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We were negotiating the price on a RAV4 and the dealer calculated the tax on the price of the vehicle. I was told elsewhere that we should only pay tax on the the price of the vehicle less the trade in. Anybody have experience with this?

I know that when you sell a used vehicle privately, they have to pay tax on it. It seems like the dealer gets out of this on a trade in?

So to summerize, suppose we negotiate a price of $23K on a Rav4. The dealer will give us $10k on the trade in, so should we pay tax on the $23K or $13k?

Thanks in advance!
 

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That is correct, if you negotiated a price of $23K and the dealer gives you $10k on the trade in. You should pay tax on the $13k.
 

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The G Man said:
That is correct, if you negotiated a price of $23K and the dealer gives you $10k on the trade in. You should pay tax on the $13k.
Actually, it depends on where you live. Each state sets it own laws. We just recently moved to Oklahoma from Arkansas. In Arkansas, you paid taxes only on the difference between purchase price and trade-in, but in Oklahoma you pay taxes on the purchase price of new car and your trade has no affect on your taxes.
 
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hockeymulder said:
Thanks for you responses.

Does anybody know how it works in California?
In California you pay tax on the purchase price of the vehicle. Doesn't matter if you have a trade in or not, you pay the same amount of tax.
 

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And in Washington state you pay 9.1% sales tax on a new vehicle thanks to our elected representatives.

on edit

Forgot to mention the tax is applied after your trade in amount is subtracted.
 
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So maybe get the dealer to lower the price of the Rav4 and give you less for your trade-in.
 

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summerwind said:
And in Washington state you pay 9.1% sales tax on a new vehicle thanks to our elected representatives.

on edit

Forgot to mention the tax is applied after your trade in amount is subtracted.
In WA, it depends on where you live. I didn't even realize that we had added a .3% addition for the sales of vehicles.

The state's sales tax rate is 6.5%, it's the individual areas that add on to it. In Seattle, it would be 8.8% (9.1% with the vehicle add on). But go out to Skamania (Stevenson) and it would be 7.0% (7.3 with vehicle add on).

Some areas of Snohomish County are at 8.9% (9.2%). So if you're in WA and looking to purchase a car, you may want to go to:
http://dor.wa.gov/Docs/forms/ExcsTx/LocSalUseTx/LocalSlsUseFlyer_Quarterly.pdf to find where you would go for the best tax rate. Of course you may spend more in gas driving there to get the deal...
 

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I bought my RAV4 in Wisconsin last week. I live in Illinois, so I had to pay Illinois's 6.5% sales tax instread of Wisconsin's 5.0%. The sales tax was applied after the trade-in was deducted.

Everyone, please remember that the entire sales tax on any car purchased this year, can be added to the IRS sales tax guidelines for people who itemize. If the combined IRS amount and what you paid on the new car total more than your state income tax paid, you can deduct your sales tax in place of your state income tax. I think this is the last year for this. It should lower my federal taxes by about $200.
 

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In Maryland you pay tax on the sale price of the vehicle. But, it seems to me that you could get the dealer to give you less for your trade and reduce the sale price (it's all the same to them) and get around this issue.
 

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When I leased my 1999 Camry, I had to pay sales tax on the full $23,300 negotiated sale price. After 3 years, I liked the car enough to buy it at the end of the lease for about $14,000. Would you beleive that in Illinois, I had to pay sales tax on the $14,000 residual value also, even though I had paid full tax at the time of the lease. Some people say you only pay tax on the non residual portion. In Illinois, this is not true.
 

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In California you pay tax on the purchase price of the vehicle. Doesn't matter if you have a trade in or not, you pay the same amount of tax.
Between that and outrageous registration fees, it suxs owning a vehicle in CA.
 
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