The Indiana car sales tax is a flat 7% of the purchase price, applied statewide with no county or city add-ons. A $30,000 vehicle generates $2,100 in tax before any trade-in credit. The same 7% applies whether you buy from a dealer or a private seller, though the mechanics of paying it differ.1Indiana General Assembly. Indiana Code 6-2.5-2-2 – Tax Rate; Rounding Rules
What Lowers the Taxable Amount, and What Doesn’t
A trade-in reduces the amount subject to tax. If you buy a $30,000 car and the dealer gives you $10,000 for your old vehicle, you pay 7% on $20,000, saving $700. The trade-in value has to be stated separately on the invoice or bill of sale, and the exchange has to be like-kind — a vehicle traded toward another vehicle, in the same transaction.2Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-1-5 – Gross Retail Income Selling your old car privately a few days before buying a new one doesn’t count.
Manufacturer rebates do not reduce the taxable amount. Indiana treats a rebate as a form of payment, not a price cut. On a $20,000 negotiated price with a $2,000 manufacturer rebate, you still owe 7% on the full $20,000, whether you take the rebate as cash or assign it to the dealer as a down payment.3Indiana Department of Revenue. Sales Tax Information Bulletin 28S – Sales of Motor Vehicles and Trailers A dealer discount that actually lowers the sticker price on the purchase agreement is different, because it changes the sale price itself.
Dealer Fees, Delivery Charges, and Warranties
Delivery or transportation charges billed by the dealer are part of the taxable price. The only exception is when a separate third-party shipper bills you directly for delivery.4Indiana Department of Revenue. Sales Tax Information Bulletin 92 Dealer documentation fees are not capped in Indiana, and whatever the dealer charges flows into the taxable total.
Warranties split along a line. An optional extended warranty, where parts replacement is uncertain, is not subject to sales tax at the point of purchase. A contract structured as a maintenance agreement, where consumable parts will definitely be provided, is taxed as a bundled transaction. An original manufacturer warranty built into the selling price is taxed as part of that price.5Indiana General Assembly. Department of State Revenue Information Bulletin 2
Private Sales and the 45-Day Titling Window
When you buy from a dealer, the dealership collects the 7% at the point of sale and gives you Form ST-108 as proof. You take that form to the BMV when you title the vehicle.
Private purchases are technically subject to use tax rather than sales tax, but the rate is still 7%. You pay it directly at a BMV branch when you apply for the title, based on the purchase price shown on your bill of sale. Indiana will not issue a title until the tax is paid or an exemption is documented.6Indiana General Assembly. Indiana Code 6-2.5-9-6 – Vehicle and Watercraft Title or Aircraft Registration; Payment of Taxes Requisite; Offenses
You have 45 days from the purchase date to title the vehicle. Missing that deadline triggers a flat $30 late-titling penalty, and driving an unregistered vehicle creates its own exposure.7Indiana General Assembly. Indiana Code Title 9 Motor Vehicles 9-17-2-14.7
Buying a Vehicle Out of State
If you buy a car in another state and bring it to Indiana, you still owe 7% at titling. Indiana gives you a credit for sales tax already paid to the other state, so you aren’t taxed twice on the same purchase. You calculate 7% of the price, subtract what you paid elsewhere, and pay the difference.8Indiana Department of Revenue. Certificate of Gross Retail or Use Tax Exemption for the Purchase of a Motor Vehicle or Watercraft
Paid 6% in Illinois? You owe Indiana 1%. Paid 7% or more somewhere else? You owe nothing additional, but the credit is capped at Indiana’s 7%, so there’s no refund for overpayment. Bring your out-of-state purchase agreement and tax receipt to the BMV as proof.
Leased Vehicles
Leases are taxed as you go, not upfront. The 7% applies to each lease payment as it comes due, including the down payment, any trade-in equity, the first month’s payment, and any manufacturer rebate applied as a capital cost reduction. At signing, the dealer collects tax on all upfront capital cost reduction amounts. After that, the leasing company collects and remits 7% on each monthly payment.9Indiana Department of Revenue. Sales Tax Information Bulletin 28L – Leases of Motor Vehicles and Trailers
A lease that calls for a single lump-sum payment instead of monthly installments is treated as a retail sale, and the entire amount is taxed at once.
Exemptions From the 7%
Family Transfers
Transferring a title to add or remove a spouse, parent, child, grandparent, or sibling is exempt from sales tax.10Indiana General Assembly. Indiana Code 6-2.5-5-15.5 – Motor Vehicles; Intrafamilial Title Transfers Watch who’s missing from that list: grandchildren, aunts, uncles, and in-laws don’t qualify. A grandparent transferring a car to a grandchild would not fall under the exemption.
Nonprofit Organizations
Qualified nonprofits are exempt from sales tax on vehicles purchased primarily to carry out the organization’s charitable purpose or for fundraising.11Cornell Law Institute. 45 IAC 2.2-5-55 – Not-for-profit Organizations; Acquisitions
How to Claim One
Any exemption requires Form ST-108E, the Certificate of Gross Retail or Use Tax Exemption, completed and presented when you title the vehicle. The form needs your Social Security or taxpayer ID number and a purchase price calculation; it isn’t valid without both.8Indiana Department of Revenue. Certificate of Gross Retail or Use Tax Exemption for the Purchase of a Motor Vehicle or Watercraft A dealer selling to an exempt buyer keeps a copy to document why they didn’t collect the tax.
What the 7% Doesn’t Cover
Sales tax is a one-time charge at purchase. Indiana also assesses an annual vehicle excise tax at each registration renewal, based on the vehicle’s original manufacturer retail price and its age. Some counties and municipalities add local excise or wheel taxes on top of the state amount.12Indiana Bureau of Motor Vehicles. Excise Tax Information
Electric and hybrid owners pay supplemental annual registration fees that offset gas taxes they don’t pay at the pump: $150 for battery electric vehicles and $50 for hybrids, on top of the standard registration fee and excise tax.13Indiana General Assembly. Indiana Code 9-18.1-5-12-b – Supplemental Fee; Electric Vehicles These are recurring costs, separate from the 7% you pay once at purchase.