If you own a car, it is important to understand car tax laws. Car tax assessments vary by state and local jurisdiction and may play an integral part of your budget. If an assessment doesn’t agree with your assessment, however, you have the power to challenge it.
New York state and city tax authorities set sales and use taxes that are collected when you register your car.
Taxes on private vehicles
Car tax payments vary by state and municipality, with values determined using standard presumptive values (SPV) or sale price as the basis. If selling to immediate family members may exempt you from sales tax payments; simply obtain a signed letter of gift or gift affidavit in this instance.
Every state, county and municipality imposes its own car taxes; before making your purchase, be sure to consult local laws. Car taxes serve a purpose: they help fund infrastructure maintenance and construction expenses while discouraging purchases of large engine cars with higher emissions that produce more carbon dioxide production – though their effect remains unproven due to not being tested in non-car-manufacturing countries.
Taxes on fuel
Governments across the globe have implemented various fuel economy tax policies in recent decades. Some offer subsidies for vehicles using certain technology while others impose flat fuel or vehicle sales taxes on all vehicles – encouraging consumers to purchase more fuel-efficient cars and reduce gas consumption while simultaneously decreasing emissions of small particles and nitrogen oxide. These tax policies may have other beneficial outcomes as well, such as decreasing emissions.
Longer-term, improved fuel efficiency leads to decreased consumption and slower vehicle miles traveled growth; it may also result in lower state and local motor fuel taxes that support transportation projects.
Common criticisms of fuel economy taxes is their potential unintended repercussions, including gaming in three distinct stages: short term when consumers and producers adjust their behavior to take advantage of temporary tax treatment; medium term when automakers tweak vehicle designs in order to achieve substantial fuel economy improvements under specific regulations; and long run when they rebrand cars as trucks in order to avoid gas guzzler taxes.
Taxes on registration
If you buy a new or used car, taxes on its registration may be applicable depending on where you live and its value. Some states also impose personal property or excise taxes which must be paid annually.
At times, registration fees based on the value of your vehicle can be deducted for federal income tax purposes if itemized as deductions. In such instances, claim it by itemizing.
An Air Force officer purchasing a car in Cleveland to use in her military service and later moving to Wichita, Kansas does not owe state use tax because she had extensive use of it while living there. The same principle holds if selling or leasing from a dealer.
Taxes on maintenance
Many vehicle owners take advantage of tax deductions to offset the costs associated with car ownership. When writing off maintenance expenses, keep a record of mileage and related expenses to determine the most advantageous method for filing taxes.
Warranty, service or maintenance contracts purchased separately after the vehicle sale are taxable regardless of when purchased; recall work (both parts and labor) is also taxed, unless specifically exempted by law.
Dealerships and service departments can purchase certain consumables they intend to resell tax-free with the help of a properly completed form ST-28C Consumed In Production Exemption Certificate, such as sand paper, rubbing compounds, masking tape and thinners. They must still remit sales tax for parts and labor not covered under manufacturer warranties or contracts.