Vermont Sales Tax on Cars: Rates, Exemptions, and Trade-In Credit

The Vermont sales tax on cars is a 6% purchase and use tax collected when you register or title the vehicle, and it applies to pleasure cars, motorcycles, motor homes, and most vehicles up to 10,099 pounds that aren’t farm trucks.¹ It applies the same way whether you buy from a Vermont dealer, a private seller, or an out-of-state source. You cannot get plates or a valid registration until the tax is paid.²

Heavier commercial trucks fall under a separate rule with a per-vehicle cap, but for a standard car, SUV, or pickup, the straight 6% applies with no ceiling.¹

How Vermont Calculates the Taxable Amount

The 6% rate is applied to the “taxable cost,” which is the purchase price or the J.D. Power clean trade-in value, whichever is greater.³ In a dealer transaction the two usually match. In a private sale, book value often becomes the floor.

Trade-In Credit

If you trade in a vehicle you already own and have previously paid Vermont purchase and use tax on, the trade-in value is subtracted from the price of the new vehicle before the 6% is calculated.⁴ A $30,000 car with a $10,000 trade-in means you pay tax on $20,000. The traded vehicle has to be one registered or titled in your name.

When the DMV Overrides the Reported Price

If the Commissioner of Motor Vehicles believes the reported purchase price doesn’t reflect actual value, the DMV can reset the taxable cost to the J.D. Power clean trade-in value for the same year, make, and model. The same authority applies when no tax form is filed or when the form contains incorrect information. If the DMV adjusts your taxable cost, you have 15 days from the notice to pay the revised amount.⁵ Reporting a $500 price on a car worth $15,000 doesn’t save you anything; the DMV simply taxes the book value.

Buying a Car Out of State

When you buy a vehicle in another state and register it in Vermont, the same 6% is charged as a use tax. Vermont credits whatever sales or use tax you already paid elsewhere. If you paid 4% in the other state, you owe 2% in Vermont. If you paid 6% or more, you owe nothing additional.⁶

To claim the credit, bring proof: a valid certificate of title from the other state and a cancelled check to that state’s DMV for at least the amount of tax owed there. If you overpaid the other state, Vermont won’t refund the difference. You’d have to contact that state’s DMV directly.⁷

For a vehicle already registered to you or your spouse in another state, Vermont bases the tax on the J.D. Power clean trade-in value rather than what you originally paid.²

Leased Vehicles

On a Vermont lease, the dealer or leasing company calculates and collects the 6% tax, and the lease agreement or dealer worksheet goes with the registration paperwork.²

If you buy the car at the end of your lease, you pay tax a second time, but only on the residual. Vermont calculates it as the original acquisition cost minus the lease-end value, and that figure becomes the purchase price for the 6%. Any excess wear and tear or excess mileage charges assessed at lease-end are also taxed at 6%.¹

Who’s Exempt From the Tax

Family Gifts

A vehicle given to a spouse, parent, child, sibling, grandparent, or grandchild is exempt, as long as it’s already registered or titled in Vermont in the donor’s name.⁶ The DMV extends the exemption to a broader set of relationships, including in-laws, step-parents, step-children, step-siblings, ex-spouses, and trusts set up for any of those people.⁸

The exemption only covers genuine gifts. If any money changes hands, it doesn’t qualify. A vehicle with an active lien can’t be gifted tax-free. For divorce transfers, you need a copy of the decree, and the transfer must happen within one year of the divorce becoming final.

Veterans and Drivers With Disabilities

A veteran who acquired a vehicle with financial assistance from the U.S. Department of Veterans Affairs is exempt, including on replacement vehicles, with an approved VA Form 21-4502 as proof. A separate exemption covers a person with a permanent physical disability whose vehicle has been fitted with altered driving controls or a mechanical lifting device for entry and exit; the Commissioner of Motor Vehicles must certify it.⁶

Religious, Charitable, and Government Vehicles

Vehicles owned or leased by religious organizations, charitable institutions, or volunteer fire companies are exempt, as are vehicles owned by federal, state, or provincial governments and their political subdivisions.⁶

Paperwork for a Family Gift

Because the gift exemption is the one most people try to use, the DMV wants specific documentation:

A properly assigned title. Every owner on the title must sign the assignment section, the new owner’s name must appear on the “transferred to” line, and any existing liens must be released.
A Bill of Sale and Odometer Disclosure Statement (Form VT-005).
A Certification of Tax Exemption (Form VT-014).

If the car is coming from out of state, you need the original out-of-state title in the donor’s name. If the donor has died, bring a death certificate and court documentation appointing the executor or administrator. A copy of the will by itself isn’t enough.⁸

Other Costs at Registration

The 6% tax isn’t the whole bill. Vermont charges separate registration fees that depend on fuel type. As of March 2026, annual passenger car registration runs:

Gas or diesel: $91 for one year, $167 for two years.
Plug-in hybrid: $135.50 for one year, $256 for two years.
All-electric: $178 for one year, $341 for two years.

Electric and hybrid vehicles pay more because they contribute less in gas tax. A new certificate of title costs $42.⁹¹⁰

How to Pay

The form you need is the VD-119, the Registration, Tax, and Title Application. You can download it from the Vermont DMV site or pick one up at any DMV office.¹¹

Submit the completed form and payment in person at a DMV office or by mail to the main office in Montpelier. If you register by mail, include a printed J.D. Power valuation dated within the last seven days.³ In person, the DMV accepts Visa, MasterCard, and Discover. By mail, send a check or money order.¹² Registration doesn’t go through until the tax is paid in full, so bring accurate paperwork and the right payment the first time.

1
Vermont General Assembly. Vermont Code 32 – Tax Imposed
2
Vermont Department of Motor Vehicles. Purchase and Use Tax
3
Vermont Department of Motor Vehicles. Registration, New
4
Vermont General Assembly. Vermont Code 32 – Definitions
5
Vermont General Assembly. Vermont Code 32 – Commissioner Computation of Taxable Costs
6
Vermont General Assembly. Vermont Code 32 – Exceptions
7
Vermont Department of Motor Vehicles. Credits and Refunds
8
Department of Motor Vehicles. Gifts
9
Vermont Department of Motor Vehicles. Registration Fees
10
Vermont Department of Motor Vehicles. Title Fees
11
Vermont Department of Motor Vehicles. Registration Tax Title Application
12
Vermont Department of Motor Vehicles. Payment