Which States Have No Sales Tax on Cars? A Complete Guide

Purchasing a vehicle is one of the most expensive investments many people make, especially when buying new cars. Aside from the base purchase price, several additional costs come into play, and one of the most significant is the sales tax. While most U.S. states impose a sales tax on car purchases — ranging from a few percent to over 10% — a handful of states provide a financial advantage by exempting cars from traditional sales tax. Whether you’re in the market for a new car or simply budgeting for your next purchase, knowing which states offer no sales tax on vehicles is crucial.

In this article, we’ll explore the states with no sales tax on cars, how they handle alternative taxes or fees, and what this means for your overall budget. We’ll also dive into how this unique exemption can impact your decision when purchasing a vehicle, especially if you’re considering buying across state lines.

Understanding Sales Tax on Cars

Before we delve into the states with zero sales tax on automobile purchases, it’s essential to understand what sales tax on cars means. In most states, when you buy a new or used vehicle, you are required to pay a percentage of the purchase price as sales tax. This tax is collected by the department of motor vehicles (DMV) or a similar agency at the time of vehicle registration.

Most states set their sales tax rate between 2.5% and 7%, with some local jurisdictions tacking on additional taxes that can push the combined total to 10% or more. In many cases, the sales tax applies to the vehicle’s sale price, minus any trade-in value.

For example, if you buy a car for $30,000 and trade in your current vehicle for $5,000, the taxable price might be $25,000. If you live in a state with a 6% sales tax, you’d owe $1,500 in taxes at the time of purchase. In states without this tax, you could potentially eliminate that entire expense.

Main States with No Sales Tax on Cars

Seven U.S. states do not impose a general sales tax on cars, making them attractive options for savvy buyers looking to save on vehicle purchases. These are:

• New Hampshire
• Oregon
• Montana
• Alaska
• Delaware

It is worth noting that while these five states impose no statewide sales tax on vehicle purchases, others may have alternative taxes or fees that buyers should be aware of.

Let’s explore each of these states in more detail to understand how they handle vehicle taxation and what other costs might apply.

New Hampshire

New Hampshire is well-known for being tax-friendly, with neither a general sales tax nor income tax on wages. When it comes to vehicle purchases, this extends to no state sales tax. However, New Hampshire does impose a title and registration fee based on the vehicle’s sale price.

The statewide titling fee in New Hampshire is $24, plus a registration fee depending on the vehicle type and weight. Additionally, a county motor vehicle office might charge a service fee, but these are minimal and pale in comparison to paying a 6% or 7% sales tax on the vehicle’s total price.

Oregon

Oregon also does not charge a sales tax on vehicle purchases, making it a popular destination for shoppers from neighboring states like Washington and California, where sales tax on cars can reach high levels.

While Oregon buyers won’t pay a sales tax, they must pay registration and title fees when purchasing any vehicle. For new vehicles, Oregon charges a $75 title fee and a registration fee, which varies depending on the vehicle’s age and type. For used vehicles, this includes an $85 title fee, plus a registration fee based on weight and model year.

Importantly, Oregon does not assess vehicle taxes like property taxes annually, further reducing the long-term costs for vehicle ownership.

Montana

Montana does not charge a general sales tax on most items, including car purchases. That alone makes it a standout among U.S. states.

While there’s no sales tax, Montana imposes a vehicle registration fee that is calculated based on the vehicle’s weight and the mileage. This fee can range from $125 to $500 depending on the type of vehicle and its weight classification. Montana is also one of the few states where there is no requirement for car inspections, which can translate into further savings.

For residents and dealers looking to purchase multiple vehicles, Montana’s tax policy offers a significant financial advantage.

Alaska

Alaska doesn’t have a statewide sales tax, thanks to the state generating significant revenue from oil and gas. As a result, individual cities and boroughs in Alaska may impose local sales taxes, but many areas do not. Since car sales fall under local jurisdiction, the sales tax is generally minimal or non-existent in over 80% of Alaskan municipalities, though this can vary by location.

