The tax rate is 6.875% of the taxable vehicle sales 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.

Local sales tax does not apply to sales of vehicles. Instead, a local vehicle excise tax may apply. See the Local Vehicle Excise Taxes section below. 

Calculating the Vehicle Purchase Price

The taxable sales price is determined by subtracting any rebates and trade-in allowance from the vehicle sales price.

*Prior to July 1, 2023, the Motor Vehicle Sales Tax rate was 6.5%.

Vehicle Sales Price

The taxable sales price includes:

• Price of the vehicle
• Charges for labor performed (e.g., rustproofing, undercoating, dealer preparation, and transportation)
• Charges for accessories (e.g., running boards and mud flaps)
• Federal excise tax when it is imposed at the wholesale level and passed on to the customer

Do not charge 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

Rebates

Rebates are 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. This includes manufacturers’ rebates and rebates issued by third parties. 

Rebates may be:

• Shown on the purchase agreement as a reduction in the taxable sales price
• Applied as a down payment
• Refunded directly to the customer

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 sales price when the seller takes a motor vehicle in trade. The type of vehicle being traded in determines which price to calculate the tax on.

Electric Vehicle (EV) Credits 

The type of electric vehicle (EV) credit and when it is applied will determine how it applies to the purchase price of a motor vehicle. 

Local Vehicle Excise Taxes

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. If the customer receives the motor vehicle in a county or city with a vehicle excise tax, the business must collect the excise tax even if the buyer 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

Note: This fee is not collected by the deputy registrar or the Driver and Vehicle Services of the Department of Public Safety.
     •  The Minnesota Department of Revenue administers the vehicle excise tax for some counties. See Vehicle Excise Tax.
     •  Some cities and counties administer their own excise tax. For more information, contact the local government.

Some motor vehicle sales have different tax rates.

Vehicles Owned by a Non-Minnesota Business Entity

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
• The resident is insured to drive the vehicle
• Operates or stores the vehicle in Minnesota for any period of time

Lemon Law

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 (See Minnesota Statute 325F.665).

For more information, see Lemon Law - MN Car Laws on the Attorney General’s Office website.

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

Gifted or Donated Vehicles

The motor vehicle sales tax applies to the fair market value of the vehicle at the time of the gift or donation. See the Driver and Vehicle Services of the Department of Public Safety website. 

Refunds

If you paid the Motor Vehicle Sales Tax in error on a vehicle, you may request a refund using a Claim for Motor Vehicle Refund form. This form is located on the Driver and Vehicle Services of the Department of Public Safety website.

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.

Some vehicle transactions are exempt from Motor Vehicle Tax.

Motor Vehicle Tax Exemptions

Some transactions are exempt from Motor Vehicle tax depending on who purchases the vehicle, as listed in the table below. For these sales, you must keep on file Form PS2000A, Application to Title and Register a Vehicle, showing the exemption code.

Vehicle Disability Accessible Modifications

Charges for parts, accessories, and labor to make a vehicle disability accessible are not taxable. These charges are not taxable even if the purchaser is not the original purchaser of the modifications. 

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.

Nontaxable Motor Vehicle Transfers

The following title transfers are not taxable: 

• By inheritance, including transferring a motor vehicle inherited upon death
• From joint tenancy to one of the joint tenants for no monetary consideration
• From an individual into the individual’s revocable trust.
• Between husband and wife in a divorce proceeding
• By gift between (no affidavit is required):
  • Spouses
  • Parents and a child
  • Grandparents and a grandchild
• Between related companies as defined in Internal Revenue Code sections 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 1563(a). For more information, see Isolated and Occasional Sales.
• A gift to a 501(c)(3) nonprofit organization when the motor vehicle is used exclusively for religious, charitable, or educational purposes
• A gift from a limited used vehicle dealer licensed (nonprofit charitable organization) to an individual – if there is no monetary or other consideration, or the expectation of consideration. The transferring parties must sign an affidavit when transferring the title.

Motor Vehicles Not Registered in Minnesota

When a customer will register the vehicle in another state, you must verify the customer’s name and address listed on their driver’s license or government issued identification and the signed contract.

If you can verify this information, the sale is not subject to the Minnesota Motor Vehicle Sales Tax.

