Navigating Auto Sales Tax in Maryland: A Complete Guide for Buyers and Sellers

Private vehicle transactions in Maryland, whether you’re buying, selling, gifting, or donating, can seem complicated. Understanding each step is crucial to ensure a smooth and legal transfer of ownership. One of the most important aspects to consider is the Auto Sales Tax In Maryland, officially known as the excise tax. This guide breaks down the process, focusing on how auto sales tax applies in various private vehicle transactions in Maryland, ensuring you are well-informed and prepared.

Private vehicle sales, those conducted without a licensed dealer, are not overseen by the Maryland Motor Vehicle Administration (MVA). This means that buyers and sellers are solely responsible for understanding and adhering to all legal requirements, including those related to auto sales tax. Familiarizing yourself with these regulations is essential for both parties.

Always remember to keep copies of all ownership transfer documents and related forms for your records. This documentation is vital for both sellers and buyers in case of any future discrepancies or questions regarding the transaction, especially concerning the auto sales tax paid.

Selling Your Vehicle Privately in Maryland: Key Steps and Auto Sales Tax Considerations

As the seller, several responsibilities fall on you to ensure a proper and legal vehicle sale. Let’s delve into these steps, particularly focusing on the implications for auto sales tax in Maryland.

Properly Assigning the Vehicle Title and Understanding Auto Sales Tax

The cornerstone of a private vehicle sale is the correct assignment of the vehicle’s Certificate of Title.

Assignment of Ownership: As the seller, you must sign and print your name on the back of the Certificate of Title, specifically in the “Assignment of Ownership” section. Crucially, you must also clearly write the buyer’s name and address in this section. An incomplete “Assignment of Ownership” section, especially missing the buyer’s information, renders the title “open.” The MVA will not recognize an open title for registration purposes, which can create significant problems for the buyer when they try to register the vehicle and pay their auto sales tax.

ASSIGNMENT OF OWNERSHIP FORM

Alt: Sample Maryland Certificate of Title Assignment of Ownership Section – Essential for Auto Sales Tax in Maryland Transactions

Lost Title: If the original title is lost or damaged, you’ll need to obtain a duplicate before proceeding with the sale. This can be done by completing the MVA Application for Duplicate Certificate of Title (form # VR-018).
Odometer Disclosure: Accurately record the vehicle’s mileage in the “Assignment of Ownership” section of the Certificate of Title. This is a federal requirement and essential for transparency in vehicle sales.
Purchase Price and Sale Date: If there’s space on the title, record the vehicle’s purchase price and the date of sale in the “Assignment of Ownership” section. This information is relevant to determining the auto sales tax, especially if a Bill of Sale isn’t required.

Notary and Bill of Sale: When are They Needed for Auto Sales Tax in Maryland?

The necessity of a notary or a Bill of Sale is tied to Maryland’s regulations regarding auto sales tax (excise tax) and the vehicle’s value.

Notary Requirement: You will need a notary to witness both the buyer’s and seller’s signatures if you are using a Bill of Sale to complete the transaction. However, if the purchase price is recorded on the Maryland Certificate of Title, a Bill of Sale is generally not needed unless the vehicle is 7 years old or newer and is being sold for less than its book value. In such cases, a notarized Bill of Sale is required for auto sales tax calculation purposes.
MVA Bill of Sale (Form VR-181): A notarized MVA Bill of Sale (form # VR-181) is mandatory if the sale price is lower than the vehicle’s book value and the vehicle is 7 years old or newer. This is to ensure that the auto sales tax is calculated fairly based on the vehicle’s actual value, not just a potentially undervalued sale price. To verify the vehicle’s book value, contact the MVA’s Customer Service Center at 1-410-768-7000.
When a Bill of Sale is Not Required: A notarized MVA Bill of Sale isn’t necessary if the sale price exceeds the vehicle’s book value or if the vehicle is older than 7 years. In these situations, the MVA usually accepts the purchase price recorded on the title for auto sales tax calculations, especially if it is within $500 of the retail value as shown in the National Publication of Used Car Values.

Lien Release and its Relation to Vehicle Ownership and Sales Tax

Providing the buyer with proof that any liens on the vehicle have been cleared is crucial for a smooth title transfer and subsequent registration and auto sales tax payment.

