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Last Updated: 9/18/2017

Sales and Transfers

Motor Vehicle Sales Tax

Motor Vehicle Sales Tax is due on most motor vehicle purchases or transfers. Tax is due every time that a title transfers, unless an exemption applies. This includes sales by car dealers, leasing companies, private individuals, or any other type of business.

A “motor vehicle” is any vehicle that requires a license for road use. Examples include:

  • Cars

  • Motorcycles

  • Motor homes

  • Pickups

  • Trailers

  • Commercial and non-commercial trucks

  • Semi/Truck-tractors

  • Tractors

  • Vans

The tax rate is 6.5 percent of the vehicle purchase price. This tax is paid to a deputy registrar or Driver and Vehicle Services of the Department of Public Safety when the title is transferred.

A lower sales tax rate applies to sales of older passenger vehicles, collector vehicles, and collector fire trucks. See miscellaneous motor vehicle taxes section for more information.

Gifted or donated vehicles

For vehicles that are gifted or donated, the motor vehicle sales tax applies to the fair market value of the vehicle at the time of the gift or donation. For more information, see the Driver and Vehicle Services of the Department of Public Safety website. 

Note: A business cannot use their direct pay authorization to buy motor vehicles exempt from tax.

Calculating the vehicle purchase price

The purchase price is determined by subtracting any rebates and trade-in allowance from the sales price as shown below:

​Vehicle sales price

​- Rebates

​- Trade-in allowance                  

​= Purchase price of the vehicle

​x 6.5% Motor Vehicle tax rate     

​= Motor vehicle sales tax

Vehicle sales price

The sales price includes:

  • Price of the vehicle

  • Charges for labor performed (for example, rustproofing, undercoating, dealer preparation, and transportation)

  • Charges for accessories (for example, running boards and mud flaps)

  • Federal Excise tax when it is imposed at the wholesale level and passed on to the customer

Rebate

Any rebate, regardless of origin, is deducted from the sales price of a motor vehicle before calculating the tax. The rebate must have a fixed value at the time of purchase. The rebate may be:

  • Shown on the purchase agreement as a reduction in the vehicle purchase price;

  • Applied as a down payment; or

  • Refunded directly to the customer

The deduction applies to manufacturers’ rebates and rebates issued by third parties who entered into an agreement with vehicle manufacturers. 

Example
A credit card company offers car rebates as an incentive for buyers to use their credit card. The credit card company and vehicle manufacturer entered into a third-party agreement to offer the rebate. The rebate is deducted from the taxable sales price of the vehicle. 

Note: Rebates from off-road vehicles – such as watercraft, all-terrain vehicles, and snowmobiles – do not reduce the sales price of a motor vehicle before calculating sales tax.

Trade-in allowance

A trade-in allowance reduces the purchase price when the seller takes a motor vehicle in trade. The vehicle must be titled in the name of the customer trading in the vehicle except in the following situations:

  • A child is trading in a vehicle titled in his or her parent’s name
  • A husband or wife is trading in a vehicle titled in his or her spouse’s name

The trade-in of an off-road vehicle does reduce the purchase price of a motor vehicle. However, sales tax for the motor vehicle is calculated on the full purchase price, before the trade-in allowance.

 

What type of vehicle is purchased?

What type of vehicle is being traded in?

What price is sales tax calculated on?

Motor vehicle

Motor vehicle

The purchase price after subtracting the trade-in allowance

Motor vehicle

Off-road vehicle

The purchase price before subtracting the trade-in allowance

For more information, see the Off-Road Vehicle Industry Guide.

What charges are not subject to the Motor Vehicle Sales Tax?

Do not charge the Motor Vehicle sales tax on:

  • Extended warranties
  • Federal Excise tax that is imposed at the retail level and separately stated on the customer’s invoice
  • Luxury tax on cars
  • Registration, license, and document fees

Modifications to make a vehicle disability accessible

Charges for parts, accessories, and labor to make a vehicle disability accessible are not taxable.

To claim this exemption when buying a vehicle, the applicant must provide a statement describing the modifications and the value. Attach the statement to the application for title of the vehicle.

If the modifications are made after the purchase, the purchaser or owner must give the vendor a completed Form ST3, Certificate of Exemption.

Local vehicle excise taxes

Local sales tax does not apply to sales of vehicles. Instead a local vehicle excise tax may apply to sales of motor vehicles registered for road use.

When do local vehicle excise taxes apply?

The vehicle excise tax must be collected by any person in the business of selling new or used motor vehicles at retail in certain areas. Individuals, institutions, businesses, non-profit organizations, and state and local government agencies must pay the excise tax.

