purchase. What makes Kansas notable is that while insurance rates, fuel prices, and maintenance costs are fairly typical compared to other states, the aggressive 7.50% sales tax rate alone pushes the state’s overall vehicle ownership costs into the top tier nationally.

California and Illinois: Both at 7.25%

California ties with Illinois at 7.25% sales tax, generating approximately $3,517 in taxes on a typical purchase. While California’s sales tax rate places it third overall, the state remains the most expensive location for vehicle ownership when factoring in insurance premiums, repair costs, and consistent leadership in gas prices across all 50 states. This combination creates a particularly challenging financial environment for car buyers and owners in the Golden State.

States With Elevated Car Sales Tax Rates (7.0% and Above)

Three additional states share a 7.0% sales tax rate on vehicle purchases: Indiana, Rhode Island, and Tennessee. Each of these states charges $3,396 in sales tax on a $48,510 vehicle, placing them among the nation’s most expensive jurisdictions for buying a car.

Moderate-to-High Car Sales Tax States

Utah follows at 6.85% ($3,323 on average purchase), New Jersey at 6.63% ($3,216), and Georgia at 6.60% ($3,202). While these rates are lower than the top tier, they still represent substantial additional costs when buying a vehicle.

States With Lower or No Car Sales Tax

Understanding the complete picture of car sales tax by state also means recognizing which jurisdictions offer relief. The five NOMAD states—New Hampshire, Oregon, Montana, Alaska, and Delaware—charge zero sales tax on vehicle purchases. Several other states offer significantly lower rates: Oklahoma, North Carolina, Colorado, and Alabama all charge less than 3.5%, while Hawaii, New Mexico, New York, and South Dakota maintain rates around 4%.

However, the advantage of buying in a low-tax state only applies if you register your vehicle there. Registration location determines your tax obligation, not purchase location.

How Car Sales Tax by State Impacts Your Total Ownership Cost

The difference between buying in a low-tax state and a high-tax state can exceed $4,000 on a single purchase. When multiplied across your vehicle’s lifetime and factored with other ownership expenses—insurance, fuel, maintenance—these tax variations become a major financial consideration. For someone purchasing multiple vehicles throughout their life, living in a high-tax state versus a low-tax state could represent tens of thousands of dollars in cumulative expenses.

Key Considerations for Smart Vehicle Purchasing

Before making your next vehicle purchase, research your state’s car sales tax by state regulations. If you’re considering relocating or have flexibility in your registration location, the tax implications merit serious consideration. Additionally, some states offer exemptions for vehicle transfers between family members, so consulting local regulations specific to your situation could yield savings.

The data demonstrates that where you register your vehicle significantly influences the true cost of ownership. By understanding these variations in car sales tax by state, you can make more informed decisions about your vehicle purchase timing, location, and overall budget planning.