Yes, there is sales tax on cars in Minnesota. The state charges a 6.875% motor vehicle sales tax on nearly every car purchase, new or used, bought from a dealer or a private seller.1Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.02 – Tax Imposed A $20 county excise applies in many counties on top of that, and a handful of transfers (family gifts, inheritance, divorce, certain disabled veterans) are fully exempt. The amount you actually pay depends on your trade-in, any rebates, and where you register the vehicle.
The 6.875% Motor Vehicle Sales Tax
The 6.875% rate applies to any motor vehicle that has to be registered in Minnesota, under Minn. Stat. § 297B.02.1Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.02 – Tax Imposed It doesn’t matter whether the seller is a dealership, a neighbor, or a dealer in another state. The rate is the same for new and used cars.
This is a separate excise tax, not Minnesota’s general sales tax, even though the percentages match. You pay one or the other on a vehicle, never both.
What the Tax Is Calculated On
The tax runs on the purchase price, but a few things on the invoice don’t count. According to the Minnesota Department of Revenue, the taxable price includes the vehicle, dealer-installed accessories, rustproofing or undercoating, dealer prep fees, and transportation charges.2Minnesota Department of Revenue. Motor Vehicle Sales Extended warranties, registration and license fees, and document fees are excluded. Federal excise tax is excluded when it’s separately stated on the invoice.
Trade-In Allowance
Trading in a vehicle you own reduces the taxable price by the trade-in value before the tax is calculated.3Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.01 – Definitions Buy a $30,000 car and trade one worth $10,000, and you pay 6.875% on $20,000. The trade-in has to be a motor vehicle. Trading in an ATV or other off-road vehicle doesn’t reduce the taxable price.2Minnesota Department of Revenue. Motor Vehicle Sales
Manufacturer and Third-Party Rebates
Rebates come off the price before tax is calculated, as long as the rebate’s value is fixed at the time of purchase.2Minnesota Department of Revenue. Motor Vehicle Sales Third-party rebates work the same way. Confirm this on the paperwork at the dealer, because states handle rebates differently and multi-state dealers sometimes get it wrong.
County $20 Excise on Vehicle Purchases
Many Minnesota counties add a flat $20 excise tax on every motor vehicle bought from a retail dealer in the county. The charge is authorized by Minn. Stat. § 297A.993 and has been adopted by more than a dozen counties, including Hennepin, Ramsey, Dakota, Scott, Carver, Anoka, and Washington in the Twin Cities metro.4Minnesota Office of the Revisor of Statutes. Minnesota Code 297A.993 – County Transportation Sales Tax It applies to new and used vehicles sold by businesses engaged in retail vehicle sales,5Minnesota House of Representatives. County Transportation Taxes and it’s collected along with the state tax at registration.
$10 Flat Tax for Older, Low-Value Cars
If you’re buying a cheap older car, the tax may be just $10 instead of the full 6.875%. Two conditions have to be met: the vehicle is in its tenth year of life or older, and its resale value is less than $3,000 under nationally recognized valuation guides.6Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.025 – Tax on Older Vehicles The registrar makes the value call, so claiming a sub-$3,000 purchase price isn’t enough. If the guide puts the car at $3,000 or more, you owe the full percentage even if you paid less.7Minnesota Department of Revenue. Miscellaneous Motor Vehicle Sales Collector vehicles are handled under a separate $150 flat tax with its own eligibility rules.
Buying a Vehicle Out of State
If you buy a car in another state and bring it home, Minnesota still charges the full 6.875% when you register it. You get a credit for any sales or excise tax you already paid to the other state, so you only owe the difference.8Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.08 – Tax Paid In Other State If the other state’s rate was 6.875% or higher, nothing more is owed to Minnesota. If it was lower, you pay the gap. The credit only applies when the other state offers a similar reciprocal credit for Minnesota tax, which most do. Bring proof of what you paid, usually shown on the purchase agreement.
Minnesota residents who buy out of state have 10 days to transfer title and register. New residents moving to Minnesota have 60 days for cars; trailers and trucks must be transferred immediately.
Transfers That Are Fully Exempt
Minnesota law excludes several transfers from the definition of a taxable “sale,” which means no 6.875% tax at all.3Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.01 – Definitions
- Gifts between close family: spouse to spouse, parent to child, grandparent to grandchild. Foster parent to foster child qualifies when the county has verified the foster relationship.
- Transfers of a vehicle between spouses in a divorce, whether voluntary or ordered by the court.
- Vehicles received through inheritance, bequest, or a transfer-on-death designation.
- Transfers between joint owners when no payment changes hands.
- Donations to organizations tax-exempt under IRC § 501(c)(3), as long as the vehicle is used for religious, charitable, or educational purposes.
Disabled Veterans
Since July 1, 2024, veterans with a 100% total service-connected disability rating pay no motor vehicle sales tax on new or used purchases.9Minnesota Department of Revenue. Nontaxable Transactions This includes veterans rated as totally disabled based on individual unemployability. Bring a VA Summary of Benefits Letter showing the rating, along with your DD-214, to the dealer or deputy registrar. If you bought after July 1, 2024, and paid the tax without knowing about the exemption, you can file a refund claim with the Department of Revenue.
Gifted Cars That Aren’t Exempt
If someone gives you a vehicle and the transfer doesn’t fit one of the exempt family categories above, tax is still owed. It’s not based on what you paid, since you paid nothing. It’s based on the vehicle’s fair market value at the time of the gift, determined by the registrar using nationally recognized resale guides.3Minnesota Office of the Revisor of Statutes. Minnesota Code 297B.01 – Definitions A $0 purchase price does not mean $0 in tax.
How To Pay and the 10-Day Deadline
Payment goes through a Deputy Registrar office, either in person or by mailing forms and payment to Driver and Vehicle Services. You’ll complete the Application for Title and Registration (Form PS2000), listing the net purchase price after trade-in and rebates. The numbers need to match your bill of sale.
The title transfer has to happen within 10 days of the sale, and missing that deadline triggers a late penalty.10Minnesota Department of Public Safety. Buying or Selling a Motor Vehicle Dealerships typically file the paperwork and remit the tax for you. In a private-party sale, that’s your job as the buyer, so plan the trip to the deputy registrar before day ten.