Paying Tax when trading a car

[GookusMaximus]

I have a question regarding tax payment when trading in a car. I know that if it's a dealer trade, I only pay the tax for the difference in the value of the two cars, but

1) what if I am trading the car at a different state

2) what if I'm trading the car with an individual owner and not a dealer?

Thanks.

 

[jlindy]

You pay your taxes according to the laws of the state in which you reside and not purchase. It doesn't matter where you purchase the vehicle, it only matters where you register it and live. In my case, I can apply the trade in for a tax credit whether I sell to car to an individual or a dealer, but a notorized bill of sale in required to do so. It should be the same for you, but I don't know your laws.

 

[nsxtasy]

jlindy is absolutely correct.

Furthermore, different states have different ways of treating this. For example, in most states, when trading at a dealer, you only pay sales tax on the difference; but there are a few states, including California, where you still pay sales tax on the full amount of the purchase, not on the difference.

In Illinois, to cite another example, the amount of sales tax on the purchase of a car from an individual is different from the amount on a purchase from a dealer.

Your best bet is to do some browsing on the website for your state's Department of Revenue, in the sales and use tax area. Most state websites have the information available - you just need to do your own research.