Buying a new car needs careful financial planning because the sticker price won’t be your final cost. In most states, sales tax and additional fees significantly impact a new car purchase. So, if your dream car is in a dealership anywhere in the Golden State, here’s all you need to know about California car sales tax to estimate its on-road cost.
The sales tax is a major addition to any vehicle’s cost, varying from state to state, county to county, and city to city. Nevada, at 8.25%, tops the list among US states that levy the highest car sales taxes, followed by Kansas at 7.50%. California is close behind at 7.25%; the Golden State also enjoys a large volume of vehicle registrations yearly. In 2020, the state had the highest in the country, with more than 30 million!
Whether you buy a new car or go for a resale, the California car sales tax applies to all motor vehicle registrations in the state unless specifically exempted. Keep reading to know more about these exemptions and other tax rules.
What is car sales tax?
The government, at all levels, may charge a tax on the goods and services you purchase. So, when you buy a new car, a certain percentage of its selling price is levied as the sales tax. Your car dealer collects this tax from you and eventually sends it to the government.
You must pay sales tax in all states except Delaware, Montana, New Hampshire, and Oregon. The state does not charge sales tax in Alaska, but some municipal governments do.
Sales tax is not only charged by federal states; counties and cities can impose separate rates. When combined with additional fees like registration and documentation, a car could cost higher than you expect.
How much is the car sales tax in California?
California collects a 7.25% sales tax on all car purchases – new or used – via the California Department of Tax and Fee Administration (CDTFA). But not all of it goes to the state – California car sales tax is only 6%, while the remaining 1.25% goes into the city and county funds.
In addition, other local taxes would stretch your car sales tax by 0.10% – 1%. As more than one district tax is effective in some areas, you can expect the total tax rate to surpass 10%.
Only a quarter of the cities in California charge just 7.25% car sales tax. Alameda County levies the highest car sales tax in California, ranging from 10.25% – 10.75%, followed by Los Angeles County at 10.5% – 10%.
Check out California car sales tax rates applicable in different counties and cities here.
How much is the used car sales tax in California?
Sales tax for used cars in California is the same as that for new vehicles – 7.25% statewide. However, depending on the location county/municipality taxes will be added to it. You have to pay the sales tax, whether you buy it from a private seller or a dealer. The car’s fair market value is used to calculate the task – not the purchase price.
How to calculate sales tax?
California sales tax applies to the vehicle’s full price, i.e., the sticker price before incentives, discounts, and trade-in credits.
Use the link above to compare the total city-wise sales tax rates applicable in California, or use the DMV’s online vehicle registration fee calculator for an accurate estimate.
Remember that California sales tax isn’t the only additional cost you’ll bear when purchasing a car. The DMV or the dealer also collects separate fees for documentation, title and registration, license plate transfer, etc.
Are there any sales tax exemptions?
The state of California offers two types of exemptions on sales tax.
- Transactions not considered retail sales – For example, vehicle transfers per court order, such as in the case of divorce. Gifts and inheritances are also not taxable. Licensed dealers/dismantlers and out-of-state dealers are also exempted.
- Use tax exemptions on retail sales – For example, domestic partner/family transfers, federal government sales, Indian-Owned Trailer Coach or Vessel
Find out more about California car sales tax exemptions here.
How does the state use the sales tax collected?
A major portion of the car sales tax collected in California (almost 4%) goes to the general fund used to finance the state government. A little over 1% goes towards public safety programs and services through a Local Revenue Fund established in 2011. Finally, the remaining amount from the 6% belonging to the state supports local criminal justice activities and health and social service programs.
As mentioned above, 1.25% of the total 7.25% levied as California car sales tax goes to the respective counties. The collected tax funds the county/city operations and transportation.
The additional sales taxes charged by the county/city is for funding public transportation programs and other county-wide initiatives.
When buying a new car in California, don’t stop your concerns at paying sales taxes and additional fees – add a reliable auto insurance plan also to your priorities. Driving your new car in the golden state without valid car insurance invites severe penalties.
But how to find affordable car insurance? Don’t go anywhere – Way.com has everything you need for your car. Compare multiple insurers in California and get the cheapest deal – get your California car insurance quote now.
Celine is your ‘Need-a-car-because-I’ve-got-places-to-be’ friend. With 10 years of experience in travel & lifestyle writing, she’s always searching for the latest user-friendly features in a car. While she’s not relaxing on a long road trip or catching the next flight for a weekend getaway, you’ll find her home huddled up with a good book or a new show and armchair traveling into distant lands or fantastic worlds.