In lieu of a traditional sales tax, Alaska collects vehicle registration and titling fees. These are relatively modest and do not come close to the percentage-based tax found in other states.

Delaware

Delaware is one of the few states with no sales tax at all — not just on cars. From groceries to electronics, Delaware residents enjoy tax-free shopping, a feature that makes it a popular day-trip destination for people from nearby states like Pennsylvania and New Jersey.

For vehicle purchases, Delaware collects a vehicle registration fee based on the vehicle’s weight, and a title fee of $45 if purchased from a dealer. These administrative costs replace the typical state sales tax, and overall, they represent a meaningful tax break for anyone purchasing a new or used car.

States with Limited or Reduced Sales Tax on Cars

While the five states listed above completely eliminate general sales tax on cars, a few other states offer some tax relief, either by reducing, capping, or offsetting the typical sales tax for vehicle purchases. These aren’t true zero-tax states, but they offer value to buyers and are worth mentioning.

Florida

Florida imposes a 6% sales tax on vehicles, but this is capped at $500 for most transactions, making it significantly better than other high-tax states. That means even if you buy a $50,000 vehicle, you’d only pay $500 in sales tax instead of a full 6% ($3,000). However, certain fees, like title ($75) and registration ($225-$350+, depending on vehicle type), apply.

This cap can still save buyers thousands of dollars, especially if they purchase a luxury or high-end used vehicle.

New Mexico

New Mexico also offers a sales tax cap, but it’s even lower than Florida’s. The state caps sales tax on vehicles at $4,000. The state’s general tax rate is 5.125%, but because of the cap, a vehicle purchase over $78,000 won’t cost more than $4,000 in sales tax.

For those looking at expensive vehicles, this can be a key advantage compared to states with uncapped vehicle sales taxes.

Other Considerations and Potential Pitfalls

Even in the states with no sales tax on vehicle purchases, there are important details and exceptions that can affect your experience. Be aware of the following nuances to avoid surprises at the DMV.

Taxation for Out-of-State Purchases

If you’re buying a car in one of the no-sales-tax states but live elsewhere, you may still end up paying your home state’s vehicle tax. That’s because many states require residents to pay the local sales tax if they purchase a vehicle outside their home state but register and use it locally.

For instance, if you live in a state with 7% sales tax and buy a car in Montana, you may still owe that 7% tax when you go to register the car back home. Always check your home state’s motor vehicle office policy on this matter before making any cross-state purchase.

Dealer Fees and Other Charges

While these states typically have no sales tax, dealerships might add administrative or processing fees that can offset some of the tax savings. These fees are separate from the tax system and are optional or subject to negotiation.

Always ask for a full itemized breakdown of the vehicle cost, including fees, during your negotiation process.

Misconceptions: “No Sales Tax” ≠ “No Taxes”

Remember: not having a sales tax doesn’t mean the vehicle is completely tax-free. You’ll likely still pay registration fees, title fees, and possibly use taxes. These fees are usually much lower than traditional sales tax and are often collected at the time of registration.

Additionally, some no-tax states may assess local taxes or excise taxes indirectly. For example, local municipalities in Alaska can charge local sales tax depending on location, though most do not.

You should always contact the local DMV or review comprehensive state vehicle tax guides before sealing a deal.

Financial Impacts and Practical Scenarios

Let’s look at a few real-world situations in which purchasing a car in a no-sales-tax state can significantly affect your bottom line.

Scenario #1: Buying a New SUV in Oregon

Imagine you’re interested in buying a brand-new SUV that retails for $45,000. If you purchase this vehicle in Oregon, you’ll pay no state sales tax, only $75 for the title and a registration fee based on the vehicle’s type and weight — let’s estimate $200 in total fees.

In a state with a 7% sales tax, like Georgia, you’d pay $3,150 in sales taxes upfront. Even with additional fees, you’re saving significantly by choosing Oregon as your purchasing destination — assuming you can navigate the logistics of registration in your home state.

Scenario #2: High-End Car Buyer in Delaware

Let’s say you’re planning to purchase a high-end used car for $100,000 — a luxury model like a Tesla Model S or BMW 7 Series. Delaware residents benefit from zero sales tax on that vehicle, possibly saving $6,000 or more depending on their state’s typical tax rate.

