Navigating Auto Sales Tax in MD: A Comprehensive Guide for Private Vehicle Transactions

Buying, selling, gifting, or donating a vehicle in Maryland through a private transaction can seem daunting. Understanding the process, especially when it comes to Auto Sales Tax In Md, is crucial for a smooth and legally sound transaction. This guide breaks down each step, ensuring both buyers and sellers are well-informed and compliant with Maryland Motor Vehicle Administration (MVA) regulations.

It’s important to remember that private vehicle sales, those conducted without a licensed dealer, are not regulated by the MVA. Therefore, all aspects of the sale, including warranties and consumer rights, are the sole responsibility of the buyer and seller. Always maintain copies of all ownership transfer documents and related forms for your records.

Selling Your Vehicle: Key Responsibilities for Sellers

As the seller, several responsibilities fall upon you to ensure a proper and legal transfer of ownership.

Properly Assigning Vehicle Ownership

The “Certificate of Title” is the core document for transferring ownership. Here’s how to assign it correctly:

Complete the Assignment Section: On the back of the Certificate of Title, under the “Assignment of Ownership” section, the seller must sign and clearly print their name. Crucially, you must also write the buyer’s name and full address in this section. An incomplete “Assignment of Ownership” section, lacking the buyer’s details, renders the title “open,” which the MVA will not recognize for registration purposes.

ASSIGNMENT OF OWNERSHIP FORM

A sample of the Assignment of Ownership form on a Maryland Certificate of Title, highlighting the areas where sellers and buyers need to provide information for a private vehicle transaction.

Lost or Damaged Title: If the original title is lost or damaged, you’ll need to obtain a duplicate title by completing the MVA Application for Duplicate Certificate of Title (form # VR-018).
Odometer Disclosure: Accurately record the vehicle’s odometer mileage in the designated “Assignment of Ownership” section on the Certificate of Title.
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.

Notary and Bill of Sale Requirements

Whether you need a notary or a “Bill of Sale” depends on the vehicle’s age and sale price.

Notary for Bill of Sale: A notary is required to witness both buyer and seller signatures only if you are using a Bill of Sale to complete the transaction. If the Maryland Certificate of Title has a space for the purchase price filled out, a Bill of Sale is generally not needed, unless the vehicle is 7 years old or newer and sold for less than its book value.
Mandatory Notarized Bill of Sale: A notarized MVA Bill of Sale (form # VR-181) is specifically required if the sale price is less than the vehicle’s book value and the vehicle is 7 years old or newer. To verify the book value, contact the MVA’s Customer Service Center at 1-410-768-7000.
Bill of Sale Not Always Needed: A notarized Bill of Sale isn’t required if the sale price exceeds the book value or if the vehicle is older than 7 years.
Price within $500 of Retail Value: If a notarized Bill of Sale isn’t presented, and the purchase price on the title is within $500 of the retail value listed in the National Publication of Used Car Values, the MVA will typically accept the purchase price stated on the title.

Providing Original Documents to the Buyer

It’s crucial to give the buyer the original title and, if applicable, the original Security of Interest Filing. This paperwork proves the vehicle is paid off and is essential for the buyer to obtain a new title.

Lien Release Evidence: If there was a loan (lien) on the vehicle, the “Notice of Security Interest Filing” serves as proof to the MVA that the lien has been satisfied. The buyer must submit this original document to get the new title. This document is typically sent to the vehicle owner by the financial institution after the final loan payment.
Alternative Lien Release Letter: If the “Notice of Security Interest Filing” is unavailable, obtain a letter from the financial institution on their letterhead. This letter must state they no longer hold a security interest in the vehicle and be signed by an authorized agent. It should also include loan details: creation date, amount, release date, debtor’s name and address, and a complete vehicle description (year, make, VIN).
Lien Payoff Responsibility: As the seller, you must pay off any existing lien on the vehicle before transferring ownership. Contact the financial institution to arrange the final payment. Once the lien is cleared, they will provide either a lien release letter or the “Notice of Security Interest Filing.”
Document Destruction Note: Be aware that once the new title is issued to the buyer, your old title and Security of Interest Filing documents will be destroyed by the MVA.