Original Title and Security Interest Filing: Always provide the buyer with the original Certificate of Title and the original Security of Interest Filing (if applicable). The Security Interest Filing serves as evidence that any loan on the vehicle has been fully paid off. This document is essential for the buyer to obtain a new title and properly register the vehicle, which is necessary before paying the auto sales tax.
Lien Satisfaction Documentation: If a lien existed on the vehicle, the “Notice of Security Interest Filing” is the official document required by the MVA as proof of payoff. The financial institution typically sends this to the vehicle owner after the final payment. If this document is unavailable, a letter from the financial institution on their letterhead, stating they no longer hold a security interest, is acceptable. This letter must be signed by an authorized agent and include loan details, release date, debtor information, and vehicle description.
Seller’s Responsibility for Lien Payoff: As the seller, it’s your responsibility to ensure any liens are paid off before transferring ownership. If the vehicle isn’t paid off, contact the financial institution to arrange payment. Once the lien is satisfied, they will provide the necessary release letter or the signed “Notice of Security Interest Filing.”
Important Note for Sellers: Once the MVA creates a new title for the buyer, your old title and Security of Interest Filing documents are destroyed. Ensure you have copies for your records if needed.

Returning License Plates Before Canceling Insurance: Avoiding Penalties Related to Uninsured Vehicles

Maryland law mandates continuous insurance coverage for registered vehicles. Returning the license plates properly is crucial to avoid penalties.

Return Plates to MVA: Unless you are transferring the plates to a newly purchased vehicle, return the license plates to the MVA before canceling your insurance. Obtain a receipt from the MVA as proof of plate return. Maryland imposes strict fines for uninsured vehicles, starting at $150 for the first day.

Buying a Vehicle Privately in Maryland: Essential Steps and Auto Sales Tax

If you are buying a vehicle in Maryland through a private sale, whether from within the state or out-of-state, the process for transferring ownership is generally the same. Visiting an MVA full-service office with the correct documents is essential. Remember, you need to register the vehicle and obtain license plates before you can legally drive it, and this process involves paying the auto sales tax.

Required Documents for Vehicle Registration and Auto Sales Tax Payment

To register your newly purchased vehicle and pay the applicable auto sales tax in Maryland, you’ll need to gather and complete the following documents:

Certificate of Title:
- As the buyer, you must sign the “Maryland Certificate of Title” in the “Assignment of Ownership” section. If there’s a co-buyer, they must also sign. Ensure your name(s) and address are clearly recorded in the “Assignment of Ownership” area.

ASSIGNMENT OF OWNERSHIP FORM

Alt: Buyer and Seller Signing the Assignment of Ownership Section of a Maryland Vehicle Title for Auto Sales Tax Purposes

- Complete the "Application for Title and Registration" section on the title. Co-buyers must also sign this section.
- Ensure the buyer names match exactly in both the "Assignment of Ownership" and "Application for Title and Registration" sections.
- For vehicles with out-of-state titles, you must complete the MVA Application for Maryland Title (form # VR-005). Co-buyers must also sign this application.

Lien Release Documentation (if applicable):
- If the seller’s Maryland title indicates a lien, you’ll need the “Notice of Security Interest Filing.” For out-of-state titles with liens, the title itself should show the lien satisfaction.
- If the “Notice of Security Interest Filing” is missing, request a letter from the financial institution from the seller. This letter must be on the institution’s letterhead, signed by an authorized agent, stating no security interest is held, and include loan and vehicle details.
- To title the vehicle in Maryland, you must have either the “Notice of Security Interest Filing” or the financial institution’s letter.
MVA Bill of Sale (Form VR-181) – Potentially Required for Auto Sales Tax:
- A notarized MVA Bill of Sale (form # VR-181) is needed if the sale price is less than the vehicle’s book value and the vehicle is 7 years old or newer. This is directly related to how auto sales tax is calculated. Contact the MVA’s Customer Service Center at 1-410-768-7000 to verify book value if needed.
- If a notarized Bill of Sale isn’t presented and the purchase price is within $500 of the retail value in the National Publication of Used Car Values, the MVA may accept the title’s purchase price for auto sales tax calculation.
Auto Sales Tax (Excise Tax) Calculation: An excise tax, which is the auto sales tax in Maryland, will be charged. For vehicles 7 years old or newer, the tax is 6% of either the vehicle’s book value or 6% of the purchase price on the notarized Bill of Sale, whichever is higher. For vehicles older than 7 years, the tax is calculated at 6% of the purchase price. Maryland has a minimum excise tax of $38.40, based on a minimum vehicle value of $640.
Vehicle Inspection:
- Used vehicles must pass a Maryland safety inspection before registration. This inspection must be done at a licensed Maryland inspection station (dealers, service stations, specialized centers). A “Maryland Safety Inspection Certificate” is valid for 90 days.
- Verify that the Vehicle Identification Number (VIN) on the inspection certificate, title, and other documents match the VIN on the vehicle itself. Altered inspection certificates are not accepted.
Temporary Registration (if needed):
- If you need to get the vehicle inspected or repaired before full registration, a Temporary Registration is available. This can be purchased at the MVA when titling the vehicle and is valid for 30 days. It allows you to legally transport the vehicle for inspection and repairs.
- You’ll need to pay title fees, taxes (including estimated auto sales tax for temporary registration), and any lien filing fees, plus the temporary registration fee when purchasing temporary plates. The full registration fee is paid later when you submit the “Maryland Safety Inspection Certificate” and request permanent plates.
- To get a temporary registration, you might need to complete an MVA Temporary Inspection Waiver (form # VR-129).
License Plates and Insurance: You will need to purchase license plates and provide proof of Maryland-compliant vehicle insurance to complete the registration process and finalize your auto sales tax payment.