Again, remember to check whether you’ll be assessed taxes by your home state if you’re an out-of-state buyer in Delaware.

Scenario #3: Truck Buyer in Montana

Montana’s tax system is especially attractive to truck buyers. If you’re buying a heavy-duty truck that costs $75,000 in Montana, you’ll avoid the typical sales tax (often 6–9%) and instead be subject to a registration fee based on weight — typically between $150 and $400.

Such buyers might find it cost-effective to set up residence temporarily in Montana, especially if purchasing for business purposes or with a legal plan to handle registration.

How to Maximize Your Savings When Buying a No-Sales-Tax Vehicle

To truly benefit from a no-sales-tax vehicle purchase, you need to consider several factors beyond just the sticker price. Here are some steps to follow:

1. Verify your state’s rules on out-of-state vehicle purchases and tax reciprocity agreements.
2. Know the total cost beyond sales tax — factor in title fees, registration costs, insurance, and potential shipping or dealership fees.
3. Check credit and loan implications if you’re financing the car. If purchasing across state lines, your state may have certain requirements for insured vehicles registered with out-of-state loans.
4. Plan your trip and registration logistics — some states make out-of-state vehicle registration easier, while others impose additional paperwork or fees.
5. Research incentives — some states provide rebates, green car credits, or other benefits to buyers even without sales tax.

Beyond Car Sales Tax: State Tax Friendliness and Overall Budgeting

States with no sales tax on vehicles often have broader tax-friendly policies. For example, states like Alaska, New Hampshire, and Delaware also have no income tax or significantly lower property taxes than the national average. These policy decisions are often intentional — attracting businesses and residents by reducing the tax burden.

If you’re relocating, starting a business, or interested in cost-efficient living, buying a car in these states — or even choosing to reside there — can lead to substantial long-term savings.

Here’s a table that summarizes the no-sales-tax states, along with key title and registration fees:

Conclusion: Choose Your Car Purchase State Wisely

While only a handful of U.S. states offer no sales tax on cars, this seemingly niche benefit can have substantial financial implications. Whether you’re looking to buy a daily commuter, an off-road adventure vehicle, or a luxury sedan, taking advantage of one of these states could save you thousands.

Before making a cross-state purchase or leveraging the policies of tax-exempt jurisdictions, conduct thorough research into the total cost of ownership, including registration, title, insurance, and compliance with your home state’s motor vehicle laws.

And if you’re open to relocation or lifestyle changes, states like New Hampshire and Alaska can offer broader tax advantages beyond car purchases — making them all the more appealing for both short-term savings and long-term living.

Ultimately, choosing the right place to buy your next car starts with knowing not just the sticker price, but the full financial picture — and sometimes, that means looking across state borders.

Which states have no sales tax on cars?

There are a few states in the U.S. that do not charge a traditional sales tax on vehicle purchases. These states are New Hampshire, Oregon, Delaware, Montana, and Alaska. However, it’s important to note that while they don’t impose a statewide sales tax on cars, individual counties or municipalities may still collect local taxes or fees that could impact the final cost of a vehicle. This makes the purchasing experience vary depending on where you buy the car even within the same state.

Additionally, some of these states have other types of fees or taxes that may offset the benefit of not having a traditional sales tax. For example, Alaska has no statewide sales tax but allows local jurisdictions to collect their own sales taxes. Similarly, while Oregon eliminated its car sales tax in favor of higher registration fees, so buyers should consider all associated costs. Understanding the complete tax picture in these states helps car buyers make informed decisions.

Why do some states not charge sales tax on cars?

Some states choose not to charge a sales tax on cars as part of economic development or consumer incentive strategies. These tax policies are often designed to attract more car buyers from neighboring states, boosting local auto dealerships and increasing economic activity. The absence of a traditional car sales tax may also be balanced by other revenue-generating methods, such as higher registration fees, property taxes, or broader sales tax rates applied to other goods and services.

