Navigating the sale, purchase, gifting, or donation of a vehicle in Maryland involves understanding various regulations, and a key component is the Maryland Automobile Sales Tax, officially known as excise tax. This guide clarifies how this tax applies to private vehicle transactions in Maryland, ensuring both buyers and sellers are well-informed.
It’s important to note that private vehicle sales in Maryland, those not involving licensed dealerships, are not overseen by the Maryland Motor Vehicle Administration (MVA) in terms of warranties or consumer rights. Therefore, both parties must be diligent and informed about all aspects of the transaction, including the applicable sales tax. Always maintain copies of ownership transfer documents for your records.
Maryland Automobile Sales Tax for Vehicle Sellers
If you’re selling your vehicle privately in Maryland, understanding your responsibilities regarding sales tax is crucial.
Transferring Vehicle Ownership and Sales Tax Implications
When you sell a vehicle, you must officially assign it to the new owner by completing the “Assignment of Ownership” section on the back of the Certificate of Title. This requires your signature, printed name, and the buyer’s name and address. Accurate completion is vital; an incomplete title, or “open” title, will not be accepted by the MVA for registration.
ASSIGNMENT OF OWNERSHIP FORM
You also need to record the vehicle’s odometer reading and, if there’s space, the purchase price and sale date on the title.
Do You Need a Notarized Bill of Sale for Sales Tax Purposes?
Whether you need a notary or a Bill of Sale often depends on the vehicle’s age and sale price, particularly in relation to Maryland automobile sales tax. For vehicles seven years old or newer sold for less than their book value, a notarized MVA Bill of Sale (form # VR-181) is required. This is because the sales tax calculation might be based on the book value if the sale price is significantly lower, especially for newer vehicles. Contact the MVA Customer Service Center to verify your vehicle’s book value if needed.
A notarized Bill of Sale isn’t necessary if the sale price exceeds the book value or if the vehicle is older than seven years. However, if a Bill of Sale is not notarized, and the sale price is within $500 of the vehicle’s retail value according to the National Publication of Used Car Values, the MVA will generally accept the purchase price listed on the title for sales tax calculation.
Ensuring Clear Title and Sales Tax Readiness
It is essential to provide the buyer with the original title and any Security of Interest Filing, demonstrating that any liens on the vehicle have been cleared. Maryland automobile sales tax implications are smoother when the title is clean and ready for transfer.
If there was a lien, the “Notice of Security Interest Filing” is crucial proof for the MVA that the vehicle is paid off, allowing the buyer to obtain a new title without sales tax complications related to outstanding liens. If this document is unavailable, a letter from the financial institution confirming the lien release is acceptable. The lien must be settled before ownership transfer to avoid issues with sales tax and title processing.
License Plates and Insurance: Avoiding Sales Tax Penalties
Before canceling your insurance, return the license plates to the MVA. Maryland imposes strict penalties for uninsured vehicles, starting at $150 for the first uninsured day. Unless you are transferring the plates to a new vehicle, returning them promptly after the sale and before canceling insurance is vital to avoid unnecessary fees that can indirectly relate to the sales transaction period.
Maryland Automobile Sales Tax for Vehicle Buyers
Purchasing a vehicle privately in Maryland requires you to visit an MVA full-service office to transfer ownership and handle the Maryland automobile sales tax, or excise tax. You will need to register the vehicle and obtain new license plates before legally driving it.
Required Documents and Sales Tax Assessment
To title and register your newly purchased vehicle, you’ll need the Certificate of Title, properly assigned to you by the seller. As the buyer, you must sign the title in the “Assignment of Ownership” section. Co-buyers must also sign. Ensure your name and address are accurately recorded on the title.
ASSIGNMENT OF OWNERSHIP FORM
Complete the “Application for Title and Registration” section, including signatures from all buyers. Names on both sections must match. For out-of-state titles, you’ll need to complete form # VR-005, “MVA Application for Maryland Title.”
Liens and Sales Tax Processing
If the vehicle was financed, ensure you have either the “Notice of Security Interest Filing” or a release letter from the financial institution. This is crucial for the MVA to process the title transfer and correctly apply Maryland automobile sales tax.
Bill of Sale and Excise Tax Calculation
A notarized MVA Bill of Sale (form # VR-181) is needed if the purchase price is below book value for vehicles seven years old or newer. This is directly related to how Maryland calculates its excise tax.
Maryland’s excise tax, the automobile sales tax, is 6% of the vehicle’s book value or 6% of the purchase price on a notarized Bill of Sale for vehicles seven years old or newer. For vehicles older than seven years, the tax is based on the purchase price. The minimum excise tax in Maryland is $38.40, based on a minimum vehicle value of $640. Understanding this calculation is key to budgeting for your vehicle purchase.
Vehicle Inspection and Temporary Registration
Used vehicles require a Maryland Safety Inspection before registration. Obtain this from a licensed Maryland inspection station, and ensure the “Maryland Safety Inspection Certificate” is valid (90 days). Verify that the Vehicle Identification Number (VIN) on the inspection certificate matches all other documents.
For vehicles needing inspection or repairs before registration, a Temporary Registration is available. This 30-day registration allows you to legally transport the vehicle for inspection and repairs. While you pay title fees, taxes (including estimated sales tax), and temporary registration fees upfront, the full registration fee is due upon submission of the Safety Inspection Certificate.