Returning License Plates to the MVA

Before you cancel your insurance, return the license plates to the MVA.

Strict Insurance Laws: Maryland has strict laws regarding uninsured vehicles. Fines for uninsured motorists start at $150 for the first day.
Plate Return is Key: Unless you are transferring the plates to a new vehicle, return them to the MVA and get a receipt before canceling your insurance coverage. This receipt serves as proof of plate return and can prevent potential fines.

Buying a Vehicle: Your Steps as the Purchaser

Whether you’re buying a vehicle privately within Maryland or from out-of-state, the ownership transfer procedure is similar. You’ll need to visit an MVA full-service office with the necessary documents. Remember, you must register the vehicle and get license plates before driving it legally on public roads.

Essential Documents for Vehicle Buyers

Certificate of Title:
- Buyer Signature Required: Sign your name in the “Assignment of Ownership” section on the Maryland Certificate of Title. If there’s a co-buyer, they must also sign.
- Buyer Information on Title: Your name and address must be clearly recorded in the “Assignment of Ownership” area to validate the sale for MVA registration.

ASSIGNMENT OF OWNERSHIP FORM

Another view of the Assignment of Ownership form, emphasizing the buyer’s role in completing their information for a successful vehicle title transfer in Maryland.

- **Complete Application Section:**  You, as the buyer, are responsible for filling out the "Application for Title and Registration" section on the title. Co-buyers also need to sign this section.
- **Name Consistency:** Ensure the buyer name(s) are identical in both the "Assignment of Ownership" and "Application for Title and Registration" sections.
- **Out-of-State Titles:** If you've purchased a vehicle with an out-of-state title, you must complete the MVA Application for Maryland Title (form # VR-005). Co-buyers must also sign this application.

Lien Release from Financial Institution:
- Maryland Titled Vehicle: If buying a Maryland-titled vehicle that was financed, you’ll need the “Notice of Security Interest Filing.” For out-of-state titles, the title should show the lien satisfaction.
- Alternative Letter: If the “Notice of Security Interest Filing” is missing, request a letter from the seller’s financial institution. This letter needs to be on the institution’s letterhead, signed by an authorized agent, stating no security interest is held. It must include loan details: date of creation, amount, release date, debtor name and address, and full vehicle description.
- Requirement for Titling: You must present either the “Notice of Security Interest Filing” or the financial institution’s letter to title the vehicle in Maryland.
MVA “Bill of Sale” and Auto Sales Tax in MD (Excise Tax):
- When a Bill of Sale is Needed: A notarized MVA Bill of Sale is required if the sale price is less than the vehicle’s book value and the vehicle is 7 years old or newer. Call the MVA Customer Service Center to verify book value.
- Price Close to Retail Value: If a notarized Bill of Sale isn’t provided 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.
- Excise Tax Calculation: Maryland charges an excise tax, essentially auto sales tax in MD, calculated at 6% of the vehicle’s book value or 6% of the purchase price on a notarized Bill of Sale for vehicles 7 years old or newer. For vehicles older than 7 years, the tax is based on the purchase price. Maryland’s minimum excise tax is $38.40, based on a minimum taxable value of $640. This auto sales tax in MD is a key cost to consider when buying a vehicle privately.
Vehicle Inspection:
- Maryland Safety Inspection Required: Used vehicles must pass a Maryland safety inspection before MVA registration. Inspections must be done at a licensed Maryland inspection station (dealers, service stations, specialized centers). A “Maryland Safety Inspection Certificate” is valid for 90 days.
- VIN Verification: Ensure the Vehicle Identification Number (VIN) on the metal plate visible through the windshield (driver’s side) matches the VIN on the Inspection Certificate, Title, and all ownership documents. Altered certificates are not accepted.
- Temporary Registration: If you need to get an inspection or repairs before registration, a Temporary Registration is available for 30 days. This allows you to legally transport the vehicle for inspection and repairs. You’ll pay title fees, taxes (including auto sales tax in MD), and lien filing fees (if applicable), plus the temporary registration fee upfront. The full registration fee is paid when you submit the Safety Inspection Certificate and request permanent plates.
- Temporary Inspection Waiver: To get a temporary registration, complete the MVA Temporary Inspection Waiver (form # VR-129).
License Plates and Insurance: You will need to obtain Maryland license plates and insurance to legally operate the vehicle.

