Whenever we are buying, leasing, or owning a car, we are subject to different types of taxes that depend on both state and local laws, as well as the type of vehicle we own. The state on which our car is registered or where it is used can also determine the taxes we would owe. Therefore, it is important to understand how car taxes work, as it would help us become more aware of any tax balance that would be generated. This is what you need to know about the different types of car taxes and how it might apply to you.
To begin with, we should be aware that there are two different types of car taxes we might have to pay when we lease, buy, or own a car. The most common type of tax we might have to pay when we purchase a car, whether new or used, is a sales tax. These taxes may vary from one state to another, having a 7.5% sales tax in the state of California, with local governments being able to charge an additional tax of up to 2.5% on top of the state sales tax.
The second type of car tax we are likely to owe is the property tax, which is charged about half of the states, but California is not one of them. California used to charge this property tax on vehicles, but in 1935 this system was replaced with the annual registration fee. Whether we are subject to a state property tax or a registration fee, we should keep in mind them both are based on the current value of our vehicles, and in the case of California, car owners are subject to a 1.75% rate.
If we want to calculate the amount of sales tax we will be subject to, we need to consider how several factors might affect the ending balance. Your vehicle’s purchase price will definitely affect the total sales tax we would have to pay, but there are other factors to consider, including the category of the vehicle. Also, we need to remember that every city and municipality can charge additional sales taxes, so it’s always best to consult with our car dealer before actually purchasing a vehicle.
When it comes to calculating the property taxes that we owe for our car, the rules for assessing the value of our car will be determined by the state or municipality that charges this tax. In the case of California, the Department of Motor Vehicles is in charge of determining such rules and of assessing the value of your car, too. There is an online tool available for car owners to request an estimate of their property tax and registration fee, and you can consult this on their official website.