Indiana sales tax on cars is a flat 7% of the purchase price, and that rate applies statewide whether you buy from a dealership or a private seller.1Indiana General Assembly. Indiana Code 6-2.5-2-2 – Tax Rate; Rounding Rules No county or city adds anything on top. What actually changes your bill is the trade-in you bring, the kind of discount you negotiate, and whether the purchase crosses a state line.
Where and When You Pay
A licensed Indiana dealer collects the 7% at the time of sale and sends it to the Indiana Department of Revenue.2Indiana Department of Revenue. Vehicle Dealers A private seller collects nothing. If you buy from your neighbor, you pay the tax yourself at the Bureau of Motor Vehicles when you title the vehicle.3Cornell Law Institute. 45 IAC 2.2-3-5 – Use Tax; Motor Vehicles The rate is 7% either way, calculated on the total the buyer pays, including accessories or add-ons rolled into the deal.1Indiana General Assembly. Indiana Code 6-2.5-2-2 – Tax Rate; Rounding Rules
How a Trade-In Lowers the Tax
When you trade a vehicle as part of the purchase, Indiana subtracts the trade-in allowance from the price before applying the 7%. The statute defining “gross retail income” excludes the value of property received in a like-kind exchange, provided the trade-in is listed separately on the bill of sale.4Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-1-5
Buy a $30,000 car and trade in a vehicle worth $10,000, and you pay 7% on $20,000, which is $1,400 instead of $2,100. The catch is that this only works vehicle-for-vehicle. Handing over a boat or a piece of real estate toward a car does not reduce the taxable base.3Cornell Law Institute. 45 IAC 2.2-3-5 – Use Tax; Motor Vehicles Make sure the trade-in allowance is clearly documented, because the BMV taxes whatever the paperwork shows.
Dealer Discount vs. Manufacturer Rebate
These feel identical at the negotiating table and are not. A dealer discount reduces the selling price directly: sticker of $35,000 with $3,000 knocked off means you pay tax on $32,000.4Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-1-5
A manufacturer rebate is treated as a form of payment, not a price cut. The Indiana Department of Revenue has been explicit: if the dealer receives reimbursement from the manufacturer for a rebate shown on your purchase agreement, that rebate does not reduce the taxable price.5Indiana Department of Revenue. Sales Tax Information Bulletin #28S On a $35,000 vehicle with a $3,000 rebate, you still owe 7% on the full $35,000, even if the rebate is applied as a down payment.
One narrow exception: a manufacturer price reduction is not a rebate. When the manufacturer actually lowers the wholesale cost to the dealer and the dealer sells the car for less with no reimbursement, that reduction is deductible for sales tax purposes.5Indiana Department of Revenue. Sales Tax Information Bulletin #28S Check whether your purchase agreement calls the incentive a “rebate” or a “price reduction.” The label controls the tax.
Buying a Car in Another State
Indiana still wants its 7% if you live here and buy elsewhere. The state imposes a use tax on any vehicle acquired outside Indiana that is titled, licensed, or registered here.6Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-3-2
You do get credit for sales tax already paid to the other state. If you paid 5% in the state of purchase, you owe Indiana the 2% difference at registration. If the other state’s rate was 7% or higher, you owe Indiana nothing more. Bring documentation of the tax paid when you visit the BMV.
If You Live Out of State and Buy in Indiana
Nonresidents buying in Indiana do not automatically pay 7%. If the buyer intends to transport the vehicle out of state within thirty days and title or register it in another state, the tax rate is the destination state’s rate, not Indiana’s.7Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-2-3 Both buyer and seller sign an affidavit certifying that intent, and the dealer documents the sale on Form ST-108NR.8Indiana Bureau of Motor Vehicles. Form ST-108NR
If the destination state’s rate is below 7%, the dealer collects at that lower rate. If the destination state has no sales tax, the dealer collects nothing. Miss the thirty-day window, and Indiana’s full 7% applies.
Exemptions
Family Title Transfers
Adding or removing a family member from a vehicle title is exempt from Indiana sales tax. The exemption covers spouses, children, parents, grandparents, and siblings.9Indiana General Assembly. Indiana Code 6-2.5-5-15.5 – Motor Vehicles; Intrafamilial Title Transfers Selling a car to a cousin, an uncle, or an in-law does not qualify.
Nonprofit Organizations
An Indiana nonprofit with valid tax-exempt status can buy a vehicle without paying sales tax if the vehicle serves the organization’s exempt purpose. The organization must present its state-issued exemption certificate at the time of purchase.
Deadlines and Late Penalties
Indiana residents have 45 days from the purchase date to register a newly acquired vehicle.10Indiana Bureau of Motor Vehicles. Registrations and Plates – Vehicle Registrations Because sales tax on a private-party purchase is collected at titling, missing that window puts you late on the tax as well.
The BMV charges a $30 administrative penalty for a late title and a separate $15 penalty for late registration.11Indiana Bureau of Motor Vehicles. Fee Chart On top of those flat fees, the Indiana Department of Revenue applies interest on unpaid sales tax at 7% for calendar year 2026, running from the date the tax was originally due rather than the day you eventually show up at the BMV.12Indiana Department of Revenue. Departmental Notice #3 On an expensive vehicle, a few months of delay adds real money.