Indiana Vehicle Sales Tax: Definition and Exemption

Indiana Vehicle Sales Tax

Why is Indiana a better state for drivers? It may be the least expensive state in the union to purchase a secondhand vehicle. Even with a cheap purchase price, there are some expenses that you just cannot avoid, such as the cost of sales tax on your vehicle! However, what is the vehicle sales tax in Indiana?  There are Indiana car sales tax exemptions, particularly for those who meet the requirements.

No county or local taxes are applied to your purchase, unlike in certain states. Thus, the state sales tax rate is the only thing you need to think about when purchasing a new or used car. What is the Indiana vehicle sales tax amount, and when is it due? To learn more about it in depth, keep reading our article! 

Indiana Vehicle Sales Tax: Definition

A “motor vehicle” is defined as a vehicle that, if it were utilized in Indiana, would be liable to the yearly license excise tax under IC 6-6-5. This covers vehicles weighing 11,000 pounds or less, such as trucks, cars, and motorbikes. Trailers, RVs, and trucks weighing more than 11,000 pounds are not included in this. 

Indiana Vehicle Sales Tax is the tax one pays when one buys a car in Indiana, and if the car will be utilized in Indiana, the tax ought to be paid.

Which Indiana tax laws apply when buying a car?

When you purchase a car, you must pay excise tax to register the vehicle as well as Indiana sales tax. At the time of registration, the state adds a sales tax of 7% to the entire cost of the vehicle. Manufacturer discounts are not subtracted from the sales price for tax purposes, even when trade or dealer reductions are. Let’s take an example where you decide to swap in your eight-year-old sedan for a dealer-sold $17,000 two-year SUV. You receive $4,000 from the dealer for your trade-in. Your taxable selling price will drop to $13,000 as a result, and you will be responsible for $910 in sales tax ($13,000 * 7%).

Sales Tax Application in General

All purchases of automobiles and trailers bought in Indiana, unless there is a legal exemption, are

subject to the sales and use tax of Indiana. This covers transactions in which the buyer plans to register, license, and/or title the car or trailer right away so it can be used in another state.

Within 30 days of the sale, if the vehicle is to be relocated and titled in a different state or nation, Indiana sales tax may be applied at the other state or nation’s rate rather than the standard 7% rate. The dealer is still required to collect Indiana sales tax and send it to the Indiana Department of Revenue, even if the other state’s sales tax rate is applicable. For further information, please refer to Sales Tax Information Bulletin #84 (which can be accessed online at in.gov/dor/legal-resources/tax-library/informationbulletins/sales-tax-information-bulletins/) and the department’s website, which includes the “Dealer Information” page at in.gov/dor/business-tax/dealer-information/.

In Indiana, How Are Vehicle Trade-Ins Taxed?

There are deals available from many dealers if you trade in your old automobile for credit toward a new car purchase. Since the car sales tax in Indiana only applies to the total cost of your ticket, the value of your trade-in is tax-free. 

The trader exchanges their old Hyundai Veloster for a $28,000 Honda Accord Sport in Indianapolis, receiving a $3,500 credit. Just $24,500 of the purchase will be subject to Marion County’s 7% combined state and municipal sales tax. 

How Much Indiana Sales Tax Is Due on an Automobile

Since there is only one 7% sales tax applied statewide in Indiana, figuring out the sales tax on an automobile is an easy task. 

Indiana Car Sales Tax Exemptions

Indiana applies sales tax to all car purchases, but those meeting certain criteria may not be required to pay it.

  • You operate as a tax-exempt company.
  • You are not a resident of the state where the car was purchased.
  • The truck is exclusively in the direct production of mining, harvesting, refining, or producing agricultural commodities. 
  • The truck is a ready-mix concrete truck that meets the requirements of the exemption for manufacturing machinery and equipment.

FAQs

Can You Sell a car for $1 in Indiana?

To put it succinctly, sure. Selling a car for $1 doesn’t cover capital gains or gift taxes, but the buyer must pay the state’s sales tax upon title transfer.

What Is Indiana’s Sales Tax on a $100 Purchase?

There are no local sales taxes in Indiana, and the sales tax rate is 7%. Therefore, it is simple to collect sales tax in Indiana; merely collect the 7% state sales tax rate.

What Is the Price of Plate Transfers in Indiana?

A $9.75

You can exchange your current license plate for a recently sold car within 31 days of purchasing a new license plate. The new car needs to be titled first; typically, registration and titling can be completed simultaneously. Additionally, a $9.75 plate transfer charge is required.

In Indiana, What Is $100,000 After Taxes?

If you earn $100,000 annually in Indiana, you will be required to pay $25,648 in taxes. This implies that you will receive $74,352 in net compensation annually, or $6,196 monthly. You pay taxes at a marginal rate of 34.5% and an average of 25.7%.

Final Thoughts

A car buyer must take the sales tax rate into account. The sales tax rate in the Hoosier State is 7% when buying a car. When preparing your budget for a car purchase, keep in mind that this rate applies to the purchase price of the vehicle. 

When purchasing a new car, it’s crucial to note that the value of your trade-in car won’t be taxed if you have one to give.

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