Motor Vehicles Purchased in Other State

If you bought and titled your vehicle under your name for at least 60 days in the other state, tax is not due when you register the vehicle in Minnesota.

If a Minnesota resident registered and paid sales tax to another state, Minnesota allows credit for tax paid to the other state. If the other state’s tax rate is lower, then tax is due on the difference in rates to Minnesota.

Tribal Governments and Members

Vehicles sold to a tribal member (all 11 tribes) are not subject to the Motor Vehicle sales tax if the sale meets both of these conditions:

• The purchaser lives on the reservation
• The sale occurs on the reservation (A sale occurs on the reservation when papers are signed, payment is made, or the vehicle is delivered to the purchaser on the reservation.)

For more information, see Motor Vehicle Sales Tax Exemption for Tribal Members.

Buying For Resale

If a buyer has a dealer’s or lessor’s license and is in the business of selling or leasing vehicles, the purchase for resale is not taxable. Without a dealer’s license, individuals cannot purchase a motor vehicle exempt for resale.

The type of dealer’s license the buyer has restricts what vehicles they can buy for resale. For example, a person licensed as a used car dealer cannot buy a new car exempt for resale. For more information, contact the Dealer’s Unit of the Department of Public Safety at 651-201-7800.

Dealer Plates

Motor vehicle dealers must place dealer plates on any vehicle they buy for resale and use for demonstration purposes, which include use by:

• The dealer, dealer's spouse, or any full-time employee of the dealership
• A part-time employee for business purposes of the dealer
• Prospective buyers

It is illegal to use dealer plates on vehicles that are used for other purposes such as loaner vehicles, tow trucks, service trucks, or parts vehicles.

Interstate Motor Carriers

Interstate truckers may have a Motor Carrier Direct Pay authorization that allows them to pay a prorated tax on their vehicle when it is registered with the Department of Public Safety. See Transportation Service Providers.

Off-Road Vehicles

If vehicles are not registered for road use, they are not subject to the Motor Vehicle Sales Tax. See Off-Road Vehicle.

Use of Dealer Owned Vehicle

When you use a vehicle purchased for resale, for a purpose other than for demonstration, you owe use tax on the reasonable rental value or sales tax on the vehicle’s full value.

For more information on the reasonable rental value, see Revenue Notice 05-05: Sales and Use Tax - Definition of Reasonable Rental Value of Motor Vehicles.

The legal references and resources related to the motor vehicle industry are listed.

Minnesota Statutes

• 144E.10, Ambulance service licensing
• 168.27, subd. 16, Dealer plates
• 297A.61, Definitions
  • subd. 3 (g)(6) (ii), Motor vehicle washing, waxing, cleaning
  • subd. 7, Sales price
  • subd. 18, Disabled
• 297A.64, Rental motor vehicle tax imposed
  • subd. 1, Tax imposed
  • subd. 2, Fee imposed
  • subd. 3, Administration
  • subd. 4, Exemptions
  • subd. 5, Payment of excess fees
• 297A.67, General exemptions
  • subd. 11, Automobiles, disabled veterans
  • subd. 12, Parts and accessories used to make a motor vehicle disabled accessible
• 297A.815, Motor vehicle leases
• 297A.90, Interstate motor carriers as retailers
• 297A.992, subd. 2. Authorization; rates
• 297B.02, Tax imposed

Minnesota Rules

• 8130.0700, Producing, fabricating, printing, or processing of property furnished by consumer

Revenue Notices

• 96-20, Sales and Use Tax – Exemption for Rebates to Purchase Motor Vehicles
• 05-05, Sales and Use Tax – Definition of Reasonable Rental Value of Motor Vehicles
• 06-08, Sales and Use Tax – Motor Vehicle Leases-Taxes and Fee
• 16-03, Optional Warranty and Maintenance Contracts on Equipment

Publications

• Advertising
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• Emergency Services
• Federal Government
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• Local Sales and Use Taxes
• Local Governments
• Motor Vehicle Leases
• Motor Vehicle Repair
• Motor Vehicle Short-Term Rentals
• Off-Road Vehicles
• Sales and Use Tax Business Guide
• State Government Agencies
• Towing, Cleaning, and Rustproofing Services
• Transportation Service Providers
• Tribal Governments and Members
• Use Tax for Businesses
• Vending Machines and Other Coin-Operated Device