If you buy a car in another state and bring it home to register, you will owe Michigan sales tax on cars bought out of state, though technically it is called a use tax. The rate is 6% of the purchase price, collected by the Secretary of State when you apply for a Michigan title. If you already paid sales or use tax to the state where you bought the vehicle, Michigan credits that amount against what you owe here, so you only pay the difference, if any.
What You Owe and Where You Pay It
Michigan’s sales tax applies to retail sales that happen inside the state. When the sale happens elsewhere and the vehicle comes into Michigan to be stored, used, or driven, the use tax takes its place. Both are 6%, so the dollar amount lands in the same place.1Michigan Legislature. Michigan Compiled Laws 205.93 – Use Tax Act
The tax is calculated on the full purchase price, including cash, credit, and any other charges rolled into the deal. The Secretary of State’s office collects it before the title transfer goes through, which means you cannot register the vehicle without paying.2Cornell Law School. Michigan Administrative Code R 205.54 – Automobile and Other Vehicle Sales There is no separate return to file. The transaction happens at the counter when you walk in to title the car.
Credit for Tax You Already Paid Elsewhere
Michigan does not double-tax you. Under the Use Tax Act, you get a dollar-for-dollar credit for sales or use tax paid to another state, provided that state extends the same courtesy to Michigan residents.3Michigan Legislature. Michigan Compiled Laws 205.94 – Use Tax Act, Exemptions
The math is simple. If the other state’s rate was 6% or higher, you owe Michigan nothing more. If it was lower, you pay the difference. A car bought in a state with a 4% rate leaves a 2% balance owed to Michigan. A car bought from a private out-of-state seller where no tax changed hands at all leaves the full 6% owed here.
Bring your receipt or a bill of sale showing the tax paid. Without proof, the Secretary of State’s office has no basis to apply the credit, and you will pay the full 6%.
Trade-In Reduces the Taxable Price
If you traded in a vehicle at a licensed dealer as part of the same purchase, Michigan reduces the taxable amount by the trade-in value. There is a cap most buyers do not know about. For calendar year 2026, the trade-in allowance on a motor vehicle is limited to $12,000 or the agreed-upon trade-in value, whichever is less.4Michigan Department of Treasury. 485, Instructions for Michigan Vehicle Dealers Collecting Sales Tax from Buyers
Trade in a car worth $18,000 toward a $40,000 purchase and you will pay tax on $28,000, not $22,000. The credit applies whether the new vehicle was bought in Michigan or out of state, as long as the trade happened through a licensed dealer in the same transaction. Recreational vehicles traded toward another recreational vehicle have no dollar limit.
Private-Party Purchases Out of State
Buying from a private seller changes one thing. On private-party transfers, the tax is based on the purchase price or the vehicle’s retail value, whichever is greater.5State of Michigan. Buying, Selling, or Leasing – Vehicle Ownership Writing $1 on the bill of sale does not work.
If you report paying $5,000 for a vehicle with a retail value of $12,000, expect to be taxed on the $12,000. The Secretary of State collects the extra at the counter under the Streamlined Sales and Use Tax Revenue Equalization Act.2Cornell Law School. Michigan Administrative Code R 205.54 – Automobile and Other Vehicle Sales
When No Tax Is Due
The one exemption most out-of-state buyers run into involves vehicles received from an immediate family member. If a parent in another state transfers a car to you, for example, no Michigan use tax is due. The qualifying relationships are:
- Spouse
- Parent (natural or adoptive)
- Child (natural or adopted)
- Brother or sister, including half-siblings
- Grandparent or grandchild
- Stepparent, stepchild, stepbrother, or stepsister
- In-laws (father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, grandchild-in-law)
- Legal ward or legally appointed guardian, with a certified letter of guardianship
Step-relationships hold if the biological parent died while still married, but end if the parents divorced before the title transfer.6State of Michigan. Transferring a Vehicle Title to a Relative Friends, cousins, aunts, and uncles do not qualify, and those transfers are taxed at the full 6%.
The 15-Day Deadline
You have 15 days from the date of sale to transfer the title into your name. Miss that window and a $15 late fee is added to everything else.7State of Michigan. Title Transfer and Vehicle Registration Driving an unregistered vehicle on Michigan roads can also get it impounded.
Plan for these amounts in addition to the 6% tax:
- Title transfer: $15, or $16 if there is a lien on the vehicle
- Registration: $15 for one year or $29 for two years
- Plate transfer: $10 to $15
Bring the original out-of-state title (not a photocopy) with the odometer reading, seller’s signature, and purchaser’s section completed. Bring proof of Michigan no-fault insurance, which the law requires before the vehicle can be driven on Michigan highways.8Michigan Legislature. Michigan Compiled Laws 500.3101 – Insurance Code Bring a lien statement if there is a loan on the vehicle, and bring your proof of tax paid out of state if you are claiming the credit. Ask an out-of-state dealer for a detailed bill of sale showing the purchase price, any trade-in value, and taxes collected; that makes the counter calculation straightforward.9Michigan Department of State. Out-of-State Residents
Driving the Car Home Before It’s Registered
You need legal authority to drive the vehicle to Michigan in the first place. Some states issue temporary tags that Michigan recognizes. If the selling state does not, you can be issued a BFS-4 Temporary Registration Permit. It costs $1, is good for 15 days, and is displayed in the rear window or where a license plate would normally go.10State of Michigan. Issuing a BFS-4 Temporary Registration Permit If the title paperwork is not processed within those 15 days, the permit expires and the vehicle can be cited or impounded.
What Happens If You Don’t Pay
The Michigan Department of Treasury watches vehicle registrations and audits transactions when the numbers look off. The department has four years from the filing deadline to assess a deficiency, and an additional two years from discovery if someone fraudulently concealed the liability.11Michigan Legislature. Michigan Compiled Laws 205.27a – Revenue Division, Penalties and Interest Assessments can include both penalties and interest running from the original due date.
Interest is not nominal. For the first half of 2026, the department charges 8.48% annually on underpayments.12Michigan Department of Treasury. Interest Rate Due on Underpayments and Overpayments On a $40,000 vehicle, the 6% use tax works out to $2,400; let it sit a year and interest alone adds roughly $200, before any penalty the department assesses on top.