Motor Vehicle Sales

Starting July 1, 2023 the tax rate is 6.875% of the taxable vehicle sales price. Prior to July 1, 2023 the tax rate was 6.5%. 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 Local Vehicle Excise Tax. 

Calculating the Vehicle Purchase Price

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

Starting July 1, 2023, the Motor Vehicle Sales Tax rate will increase from 6.5% to 6.875%.

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

Rebate

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. 

Rebate 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. 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

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 Local Sales and Use Taxes.
     •  Some cities and counties administer their own excise tax. Contact the city or county directly for more information.