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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10131
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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How much tax do you pay on purchasing a used car for

Customer Question

How much tax do you pay on purchasing a used car for $17,000. Do you have to pay this tax at the time of registering your new pre-owned car? this is for cambridge, MA
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from Mercer University's Stetson School of Business and Economics, as well as CFP and CRPS designations... I can help here.

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Massachusetts has an excise tax on vehicles that's paid annually. It It is an annual tax for the privilege of registration. Anyone who registers with Massachusetts license plates will be billed based on the information supplied to the Registry of Motor Vehicles on the registrant's application.

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THe rate is $25 per thousand and based on 50% of thre cars vallue in the year you buy ... then follows a scedule that starts wiith 90% of list price in the second year (first full year you own the car)

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Here's the schedule:

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How are vehicles valued?

Based on valuation rates set by the state, vehicles are valued as follows:

• 90% of manufacturer's list price when new (1st year)

• 60% of mfr.'s list price (2nd year)

• 40% of mfr.'s list price (3rd year) How are vehicles valued?
Based on valuation rates set by the state, vehicles are valued as follows:
• 90% of manufacturer's list price when new (1st year)
• 60% of mfr.'s list price (2nd year)
• 40% of mfr.'s list price (3rd year)
• 25% of mfr.'s list price (4th year)
• 10% of mfr.'s list price (5th year)

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See this:

http://www2.cambridgema.gov/CityOfCambridge_Content/documents/What%20is%20motor%20vehicle%20excise%20tax.pdf

Expert:  Lane replied 1 year ago.

You can also see all of this here:

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https://www.cambridgema.gov/assess/FAQs/motorvehiclefaq

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Please let me know if you have questions

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Lane

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Expert:  Lane replied 1 year ago.

Hi again,

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As I look back through questions review for thoeoughness (something I have time to do when things are slow on the site)noticed that although this small anual tax is there, I had not dealt with the sales tax that is paid when the title is registered from buyimng a new or used car.

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See this from Massachusetts:

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General Rules

Effective August 1, 2009, under Massachusetts sales and use tax provisions, the purchaser, transferee or user having title to or possession of a motor vehicle is directly responsible for the payment of the 6.25% sales or 6.25% use tax. (Prior to August 1, 2009, the sales/use tax rate was 5 percent.) The sales tax, which is imposed by Massachusetts General Laws chapter 64H, applies to transfers of title or possession through retail sales by Massachusetts dealers or lessors in the regular course of business. The use tax, which is imposed by Massachusetts General Laws chapter 64I, applies to all other types of transfers of title or possession where the vehicle transferred is thereafter stored, used, or otherwise consumed in Massachusetts.
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Calculation of the Tax:
The sales tax rate is 6.25% of the sales price if the sale is made by a motor vehicle dealer or lessor registered with the Department of Revenue. If the motor vehicle is sold in a casual and isolated sales transaction, however, the use tax rate is 6.25% of the actual amount paid for the vehicle or the clean trade-in value (book value) of the vehicle, whichever is greater.

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So, on a 17000 purchase, the sales tax would be 17000 x .0625 = $1,062.50

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I think that now covers it all

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Let me know if you have questions

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Lane

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Expert:  Lane replied 1 year ago.

Hi,

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Just checking back in to see if you saw the follow up answer

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Hope this has helped

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If this HAS helped ... would appreciate a poitive rating (using the stars on your screen) ... but if you have additional questions on thei let me know

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THanks,

Lane

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