Across the country, the Department of Motor Vehicles, or DMV, for each state must collect taxes on some vehicles. However, there are types of vehicles that are exempt from car taxes. It depends on the state and the situation. Here are a few details about tax-exempt vehicles.
Farm Vehicles and Commercial Horse Boarding Vehicles
In New York state, you can get a sales tax exemption for motor vehicles, snowmobiles, trailers, boats, and all-terrain vehicles that you use for farming or in a horse boarding operation. In New York, the term “farming” refers to various activities. These include:
- Agriculture, horticulture, aquaculture, floriculture, and silviculture
- Ranching
- Running an orchard
- Raising animals for fur
- Producing fruit, vegetables, grapes, tree farming (such as Christmas or maple trees), stock, or dairy
- Cultivating crops, cattle, or cattle products
- Nurturing and harvesting woodland items such as timber, firewood, pulpwood, and logs
New York defines a business that boards horses as a company that is located on a minimum of 7 acres of property. Also, the business must host at least 10 horses. However, anyone can be the owners of the animals. To qualify as a commercial boarding organization and to gain tax exemption status for a vehicle, the company must earn $10,000 or more for boarding the animals or produce livestock, crops, or livestock products to sell. The state does not permit tax exemption on vehicles for organizations who race horses.
According to the state, farm production occurs when a business or individual starts the process by readying the soil or another type of growing product or at the start of life for animals intended for farming or for use in the business.
Emergency Service Vehicles
Connecticut does not charge organizations sales tax for vehicles used in emergency situations. However, those who are requesting tax exemption for emergency vehicles must use the vehicles solely to transport people who are suffering from a medical emergency and who are not required to compensate the company for taking them to a medical facility. The person who is buying a vehicle for medical transportation and is requesting tax exemption for it must provide verification that it is being used for this purpose.
Vehicles Used to Train People to Drive
In some places, car dealers donate vehicles to high schools to help them teach students how to drive. Connecticut requires the Board of Education or the high school itself to register driver training vehicles in their name for the car to be tax exempt. If the dealer registers the vehicle in the name of its business, then the state will require taxes to be paid on it. This will be based on the purchase price that the dealer paid to buy the vehicle from the manufacturer.
Interstate Commerce Cars, Trucks, and Buses
Some states do not require the owners of vehicles that are used for interstate commerce to pay taxes on these modes of transportation. To qualify, the vehicles must be operated inside the state’s borders and used solely for the purpose of transporting cargo or passengers. Another stipulation is that the owner of the vehicle can only use it to do interstate business.
Commercial Vehicles
Vehicles like tractor trailers, semis, and commercial trucks are tax exempt as long as the vehicle’s gross weight is heavier than 26,000 pounds or the owner is using it solely for the purposes of interstate trade. For tax exemption status, the owner of the vehicle must use it for business for the one-year period that starts from the day that he or she bought the vehicle. Plan to show the DMV documentation of your interstate commerce activity when you go to the agency to register the vehicle.[2]
Hybrid and Electric Vehicles
If you own a hybrid or an electric vehicle, it may be eligible for tax exemption. For instance, in Connecticut, cars like the Honda Civic Hybrid manufactured from 2003 through 2008 and the Honda Insight manufactured from 2000 through 2007 are eligible for tax exemption. The Toyota Prius manufactured from 2001 through 2008 is on the list too. Visit your state’s DMV website to see what makes and models qualify. Usually, a vehicle must get a minimum of 40 miles per gallon.
Those With Disabilities
In Texas, people with disabilities receive some tax exemptions. This may include exemptions for their cars. The state allows disabled individuals tax exemptions when they purchase items for medical purposes or things that will allow them to get by in their everyday lives independently, such as vehicles. Texas permits a vehicle to be tax exempt if a disabled person needs to adapt it for transportation. For instance, if you or someone you love has an orthopedic disability and must modify a vehicle with a hand control, an accelerator pedal change, or a lift, then Texas will consider the vehicle tax exempt.
For the exemption, you’ll need to fill out a document called the Title Application/Tax Statement form. Be sure to include information confirming that you bought the vehicle to transport a disabled person or that the vehicle will be operated by someone with a disability. Plan to explain what modifications needed to be made to the vehicle for this purpose.
The state does not require you to pay taxes on modification devices nor will you be asked to pay taxes on the labor needed to install them. If there are additional remodeling charges, Texas does not require you to pay sales tax on those charges. The tax exemption does not cover travel trailers or other vehicles that are not meant for transportation.
If you paid the state taxes on an exempt vehicle inadvertently, be sure to request a refund. To do this, just send a letter to the comptroller’s office. Be sure to include information like the social security number of the person who purchased the vehicle, an invoice listing the modifications, and a copy of your county-provided tax receipt. When you buy a vehicle, Texas requires you to pay sales tax at the time of purchase. You’re eligible for tax exemption of a modified car purchase or on a vehicle that you intend to convert soon after buying it.
Non-Residents
In the state of Washington, vehicle dealerships are permitted to sell vehicles or trailers to some consumers without requiring the person or company to pay sales tax. This includes people or companies who are not residents of Washington or even United States citizens. Military members who are stationed in Washington but who are not residents can purchase a vehicle without paying the retail sales tax. Native Americans and tribes are eligible for tax exemption too.
To confirm that you qualify for tax exemption, you will need to show documentation by filling out the proper affidavits. Be sure to keep these forms in case you face an audit. Dealers must make sure that a customer lives out of state by checking a buyer’s driver’s license, a billing statement that includes the person’s address, and an out-of-state tax return.
Personal Property Tax Relief
In Virginia, the Personal Property Tax Relief, or PPTRA, offers tax exemption for an automobile that you register locally in the Commonwealth. To receive an exemption for taxes on a vehicle, you must purchase a passenger car, truck, or motorcycle that weighs less than 7,501 pounds. A few years ago, the state made a change stating that a pickup truck that weighed less than 10,000 pounds could qualify for tax exemption.
The vehicle must be owned, or leased, by a person who is under contract to pay the state’s personal property tax. Also, the vehicle can only be used for business 50% of the time. If you use the vehicle for business, then it does not qualify for tax exemption status under the Personal Property Tax Relief program.
Family Transfers
In California, if you’re buying a vehicle from a family member, then the purchase may be tax exempt. To qualify, you must be related to the seller as a parent, child, grandparent, grandchild, spouse, or sibling. If the person selling the vehicle is a car dealer, then the exemption doesn’t apply, even if you’re related. If you’re applying for a tax exemption, be prepared to confirm your relationship to the person by showing a marriage license, a birth certificate, or another type of official documentation.
Vehicles That Are Tax Exempt
Tax exemptions are one way you can save money on your vehicle. In most states, commercial vehicles, emergency vehicles, autos modified for a disability, and cars sold between family members are tax exempt. Keep in mind that when it comes to tax exemption regulations on vehicles, the laws may vary by state. That’s why it’s important to check your state’s DMV page.