Understanding Vehicle History and Title Brands: Due Diligence Before Purchase

Before finalizing the purchase, it’s wise to investigate the vehicle’s history, especially regarding salvage titles, which can impact value and potentially auto sales tax considerations in specific situations (though generally tax is based on sale price or book value, regardless of salvage history unless value is significantly impacted and reflected in a lower sale price).

Title Review: Always examine the title carefully for any indications of “salvage” or other brands.
Salvage Titles in Maryland: In Maryland, a salvaged vehicle title indicates extensive damage. To re-title a salvaged vehicle, it must undergo a salvage inspection to ensure it’s safe to drive. Maryland salvage certificates are branded with categories like:
- Damage exceeding market value.
- Damage equal to or less than market value (title not branded in this case).
- Vehicle not rebuildable (cannot be re-titled).
- Stolen or abandoned vehicles.
Rebuilt Salvage Titles: If a Maryland Salvage Certificate was issued due to damage exceeding market value or abandonment, the re-issued title will be branded “rebuilt salvage.” Vehicles branded “not rebuildable” cannot be titled in Maryland. Salvaged vehicles require both a Maryland Salvage Inspection and a Maryland Safety Inspection before registration and auto sales tax payment.
Vehicle History Reports: The Maryland MVA can provide basic title history information for vehicles registered in Maryland, but due to privacy laws, they won’t disclose previous owner names or addresses. You can request this information using the MVA Request for Motor Vehicle Administration Records (form # DR-057). Non-certified records are sufficient for history checks, while certified records are for legal purposes.
Out-of-State Vehicle History: If the vehicle was salvaged or re-titled in another state, it might not appear on Maryland MVA reports. Contact the motor vehicle department in the relevant state to get its history.
Commercial Vehicle History Services: Services are available (often for a fee) that provide comprehensive vehicle history reports, including salvage history, using the VIN.

Helpful Transaction Tips for Buyers and Sellers Regarding Auto Sales Tax

Seller Responsibilities: Sellers should have the Certificate of Title and Security Interest Filing readily available for buyer inspection. Verify the seller’s name matches the title, the title is unaltered, and the VIN matches the vehicle.
Title Completion: Both buyer and seller must properly complete the title at the time of transaction. Information should be clear and legible to avoid registration and auto sales tax issues.
Buyer Name on Title: The buyer’s name must be in the “Assignment of Ownership” area for the title to be valid for MVA registration and auto sales tax processing.
Bill of Sale Necessity: Remember, a notarized MVA Bill of Sale (form # VR-181) is required if the vehicle is less than 7 years old and sold for less than the book value. This directly impacts the calculation of auto sales tax.

Donating a Vehicle to Charity: Auto Sales Tax and Title Transfer

Donating a vehicle to charity involves a title transfer similar to a sale, but with potential tax deduction benefits for the donor, although auto sales tax isn’t directly applicable here for the donor, the charity will eventually need to handle title and potential resale taxes.

