How Much Is Tax on a Used Car in Mn

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Staying up to date on Minnesota sales tax on cars is important for all vehicle owners. Determining how much sales tax and additional expenses you have to pay before purchasing a car helps you better prepare your finances and understand how much to save. Let's review the state laws for making certain vehicle purchases in Minnesota.

What Is the Motor Vehicle Sales Tax in Minnesota?

Per the Minnesota Department of Public Safety, when purchasing a new or used vehicle, owners must pay a 6.5 percent tax, otherwise known as a Motor Vehicle Sales Tax, or MSVT. According to the Minnesota Department of Revenue, when the title has been transferred to the new car owner, the buyer pays the MSVT to the Driver and Vehicle Services of the Department of Public Safety or to a deputy registrar.

How Is the Motor Vehicle Sales Tax Rate Computed?

According to the Minnesota House Research Department, the MSVT rate is calculated based on how much the owner paid when they purchased the car, rather than charging the state general sales tax. When making a private sale, auto dealers or deputy registrars collect the MSVT when the owner registers the vehicle.

Other Expenses When Purchasing a Car in Minnesota

The Sales Tax Handbook says that car buyers may have to pay additional fees apart from the sales tax for their recently purchased vehicle. Since these payments are separate from the sales tax, the Minnesota Department of Motor Vehicles collects these payments rather than the Minnesota Department of Revenue. These fees include:

• Plate transfer fee: $20
• Title fee: $14
• Registration fee: $300

Altogether, the average amount of Minnesota DMV fees is $388 for the purchase of a new car. Dealerships also have the option to charge an additional documentation fee. Paying this fee covers the cost and time it takes for the dealership to prepare and file information like sales tax documents and the sales contract. Since the dealerships price these fees, the amount they charge can vary depending on the needs of the dealership and the type of vehicle you purchase.

Exceptions and Exemptions to the MVST

Owners may have to pay a flat tax rate of $10 on automobiles that are 10 years or older and considered low-value. Collector vehicles may receive a flat tax rate of $150. Depending on the vehicle and circumstance, you may be exempt from paying sales tax. Some instances can include:

• Towns purchasing vehicles to use for maintenance on their roads, excluding pickup trucks and passenger vehicles.
  
• Vehicle purchases made by the federal government.
• Transit services.
• Members of school or educational systems purchasing cars for automotive and vehicle training programs.

Citizens who previously lived outside of Minnesota and registered their car in a different state have 60 days to become a Minnesota resident and start paying Minnesota sales tax on their cars. Some vehicles that don't require registration to work on roads include:

• Marked police vehicles
• Marked ambulances
• Fire apparatuses

Since they don't require state registration, these vehicles are exempt from MSVT.

What Are the Common Motor Vehicle State Tax Exemptions?

When paying Minnesota sales tax on cars, there are certain exemptions, according to Drive and Vehicle Services, that you can keep in mind, including:

• Gifts: exchanging a car as a gift with a spouse, parent, child, grandparent, or grandchild, for no monetary value or other consideration
• Divorce: transferring a car between spouses after experiencing a divorce
• Inheritance: legally inheriting a vehicle from another owner
• Joint ownership: one of the joint owners of a car becomes the sole car owner
• Related companies: transferring a car between related companies within reasoning of the Internal Revenue code
• Nonprofit organizations: when a nonprofit group buys or leases a vehicle to transport goods or at least nine passengers as part of their nonprofit services via a car, bus, or truck for a charity, religious, or educational group or purpose
• Disabled Veterans: if a disabled veteran has purchased a vehicle funded by grants under the U.S. Code, title 38, section 3902, they may also need to submit a letter of authorization from the Veteran's Administration
• Government vehicles: this includes any vehicles bought, rented, or leased by the federal government and its agencies
• Road maintenance vehicles: any dump trucks, snowplows, or other motor vehicles purchased to construct or perform maintenance in a town

How to Determine the Fair Market Value of a Car

When figuring out the fair market value of your car with an overall value of over $3,000, you should gather the following information:

• The year, make, and model
• Style of the car (Convertible, four-door, two-door, etc.)
• Purchase price
• Condition of the car's body
• Condition of the interior
• Condition of the engine
• Type of motor in the car

You can also use credible and recognized fair pricing guides to help you determine the fair market value of an older car. These can include:

• Kelley Blue Book Price Guide for used truck and car pricing reviews
• NADguides.com for vehicle pricing and internet sources
• Edmunds for pricing reviews on used trucks and cars

How Are Trade-In Cars Taxed in Minnesota?

When trading in your car at the dealership, you can receive a credit toward the new vehicle you're purchasing, depending on the type of car you're trading in and the condition it's in. This can make the overall payment of your car lower than if you bought one without a trade-in. You'll use this as the taxable price of your car. The original value of your trade-in car is not considered when calculating this sales tax.

How Are Rebates and Dealer Incentives Taxed in Minnesota?

To gain more sales, car dealers may incentivize buyers with cash or manufacturer rebates based on the price of the vehicle. This means that when a buyer goes to purchase a car, the dealer may offer them a rebate that makes the out-of-pocket cost lower than the original sticker price. The final price of this vehicle, including the rebates, is the amount the buyer will pay taxes on.

Being aware of Minnesota sales tax and fees helps you prepare and gain a better understanding of what you may have to pay for your own car in the future.

Sources used:

https://www.house.leg.state.mn.us/hrd/pubs/ss/ssmvst.pdf

https://dps.mn.gov/divisions/dvs/Pages/motor-vehicle-sales-tax.aspx

https://www.revenue.state.mn.us/guide/motor-vehicle-sales-tax

https://www.salestaxhandbook.com/minnesota/sales-tax-vehicles

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How Much Is Tax on a Used Car in Mn

Source: https://www.caranddriver.com/research/a31548124/minnesota-sales-tax-on-cars/

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