Arizona Sales Tax on Cars

Arizona is the 6th largest state in the Southwestern United States of America. There are several taxes to pay in this state – some of them are income tax, sales tax, an aircraft use tax, residential rental, and peer-to-peer car rental taxes, etc.

Its tax system takes the 23rd position in the recent State Business Tax Climate Index. Arizona has a 5.60% state sales tax rate, a progressive individual income tax rate ranging from 2.59% to 4.50%, a 4.90% corporate income tax rate, and an 8.40 percent combined state and local sales tax rate. 

One of the largest purchases made in Arizona is that of cars, and there is a sales tax on them. The basic Arizona sales tax on cars is 6.6%, which applies to both new and used cars, and the rate may be higher depending on the city or county where the car is purchased. County tax can be up to 0.6% while city tax can be up to 2.5%.

This page explains Arizona sales tax, its sales tax on cars, exemptions, calculations, cases of trade-ins or incentives, and much more.

How much is the Arizona Sales Tax Rate?

There are close to 99 local tax jurisdictions in the state, and they take an average local tax of 2.407%. Basically, the Arizona sales tax rate is 5.6%, and it permits the local governments to collect up to 5.3% local sales tax. When joined with the state sales tax, Arizona’s highest sales tax rate turns out to be 11.1% in the city of Tucson.

What is Arizona Sales Tax on Cars?

Arizona sales tax on cars is 6.6% for all cars (including the basic state sales tax of 5.6% and other local government sales tax rates). The county and city where the car is being bought may influence the tax rate too, thus making it high. The county tax can be up to 0.7%, and the city tax can be up to 2.5%. Going with a budget to purchase a car is very important, though there are other fees that may emerge, some of them being registration, title, and license plate fees.

How do You Figure Sales Tax on a Car in Arizona?

The car sales tax in Arizona is based on its assessed value. The assessed value is 60 percent of the manufacturer’s base retail price, reduced by 16.25% for each year since the vehicle was first registered in Arizona.

How are Car Trade-Ins Taxed in Arizona?

Most car dealers permit you to trade in your old car for a credit that is placed on the cost of a new one, and with this, you can save money. Trade-ins are one of the ways a customer can get past Arizona’s car sales tax.

This is how trade-ins work. For instance, you can trade in your old car and receive a $6,000 credit, which is against the price of $12,000 for a new car, thus saving you an extra $6,000.

In this case, the taxable cost of the new car will be $6,000 because sales tax does not apply to trade-ins. To further expound on this, it means that you will pay sales tax on $6,000 worth of the car.

How are Rebates and Dealer Incentives Taxed?

Arizona sales tax on cars is applied after rebates or cash incentives have been added to the price. These cash incentives or manufacturer rebates are offered by vendors on the main price of the car to help enhance or encourage sales. Most people refer to it as a bonus or discount. As an example, a vendor may decide to give a cash rebate of $2,000 on a $15,000 car now this means that the client will pay $13,000.

Remember that car sales tax in Arizona is applied after rebates or incentives have been made so in this case, the customer will pay taxes just as if the main cost of the car is $13,000.

How to Calculate Sales Tax on a Car In Arizona

When you want to calculate Arizona sales tax on cars, ensure you know the sales tax rate and remove all trade-ins, incentives, and rebates before you start. After this, multiply the car price by the sales tax fee.

For instance, you are buying a car for $55,000 and the state sales tax is 6.6%. Then you trade in a car for $6,000 and get a $3,000 incentive. Remember, there’s no sales tax on trade-ins, rebates, or incentives, so you have to deduct $9,000 from the price of the car, leaving $46,000, which is the actual taxable amount.

What you ought to do is to multiply $46,000 by 0.066 to get $3,036 when added to $46,000, it gives a total purchase cost of $49,036.

Use this guide to fully comprehend:

Example of Car Sales Tax in Arizona:

Initial Car Price: $55,000
Sales Tax Rate: 6.6%
Trade-In Amount: $6,000
Rebate/Incentive Amount: $3,000
Sales Tax = ($55,000 – $6,000 – $3,000) * 0.066
Sales Tax = $3,036
Total new price: $49,036

Exemptions From Arizona Car Sales Tax

There are some exemptions from paying sales tax in the state. This means you will not have to worry about car sales tax at all but you can only get this exemption if you are qualified for it. Also, you are qualified to apply for exemption on car sales tax in Arizona if: 

• You use an electric vehicle
• You are a survivor (or one of the survivors) of a fallen military member
• You are a health worker
• You face any disability condition
• You are a staff of a religious or non-profit organization
• You are either a functional or old military member
• You are a tribal member hence you live on the reservation
• You are widowed (widow or widower)
• You register your car outside the state though you must show proof that you registered it outside the state before you will be allowed to use it in Arizona
• You apply for file credits

How to Estimate Arizona Tax, Title, and Registration Fees

Apart from car sales tax in the state, there are other fees to pay, and they include registration, license plate transfer fee, title fee, and documentation fee.

Documentation Fee

This fee covers the costs that the vendor or car dealer encountered while preparing and filing the sales contract, sales tax documents, and other documents.

The average documentation fee in Arizona is $410, and it can differ from vendor to vendor because the law of Arizona does not limit the number of documentation fees a vendor should charge.

Also, some of the extra rates to pay for these fees are stated below:

Cost And Average Cost

Sales tax – 6.6%
Registration fee – $8
Title fee – $4
Air quality research fee – $1.50
Plate transfer fee – $12

There is also a Vehicle License Tax (VLT) in Arizona and it is a yearly amount for the registration of your car which begins at 60% of the manufacturer’s base retail price and is reduced by 16.25% in subsequent years (that is after the first registration).

Arizona Dealership Fees

Some fees that can be charged by most dealers in Arizona include:

• Advertising Fees: up to $500  (this may vary depending on the vendor)
• Transport Fee: $800-$1,700

Tucson Car Sales Tax

Tucson is the home of the University of Arizona. It is a city in and the county seat of Pima County, Arizona, United States.

Also, listed below is information about Tucson’s car sales tax.

• In Tucson, the car sales tax is 8.70% of the selling price.
• If there is a trade-in, you will be taxed on the difference after the trade-in.
• The tax is based on the car’s selling price, not the cost of the car.
• You will pay this tax when you register the car in Arizona.
• The tax is in addition to other taxes that you may have to pay on the car.

Arizona Used Car Sales Tax

Here, there’s no unique treatment given to any car; all cars (old and new) are treated the same way. Hence, the Arizona sales tax on used cars is still 6.6%, and it is added to your bill. You also have to add your local or county sales tax to that amount to get the total combined sales tax on your vehicle.

Conclusion

One of the purchases in Arizona that brings a lot of income is car sales. The sales tax on these cars is 6.6% though the city or county where the purchase is being made can affect the total sales tax. There are some exemptions from these taxes and it only applies to those who qualify ( certain criteria must be met). 

Also, there are credits, incentives, and rebates that are given by vendors to encourage sales, and if you are lucky enough, you can get them. Arizona sales tax on cars is applied to all vehicles, whether they are old or new. 

FAQs on Arizona Sales Tax on Cars

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