Motor Vehicle Sales Tax Breakdown
Tax Rate 6.5%:
Sales tax is due on most purchases or acquisitions of motor vehicles. It is based on the total purchase price or fair market value of the vehicle, whichever is higher. When a vehicle is acquired for nominal or no monetary consideration, tax to be paid is based on the average value of similar vehicles.
$10 is collected on passenger vehicles 10 model years old and older (does not apply to motorcycles). Purchase price must be under $3,000 - see below for sales tax information for older cars.
$150 applies to passenger vehicles and fire trucks registered, or applying for registration, as Collector, Classic, Street Rod and Pioneer, regardless of actual purchase price or fair market value of vehicle. All other vehicles (trucks, one ton pickups, motorcycles) must pay 6.5 percent of the purchase price or fair market value.
The only allowable trade-in, for a reduction of purchase price is another registered or previously registered motor vehicle. Farm equipment, furniture, animals, etc., are not allowed as a trade-in value for sales tax purposes. Please see Minnesota Revenue - Trade-In Allowance.
Sales Tax Guideline for Older Cars
Instead of the 6.5% Motor Vehicle sales tax, a $10 In-Lieu of Tax applies if the vehicle meets all of the following:
- The vehicle is 10 years or older, and
- It has a sales price and average value of less than $3,000
If the vehicle does not meet both requirements it does not qualify for the $10 flat in-lieu of tax.
To determine the actual fair market value, use nationally recognized pricing guides such as:
Edmunds -- Used Cars and Truck Prices Reviews
Kelley Blue Book Price Guide -- Used Cars and Truck Prices Reviews
NADAguides.com -- Source for vehicle pricing and information on the Internet
To help determine if the fair market value of the vehicle is $3,000 or more, you need to know:
- The style (2D, 4D, Convertible, etc.)
- The model (Standard, Deluxe, Master, etc.)
- The motor (V-8, 6, Hemi, 444,427 etc.)
- The condition of the vehicle:
- Is it running?
- Are there any missing parts?
- What is the condition of the body?
- What is the condition of the engine?
- What is the condition of the interior?
Common Motor Vehicle Sales Tax Exemptions
The transfer of a motor vehicle between specifically identified individuals is not charged sales tax if the transfer is a gift for no monetary or other consideration, or other expectation of consideration. The specific individuals are: spouses, parents and children, and grandparents and grandchildren.
Transfers between spouses in a divorce proceeding are not charged sales tax.
Transfers on vehicles acquired by inheritance are not charged sales tax.
Transfers from joint ownership to one of the joint owners for no cost are not charged sales tax.
Sales tax is not charged on purchases and leases of motor vehicles that are used primarily to transport goods or people, other than employees, as part of the group's nonprofit activities. To qualify, the vehicle must be a truck, bus or automobile designed to carry at least nine people. This exemption is limited to groups organized exclusively for charitable, religious or educational purposes; it does not apply to state or local government organizations or schools, or private bus companies. Vehicles that are given as gifts to qualifying nonprofit organizations, if they are used exclusively for religious, charitable or educational purposes, are not taxable.
Sales tax is not charged on vehicles purchased by disabled veterans if the vehicle has been furnished free, in whole or in part utilizing grants under U.S. Code, title 38, section 3902. A letter of authorization from the Veteran’s Administration is required.
Vehicles purchased, leased or rented by the federal government and its agencies are not charged sales tax.
Sales tax is not charged on vehicles purchase or used by a private non-profit or public school for use as an instruction aid in a vehicle body and mechanical repair course. This exemption does not include vehicles used in driver education programs.
Road Maintenance Vehicles
Sales tax is not charged on snowplows, dump trucks and other motor vehicles purchased by a town to be used exclusively for road maintenance. The exemption does not apply to automobiles, and/or pickup trucks. Town means township. It does not include statutory or home rule charter cities, counties or special taxing districts.