How Is Vehicle Tax Calculated?


Quick Answer

Vehicle tax, or vehicle excise tax, is calculated by the state and includes the value of the car as determined by the state, the state tax rate minus the exemption for value, and the number of calendar days out of 365 that the registration is active. The tax begins on the day the owner registers the vehicle at his state's department of motor vehicles.

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Full Answer

Many states offer car owners the option of paying vehicle excise taxes in a lump sum or in quarterly installments.

In some states, such as Rhode Island, out-of-state residents, foreign students and active duty military who claim Rhode Island as their domicile and who register a car in Rhode Island are not exempt from vehicle excise tax. Rhode Island residents who purchase a car outside of Rhode Island are also subject to a use tax, which is often the same rate as the state sales tax.

Car owners are responsible for excise tax in addition to sales tax, which is a one-time fee paid to the state's department of motor vehicles. The total amount of sales tax applied to a transaction depends on the purchase price of the vehicle. In Massachusetts, for example, the taxable amount may be the sales price, the actual amount paid or the trade-in value of an automobile.

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