Vehicle History and Title Checks: Due Diligence

Importance of Title History

Always inspect the title carefully and consider tracing the vehicle’s history. This helps confirm ownership, verify mileage, and identify potential issues like salvage history.

Salvage Titles and Brands: Check for indications of “salvage,” which suggests extensive vehicle damage. Maryland brands salvage certificates with categories like:
- Damage exceeding market value
- Damage equal to or less than market value (title usually not branded in this case)
- Non-rebuildable (cannot be re-titled)
- Stolen or abandoned
Rebuilt Salvage Titles: Vehicles with salvage certificates branded due to damage exceeding fair market value or being abandoned will have a “rebuilt salvage” brand on the new title after passing a salvage inspection. The MVA will not title vehicles branded “not rebuildable.” Rebuilt salvage vehicles require both a Maryland Salvage Inspection and a Maryland Safety Inspection before registration. Maryland MVA history reports will show “rebuilt salvage” status.
Obtaining Vehicle History from MVA: The Maryland MVA can provide basic title history information for vehicles registered in Maryland. Due to privacy laws, they won’t disclose previous owner names or addresses but will provide vehicle details. Request this information using the MVA Request for Motor Vehicle Administration Records (form # DR-057), choosing between non-certified (vehicle history only) or certified (for legal/court use). You’ll need the vehicle title number, tag number, or VIN.
Out-of-State Vehicle History: Maryland MVA history reports may not show salvage history from other states. Contact the Department of Motor Vehicles in the state where the vehicle was previously titled or salvaged to get its history. Each state has its own requirements for obtaining vehicle history.
Commercial Vehicle History Services: Numerous commercial services (online or in yellow pages) offer comprehensive vehicle history reports for a fee or sometimes for free. These reports often include salvage information and usually require the vehicle’s make, model, and VIN.

Transaction Tips for a Smooth Process

Seller Document Readiness: The seller should have the Certificate of Title and Security Interest Filing (if applicable) ready for the buyer to inspect at the time of transaction.
Title Verification: Buyers should verify the seller’s name matches the name on the title, the title isn’t altered, and the VIN matches the vehicle. Avoid titles with erasures or staples that could invalidate them.
Proper Title Completion: Both buyer and seller must complete the title accurately and legibly during the transaction to prevent registration issues.
Buyer Name on Title: The buyer’s name must be in the “Assignment of Ownership” area. Without it, the title is “open” and unacceptable for MVA registration.
Bill of Sale for Newer, Lower-Priced Vehicles: Remember, a notarized MVA Bill of Sale is needed if the vehicle is less than 7 years old and sold below book value.

Donating a Vehicle to Charity: Guidelines

Donating a vehicle involves specific steps for both the donor and the charity.

Donor Responsibilities:

Title Assignment to Charity: Properly assign the title to the charity, just as in a sale. Fill in the charity’s name and address in the “Assignment of Ownership” section to ensure proper transfer. Avoid leaving new owner information blank, as this creates an “open” title, potentially causing issues and affecting your tax deduction.
Odometer Reading: Record the odometer mileage on the Maryland Certificate of Title.
Lien Release for Charity: If the vehicle was financed, provide the charity with the “Maryland Notice of Security Interest Filing” as proof of lien satisfaction. If unavailable, get a lien release letter from the financial institution (as described in the “Selling Your Vehicle” section).
Remove and Return Plates: Do not leave license plates on the donated vehicle. After title transfer, remove and return plates to the MVA (unless transferring them to another vehicle registered in your name and same vehicle class). Keep the MVA receipt. Maintain insurance until plates are returned or transferred.
Cancel Insurance: Cancel vehicle insurance after returning plates to the MVA or transferring them.

Charity Responsibilities:

The charity must provide you with a receipt for tax purposes. Inquire with the charity about allowable tax deductions for vehicle donations.