In some cases, the legislative structure and budgetary needs of the state influence the decision. States with strong budgets or alternative revenue sources may opt to exclude car sales tax to remain competitive with neighboring states. For example, Oregon relies less on a car sales tax and more on stringent regulatory fees to fund infrastructure and transportation projects. These decisions reflect a broader economic and political philosophy that varies from state to state.

What should I consider when buying a car in a state with no sales tax?

While buying a car in a state that doesn’t charge sales tax on vehicles may seem financially advantageous, there are several other factors to consider. You should evaluate the cost of registration, insurance, and any local taxes or fees that might apply. For instance, Oregon doesn’t have a car sales tax but imposes a higher vehicle registration fee, which could affect the overall savings. Also, you may still be required to pay taxes from your home state if it imposes tax on the purchase of vehicles regardless of where the sale occurred.

Another important consideration is the logistics of purchasing the vehicle. Buying a car out of state typically involves registration and titling procedures in your home state after purchase. You may need to account for transportation costs, temporary registration, and any documentation fees. Always research the requirements of both the state where you are purchasing the car and the state where you plan to register it to avoid unexpected expenses or compliance issues.

Do I still have to pay tax if I buy a car in a no-sales-tax state but live elsewhere?

Yes, in many cases, you will still owe taxes if you buy a car in a state with no sales tax but register it in your home state. Most states require residents to pay their local sales or use tax on vehicle purchases, even if the car was bought in another state with no sales tax. The tax is typically based on the rate in effect where you reside, and you may be able to receive a credit for any fees paid in the selling state.

It’s crucial to check with your local department of motor vehicles (DMV) or tax authority to determine how much, if any, tax you will owe. For example, if you live in Washington and buy a car in Oregon (which has no car sales tax), you will likely owe Washington’s sales tax upon registration. Failing to pay these taxes or understand your obligations can lead to penalties, so understanding the full implications of cross-state vehicle purchases is essential.

How are car registration fees different in no-sales-tax states?

In states that do not impose a traditional sales tax on cars, registration fees often tend to be higher to compensate for the lost revenue. For example, Oregon has no car sales tax, but its vehicle registration fees are among the highest in the country. These increased fees help fund roadway maintenance, transportation infrastructure, and other state projects typically reliant on sales tax revenues.

Car buyers should compare registration costs between their home state and the tax-free state they are considering for purchase. Sometimes, the long-term savings from a lower or zero sales tax can be offset by a higher initial registration fee or more expensive annual renewals. It’s also important to consider whether these fees go toward services or improvements that could benefit the driver directly, such as better roads or enhanced vehicle services through the DMV.

Does Alaska have a sales tax on cars?

Alaska does not have a statewide sales tax on car purchases, but it allows individual municipalities and boroughs to collect local sales taxes. This means that while many areas in Alaska do not charge a car sales tax, others may impose a local rate that could significantly impact the purchase cost. Depending on the city or region, local sales taxes can range from 1% to as high as 7.5%, which is important to verify before purchasing a vehicle in the state.

Additionally, Alaska collects vehicle registration fees and an excise tax in some cases, which may vary depending on the vehicle type and its intended use. These fees are often used to support local government services and infrastructure development. Buyers from other states contemplating a car purchase in Alaska should also be aware that they may still be required to pay taxes and fees in their home state if local laws require it.

Are there other taxes or fees on cars in no-sales-tax states?

Yes, even in states without a traditional car sales tax, various other taxes and fees are typically in place that can add to the vehicle purchase cost. For example, many of these states impose hefty vehicle registration fees, excise taxes, or administrative fees to offset the loss of sales tax revenue. These fees can vary based on the vehicle’s value, weight, or type and can sometimes negate the upfront savings of not having a sales tax.

States also often require fees for title transfers, license plates, emissions testing, and other bureaucratic procedures. These ancillary costs are important to account for when purchasing a vehicle in or from a no-sales-tax state. It is always recommended to contact your local DMV or a professional vehicle registration service to understand the full financial impact of your purchase, ensuring no hidden costs catch you by surprise after the transaction.