Businesses selling motor vehicles in a county or a city with a vehicle excise tax must collect a $20 tax on each vehicle and report it on their Minnesota sales and use tax return. They must collect the excise tax even if the buyer is not from Minnesota and will register the vehicle in another state.

All buyers must pay local vehicle excise taxes except for:

  • Federal government agencies
  • Vehicles not required to be licensed for road use (marked police cars, fire trucks, ambulances)
  • Vehicles for resale 

The Minnesota Department of Revenue administers the vehicle excise tax for some counties. For information on the vehicle excise taxes we administer, see Fact Sheet 164, Local Sales and Use Taxes.

Some cities and counties administer their own excise tax. Contact your city or county for more information.

Note: This fee is not collected by the deputy registrar or the Driver and Vehicle Services of the Department of Public Safety.

Miscellaneous Motor Vehicle Taxes

Older passenger vehicles

Instead of the 6.5 percent Motor Vehicle sales tax, a $10 tax applies if the vehicle meets all of the following:

  • The vehicle is 10 years or older; and
  • it has a sales price and average value of $3,000 or less;

Note: The deputy registrar has the authority to determine a vehicle’s value by using nationally recognized sources of information on vehicle resale values.

This tax is paid to a deputy registrar or the Driver and Vehicle Services of the Department of Public Safety at the time the title is transferred.

Collector passenger vehicles and fire trucks

Instead of the 6.5 percent Motor Vehicle sales tax, a $150 tax applies to collector passenger vehicles and fire trucks. A “collector passenger vehicle” is a motor vehicle manufactured between 1925 and 1948 and designated as a collector car.

This tax is paid to a deputy registrar or the Driver and Vehicle Services of the Department of Public Safety at the time the title is transferred.

Small price vehicle transfer

When a vehicle is transferred at a small price, the Motor Vehicle Sales Tax is calculated on the average value of similar vehicles.

Motor vehicles not registered in Minnesota

When the customer states they will register the vehicle in another state, you must verify the customer’s name and address listed on their driver’s license and the signed contract. If you can verify this information, the sale is not subject to the Minnesota Motor Vehicle Sales Tax.

Vehicles owned by a non-Minnesota business entity

Starting May 31, 2017, when a non-Minnesota business owns a motor vehicle that is operated by a Minnesota resident, it is presumed that the Minnesota resident is the owner of the motor vehicle when two or more of the following are true:

  • The business lacks a specific business activity or purpose
  • The business maintains no physical presence in the jurisdiction where it is organized
  • The business earns de minimis or no revenue
  • The business maintains minimal or no business records
  • The business fails to employ individuals and does not provide W-2 wage statements
  • The business does not file federal income tax returns or fails to file state income tax in the state they are organized

A motor vehicle is under the control of a Minnesota resident when the following conditions are met

  • the vehicle is driven by a Minnesota resident
  • the resident
    • Is a partner, member, or shareholder of the business entity
    • Is insured to drive the vehicle

    • Operates or stores the vehicle in Minnesota for any period of time

Lemon law

Minnesota’s vehicle warranty statute, also known as Minnesota’s Lemon Law, helps protect buyers who buy or lease a new car, pickup truck, or van that is still under the original manufacturer’s warranty (Minnesota Statutes 325F.665). For more information, call the Attorney General’s Office at 651-296-3353 or 1-800-657-3787.

If the vehicle qualifies for a refund under the lemon law, then the manufacturer is responsible for refunding the sales tax.

Refunds

If the motor vehicle sales tax was paid in error on the purchase of a vehicle, then the customer should file a refund claim directly with the Driver and Vehicle Services of the Department of Public Safety by using a Claim for Motor Vehicle Refund form. The Minnesota Department of Revenue does not issue refunds for motor vehicle sales tax paid in error. 

Insurance reimbursements

If your car is totaled and you receive reimbursement for the value of the vehicle, no sales tax refund is allowed. Once a title is issued, the tax is not refundable unless it falls under the state Lemon Law.

Vending machine sales

Starting July 1, 2017, the only taxable food sold through vending machines or honor boxes is prepared food, soft drinks, candy and dietary supplements. For more information see, Fact Sheet 158, Vending Machines and Other Coin-Operated Devices.

Local sales tax

Some cities and counties have local sales and use taxes. You must charge any local sales taxes that apply if your business is located in, or delivers to, an area that has them.

To determine the sales tax rate, use the location where the product is received by the customer, typically your business or a delivery address. You can use the Sales Tax Rate Calculator to help you determine the sales tax rate.

Note: The rate calculator does not include special local taxes.  

For more information, see:

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