List of Charities Licensed as Wholesale Dealers in Maryland.

Gifting a Vehicle: Family Transfers and Excise Tax Exemption

Gifting a vehicle to a family member in Maryland may qualify for an excise tax exemption, reducing the auto sales tax in MD burden. Specific family relationships qualify:

Spouse
Child (son, daughter, adopted, step, grandchild, in-law)
Parent (mother, father, step, in-law, grandparent)
Sibling (brother, sister, half-sibling)
Aunt/Uncle (65+ years old) to niece/nephew

Relationship Proof: If last names differ, you must provide proof of the relationship (e.g., marriage certificate, birth certificate). Contact MVA Customer Service 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.

Gift Transfer Procedures:

Maryland Title Requirement: The vehicle must already be titled in Maryland to be gifted in Maryland.
Gift Certification Form: Submit the Gift Certification (form # VR-103) along with the Certificate of Title.
Title Assignment as Gift: On the Maryland Certificate of Title, the giver is the “seller,” and the recipient is the “buyer.” For adding a name to a title as a gift, put both names on the “name of buyer” line in the “Assignment of Ownership” section, and complete address lines for buyers and the “Application for Title and Registration.”
Lienholder Approval for Name Change: If there’s a lien, the lienholder must approve adding or removing a name from the title. Get a permission letter from the lienholder on their letterhead to submit to the MVA.
“Gift” Notation on Title: In the purchase price section, write “gift” and the transaction date.
Odometer Reading: Record the odometer reading in the “Assignment of Ownership” section.

GIFT ASSIGNMENT OF OWNERSHIP Click to see enlarged form

Inspections and Taxes for Gifts:

Inspection Exemptions: Transfers between spouses or parent and child are exempt from Maryland Safety Inspection if the vehicle is Maryland-titled. All other gift transactions require inspection. Co-owner removals from titles do not require inspection.
Lien Release for Gifts: If a lien is on the title and paid off, the gift recipient needs the “Notice of Security Interest Filing.” If unavailable, the giver should get a lien release letter from the financial institution.
Excise Tax Exemption for Gifts: A vehicle titled in Maryland and gifted to a qualifying family member is exempt from excise tax (auto sales tax in MD). Out-of-state gifted vehicles are not tax-exempt unless previously Maryland-titled and meeting relationship requirements.

Plates and Registration for Gifted Vehicles:

Insurance Information: Provide insurance details (company name, policy number, agent name) on the “Application for Title and Registration.” The recipient certifies insurance accuracy with their signature. Insurance must be from a Maryland-licensed insurer.
Duplicate Title if Needed: If the recipient lacks the Maryland Certificate of Title, the giver must get a Duplicate Title (form # VR-018) and then gift the vehicle.
Plate Transfer Rules: Plate transfers for gifts are limited to specific family scenarios (spouse to spouse, parent to child, individual to joint ownership with parent/child). New plates are needed for other gift transfers. Plate transfer rules are detailed in the original document for specific situations.

APPLICATION FOR TITLE AND REGISTRATION

A sample Application for Title and Registration section, showing where buyers provide their information, including insurance details, when transferring vehicle ownership in Maryland.

Unlicensed vs. Licensed Vehicle Dealers

Be aware of the difference between licensed dealers and “curbstoners” (unlicensed dealers). Curbstoners sell vehicles on the street or through classified ads, often with questionable practices.

Spotting Curbstoners:

Title not in seller’s name
Same phone number for multiple vehicles advertised
Out-of-state, temporary, dealer, or missing license plates

Licensed Dealers:

Must display business licenses at their location.
Can only sell from licensed locations.
Salespeople must be licensed and work for the dealer listed on their license; ask to see their license.

Dealer License Types:

New vehicle dealers: Can sell new and used vehicles, and wholesale to other dealers.
Used vehicle dealers: Can only sell used vehicles, and wholesale to other dealers.
Wholesale dealers: Cannot sell to the general public.

Understanding these guidelines will help you confidently navigate private vehicle transactions in Maryland, including the often-confusing aspects of auto sales tax in MD. Always consult official MVA resources or seek professional advice when needed.