Owner (Donor) Responsibilities:

Title Assignment to Charity: Assign the title to the charity in the “Assignment of Ownership” section, just as you would for a sale. Include the charity’s name and address. Do not leave new owner information blank, as this creates an “open” title and potential liability for you.
Odometer Reading: Record the odometer mileage on the Maryland Certificate of Title.
Lien Release: If the vehicle was financed, provide the charity with the “Maryland Notice of Security Interest Filing” or a lien release letter from the financial institution.
Remove License Plates: Do not leave plates on the donated vehicle. Return them to the MVA after title transfer, unless transferring them to another vehicle. Keep the MVA receipt. Maintain insurance until plates are returned or transferred.
Cancel Insurance: Cancel vehicle insurance after returning plates to the MVA to avoid penalties.

Charity Responsibilities:

Donation Receipt: The charity must provide you with a receipt for tax purposes. Consult with the charity about tax deduction guidelines.
Charity Licensing: List of Charities Licensed as Wholesale Dealers in Maryland. (Link to MVA list if available).

Giving a Vehicle as a Gift: Auto Sales Tax Exemption in Maryland

Gifting a vehicle to a qualifying family member in Maryland can exempt you from auto sales tax (excise tax).

Relationship Requirements for Gift Exemption:

The gift recipient must be an immediate family member: Spouse, child (including adopted and step), grandchild, parent (including step), sibling (including half), grandparent, in-laws, aunt/uncle (over 65) to niece/nephew.

Proof of Relationship: If last names differ, you must provide proof of the family relationship (e.g., marriage certificate, birth certificate). Contact the MVA Customer Service Center for clarification on acceptable documentation.

Required Forms: For gifts from aunt/uncle to niece/nephew, a Certified Statement (form # VR-299) and Gift Certification (form # VR-103) are needed.

Certificate of Title for Gifts:

The vehicle must already be titled in Maryland to qualify for the gift exemption. Submit the Gift Certification (form # VR-103) with the Certificate of Title.
Follow standard title assignment procedures, with the giver as “seller” and receiver as “buyer.”
To add a name to the title (e.g., adding a spouse), put both names on the “name of buyer” line.
Lienholder approval is needed to add/remove names if a lien exists.
In the purchase price section of the title, write “gift” and the transaction date.
Record the odometer reading.

GIFT ASSIGNMENT OF OWNERSHIP Click to see enlarged form

Vehicle Inspection for Gifts:

Transfers between spouses or parent and child are exempt from inspection if the vehicle is Maryland-titled. Other gift transactions require a Maryland Safety Inspection. No inspection is needed if co-owners are removing a name from the title.

Notice of Security Interest Filing for Gifts:

If a lien is on the title but paid off, the gift recipient needs the “Notice of Security Interest Filing.” If unavailable, request a lien release letter from the financial institution.

Auto Sales Tax (Excise Tax) Exemption for Gifts:

Gifts to qualified family members of Maryland-titled vehicles are exempt from auto sales tax. Out-of-state gifts are not tax-exempt unless the vehicle was previously Maryland-titled and the relationship meets requirements.

Plate Transfer and Registration for Gifts:

Provide insurance information for registration.
Complete the “Application for Title and Registration” section on the title.

APPLICATION FOR TITLE AND REGISTRATION

Alt: Application for Title and Registration Section on a Maryland Vehicle Title – Required for Auto Sales Tax and Registration Completion

If the giver lacks the title, they need to get a duplicate title (form # VR-018) and then gift the vehicle.
Plates can be transferred in specific family transfer scenarios (spouse to spouse, parent to child, etc.). New plates are needed for other gift transfers. Plate transfer rules apply regarding registration year remaining and potential refunds.

Unlicensed vs. Licensed Vehicle Dealers: Implications for Buyers

Understanding the difference between licensed dealers and unlicensed “curbstoners” is important for buyer protection, though less directly related to auto sales tax itself.

Curbstoners: Unlicensed dealers selling vehicles informally, potentially with title issues or undisclosed vehicle problems. Signs include titles not in the seller’s name, multiple vehicles listed with the same number, out-of-state/temporary/dealer/missing plates. Curbstoner Information Link.
Licensed Dealers: Must display business licenses, operate from licensed locations, and have licensed salespeople. Salespeople must have licenses available to show.
Dealer License Types:
- New vehicle dealers can sell new and used cars and wholesale to other dealers.
- Used vehicle dealers can sell used vehicles and wholesale to other dealers.
- Wholesale dealers cannot sell to the general public.

By understanding these guidelines, especially regarding auto sales tax (excise tax) and title transfer procedures, both buyers and sellers can navigate private vehicle transactions in Maryland with confidence and compliance. Always consult the official Maryland Motor Vehicle Administration website or contact them directly for the most up-to-date information and specific guidance.