License Plates, Insurance, and Finalizing Sales Tax
You’ll need to provide proof of Maryland insurance to register your vehicle and obtain license plates. Ensure your insurance is active before you drive the vehicle legally.
Vehicle History and Sales Tax Considerations
Always review the vehicle’s title history. A salvaged title might indicate extensive damage, which could affect the vehicle’s value and potentially, though indirectly, the sales tax assessment if value is considered. Maryland brands salvage certificates based on damage severity, rebuildability, or if the vehicle was stolen or abandoned.
For a vehicle with a rebuilt salvage title due to significant damage or abandonment, the title will be branded “rebuilt salvage.” Vehicles branded “not rebuildable” cannot be titled in Maryland. Salvaged vehicles require both a Maryland Salvage Inspection and a Maryland Safety Inspection before registration and sales tax finalization.
Requesting a vehicle history report from the MVA (form # DR-057) can provide title information within Maryland. While privacy laws limit personal information, you can verify vehicle details. For vehicles previously registered out-of-state, contact the respective state’s DMV for history. Commercial vehicle history services are also available, some offering free checks, typically requiring the VIN.
Transaction Tips for Smooth Sales Tax Processing
As a buyer, verify the seller has the Certificate of Title and Security Interest Filing (if applicable). Check that the seller’s name matches the title, the title is unaltered, and the VIN matches the vehicle. A properly completed title avoids issues during registration and sales tax processing. Ensure the “Assignment of Ownership” section is correctly filled, as incomplete information can cause MVA rejection.
For sales tax accuracy, especially for newer, lower-priced vehicles, be prepared to use a notarized MVA Bill of Sale if the sale price is significantly below book value.
Donating a Vehicle and Sales Tax Exemptions
Donating a vehicle to charity in Maryland also requires proper title transfer. Assign the title to the charity, similar to a sale, including the charity’s name and address in the “Assignment of Ownership” section. Leaving it blank can create title issues and potentially affect your tax deduction. Record the odometer reading on the title.
For sales tax exemption on donated vehicles, ensure the title is correctly transferred to the charity. While donations themselves are not sales, the transfer process mirrors a sale for title purposes. Do not leave plates on the donated vehicle; return them to the MVA after title transfer to avoid insurance and potential sales tax related penalties linked to registration. Charities will provide a receipt for tax deduction purposes.
Gifting a Vehicle and Sales Tax Exemptions
Maryland offers sales tax exemptions when gifting vehicles to immediate family members. Qualifying family members include spouses, children, parents, siblings, grandparents, grandchildren, stepfamily, in-laws, aunts/uncles (to nieces/nephews, if over 65). Proof of relationship is required if last names differ, such as marriage or birth certificates. For gifts from aunts/uncles to nieces/nephews, forms # VR-299 and # VR-103 are needed.
Sales Tax Exemption Requirements for Gifts
To gift a vehicle and claim sales tax exemption, the vehicle must already be titled in Maryland. Submit form # VR-103, “Gift Certification,” with the Certificate of Title. The gifting process on the title mirrors a sale, with the giver as “seller” and receiver as “buyer.” For adding a name to a title as a gift, include both names in the “buyer” field. Lienholder approval is needed if adding or removing names while a lien exists. Write “gift” in the purchase price section and the transaction date.
Inspection and Sales Tax Exemption
Transfers between spouses or parent and child are exempt from Maryland Safety Inspection if the vehicle is already Maryland-titled, further simplifying sales tax exempt gift transfers. Other family gift transfers require inspection.
Security Interest and Sales Tax for Gifts
Ensure any liens are addressed. The recipient needs the “Notice of Security Interest Filing” if the vehicle was financed and is now paid off, or a release letter from the financial institution.
Excise Tax (Sales Tax) Exemption Details for Gifts
Gifts of Maryland-titled vehicles to qualifying family members are excise tax (sales tax) exempt. Gifts from out-of-state are not exempt unless the vehicle was previously Maryland-titled and the family relationship qualifies.
Plate Transfer and Registration for Gifted Vehicles
Insurance information is required for registration of gifted vehicles. Plates can be transferred in specific family transfer scenarios (e.g., between spouses, parent-child) but new plates are often required for other family gifts. Plate transfer rules are detailed in the original document.
APPLICATION FOR TITLE AND REGISTRATION
If the giver lacks the title, they must first obtain a duplicate title (form # VR-018) before gifting.
Understanding Vehicle Dealers: Licensed vs. Unlicensed and Sales Tax
Be aware of the difference between licensed vehicle dealers and “curbstoners,” unlicensed dealers. Curbstoners may sell vehicles in public places and often avoid sales tax regulations. Signs of a curbstoner include titles not in the seller’s name, multiple vehicles listed with the same number, or out-of-state/temporary/dealer/missing plates.
Licensed Maryland dealers must display their business license and operate from licensed locations. Salespeople must also be licensed. Different dealer licenses authorize different sales types (new, used, wholesale). Wholesale dealers cannot sell to the public, highlighting the regulated nature of vehicle sales and sales tax collection through licensed entities.
This comprehensive guide aims to clarify Maryland automobile sales tax within private vehicle transactions, helping buyers and sellers navigate these processes effectively and compliantly.
