Buying or selling a vehicle may seem like a small task, but it's easy to get bogged down in the fees and legal papers that follow a sale. The Pennsylvania sales tax on cars can significantly raise the cost of a vehicle, and making sure the vehicle is legal for you to drive takes a little legwork. Before you buy or sell a vehicle, know your way around the Pennsylvania sales taxes and the paperwork needed to make your vehicle street-legal.
Pennsylvania Tax on Car Purchases
Vehicle purchases are large sales. Those sales grow even larger when Pennsylvania's sales tax is factored in. Any vehicle that's designed to be used on the highway, whether it's a sedan, boat trailer, camper, or even a mobile home, is subject to sales tax because it is personal property.
According to the Pennsylvania Department of Revenue, the state sales tax rate for motor vehicles is 6 percent, which is the same rate for other items that are subject to sales tax. If the vehicle is registered in Allegheny County, there's also a 1 percent local sales tax. In Philadelphia, there's an additional 2 percent sales tax when you register your vehicle.
When you pay your sales tax, the money goes to the Pennsylvania Department of Transportation. This department acts as a collection agent for the Department of Revenue. Any vehicle sellers, leasing agents, or buyers who pay the sales tax when they apply for the title cannot take advantage of the vendor discount for the sales tax return. This is reserved for those who collect and send sales tax directly to the Department of Revenue.
Taxes aren't the only extra expense you'll take on when purchasing a vehicle. A car purchase will also be subject to licensing, title, and registration fees.
Extra Sales Tax with the Motor Vehicle Understated Value Program (MVUVP)
The MVUVP allows the Department of Revenue to tack on more sales tax to vehicle purchases. This will be done if they deem the sale price to be much lower than the market value of the vehicle. This program was created by the Pennsylvania government to target those who attempt to sell cars well below market value in order to lower the sales tax on the purchased vehicle.
According to the Department of Revenue, the fair market price of a vehicle is decided not by the seller or buyer of the vehicle but by the Pennsylvania state government. Before listing a vehicle for sale or buying a privately sold vehicle, it's a good idea to check the Pennsylvania Department of Revenue's website to read about this program and find the fair market value of the vehicle you're considering selling or buying.
Using a Notary
If the parties in a vehicle sale use a public notary to witness the sale, that public notary may use a list of values from the Department of Revenue to compare the sale price with the current market value.
The Morning Call reports that sometimes the value the Department of Revenue lists is higher than the price Kelly Blue Book claims, which can cause problems for those who have no intention of trying to lower the sales tax of a vehicle. It's up to the parties taking part in the sale to prove to a notary that the vehicle's fair market value is lower than the Department of Revenue's estimate. This can be done by creating a list of things that are wrong with the vehicle.
How Are Rebates and Dealer Incentives Taxed?
Rebates and dealer incentives are meant to draw in customers to purchase vehicles from sellers with the promise of a better deal. The government only applies sales tax to the final cost of the vehicle after rebates are applied.
For example, if a dealership offers a $1000 rebate on a $20,000 vehicle, you will only pay sales tax on $19,000, instead of the original price.
Other Taxes and Fees Applicable to Pennsylvania Car Purchases
In addition to the state and local taxes, there will be other fees due when you purchase a car in Pennsylvania. These fees will be collected by the Pennsylvania Department of Motor Vehicles as you make your vehicle street-legal:
- Title fee: $51
- Registration fee: $35-$84
- Plate transfer fee: $9
Pennsylvania Documentation Fees
When you buy your vehicle from a dealership, you may be required to pay a documentation fee. This fee is meant to cover the cost of the dealership preparing the sales contract and legal paperwork. In Pennsylvania, the average documentation fee is $130, according to the Sales Tax Handbook.. The dealership decides how high these fees are, rather than the Pennsylvania government.
Transferring a Pennsylvania Title
To transfer a title from a vehicle that has previously been titled in Pennsylvania, the seller of the vehicle needs to list the following information on the title itself:
- Buyer's name
- Buyer's address
- Odometer reading at the time of the transfer
- Signatures of both the buyer and seller
The buyer needs to fill out Section D on the front of the title, including lien information if they are financing the vehicle.
Car Registration
After you establish that you are the new owner of a vehicle, you'll have to register it to receive a registration plate. You should be able to apply for registration with the same form you used for your title application. If you already have a Pennsylvania registration plate, a Department of Transportation agent can transfer it for you.
Insurance Requirements
Before a temporary registration plate is issued or your existing registration plate is transferred, you'll need to provide a Department of Transportation agent with proof of insurance. Only these four documents count as proof of insurance:
- An insurance identification card issued by an insurance carrier
- A declaration page of an insurance policy
- A copy of a valid binder of insurance that includes the information on the insurance ID card
- A copy of an application for insurance to the Pennsylvania Assigned Risk Plan
Be sure you know the laws and fees that come with buying a car from a dealership or a private seller before you hand over your money. It may seem like a lot at first, but with a little research, buying a new car can be stress-free when done intelligently.
Sources:
https://revenue-pa.custhelp.com/app/answers/detail/a_id/199/~/what-is-the-motor-vehicle-sales-tax%3F
https://www.salestaxhandbook.com/pennsylvania/sales-tax-vehicles
https://www.mcall.com/news/local/mc-xpm-2012-04-23-mc-vehicle-sales-tax-fraud-20120422-story.html
https://www.caranddriver.com/shopping-advice/a27703340/how-to-sell-a-car/
