The Benefits of Learning How to Calculate Sales Tax on Cars

By Raymond articles Published 10/14/2008 | Auto and Trucks

In today's economy, it should come as no surprise that car dealers will demand payment for fraudulent sales tax amounts.  Therefore, before you purchase a vehicle, it will be to your advantage to know how sales tax is calculated, as well as make sure that the amount is correct.  As may be expected, this will depend on the state that you live in, as well as the types of documents that will be required to take ownership of the vehicle.

Before you even begin shopping for a vehicle, it will be of benefit to contact your local department of motor vehicle.  If they cannot tell you how sales tax is calculated in your state, they may still be able to provide you with a phone number for the state tax department.  Once you have located the appropriate department, there are a number of questions that you will want to ask.

To begin, you will want to know if the tax is calculated based on where you live, or where the vehicle is located.  Together with this, you may also find that car dealers must charge a different rate than a private person.  If you own a business, and have a sales tax certificate, you may also want to find out if you can have the sales tax waived. 

Next, you will need to ask if there is a difference in sales tax based on the vehicle type.  As an example, you may have to pay additional taxes on a luxury vehicle or a truck.  Or, you may also find that there will be higher fees and tax rates associated with vehicle transfer documentation.

Once you know how to calculate vehicle taxes, it is important to audit each from the car dealer before you pay it.  Aside from ensuring that the percentages are correct, you will want to make sure that you are not paying double taxes.  Unfortunately, there are a number of unethical dealers that will give you more than one invoice, and then charge sales tax on each one.  While it may be difficult to spot these inconsistencies, it is still important to do your best. 

If you think you are paying too much tax, it may be to your advantage to call the tax department first.   For the most part, if you have a cell phone available, and know which number to call, it will only take a few moments of your time.  As may be expected, if the car salesman gets nervous, or tries to persuade you not to make this type of call, it is best to simply walk out and not purchase the vehicle at all.

There is no question that taxes are strangling consumers and business owners beyond all reasonable measure.  At the same time, the automobile sales industry is filled with unscrupulous individuals that will charge you excess tax, and then report something different to the tax department.   It is very important to make sure that you know how car taxes are calculated in your state, so that you do not wind up spending more money than necessary.