Navigating Maryland Car Sales Tax and Private Vehicle Transactions: A Comprehensive Guide

Buying, selling, gifting, or donating a vehicle in Maryland through a private transaction can seem complex. As your trusted auto repair experts at cardiagnosticnearme.com, we’ve created this guide to clarify each step, ensuring a smooth process, and importantly, helping you understand Maryland Car Sales Tax implications.

Private vehicle sales in Maryland, those conducted without a licensed dealer, are not regulated by the Maryland Motor Vehicle Administration (MVA). This means buyers and sellers are responsible for understanding and completing all necessary legal and administrative steps. Concerns regarding sales, warranties, or consumer rights in private transactions are solely between the buyer and seller.

Crucially, understanding Maryland car sales tax, or more accurately, the vehicle excise tax, is vital in these transactions. While there isn’t a traditional “sales tax” on vehicles in Maryland, the state levies an excise tax during the titling process, and this applies to private sales, gifts, and even donations.

To protect yourself, always keep copies of all ownership transfer documents and related forms. Let’s break down the process for each scenario:

For Vehicle Sellers in Maryland: Your Responsibilities

As the seller, you are responsible for several key actions to legally transfer ownership:

Properly Assign the Vehicle Title

Complete the Assignment of Ownership Section: On the back of the original “Certificate of Title,” the seller must sign, print their name, and clearly write the buyer’s name and address in the “Assignment of Ownership” section. This section must be filled out correctly; an “open” title (missing buyer information) is invalid and will not be accepted by the MVA for registration.

ASSIGNMENT OF OWNERSHIP FORM

Alt text: Sample Maryland vehicle title assignment of ownership section, highlighting fields for seller signature, printed name, buyer name and address.

Lost or Damaged Title: If the original title is lost or damaged, you must obtain a duplicate title using the MVA Application for Duplicate Certificate of Title (form VR-018).
Odometer Disclosure: Record the vehicle’s mileage in the “Assignment of Ownership” section of the title. This is a federal requirement to prevent odometer fraud.
Purchase Price and Sale Date: If there’s space on the title, record the vehicle’s sale price and the date of sale. This information is important for Maryland car sales tax (excise tax) calculation.

Notary and Bill of Sale Requirements in Maryland

Whether you need a notary or a “Bill of Sale” depends on the vehicle’s age and sale price, and its relation to the book value.

Notary for Bill of Sale in Specific Cases: A notary, witnessing both buyer and seller signatures on a MVA Bill of Sale (form VR-181), is required only if you use a bill of sale AND the vehicle is 7 years old or newer AND being sold for less than its book value.
Verifying Book Value: Contact the MVA Customer Service Center at 1-410-768-7000 to verify the vehicle’s book value if you are unsure.
When a Notarized Bill of Sale is NOT Needed: A notarized bill of sale is not required if:
- The vehicle’s sale price is higher than its book value.
- The vehicle is older than 7 years.
- If the sale price is within $500 of the retail value in the National Publication of Used Car Values, the MVA will generally accept the purchase price stated on the title without a notarized bill of sale.

Providing Lien Release Documentation

It’s crucial to provide the buyer with proof that any liens on the vehicle have been satisfied.

Original Title and Security Interest Filing: Always provide the buyer with the original “Certificate of Title” and the original “Notice of Security Interest Filing” (if a lien existed). This “Notice of Security Interest Filing” is the buyer’s evidence that the loan is paid off and is required by the MVA to issue a new title.
Letter from Financial Institution (If Notice is Missing): If the “Notice of Security Interest Filing” is unavailable, obtain a letter from the lienholder (financial institution) on their official letterhead. This letter must state they no longer hold a lien and be signed by an authorized agent. It should also include loan details: creation date, amount, release date, debtor’s information, and vehicle description (year, make, VIN).
Lien Payoff Responsibility: As the seller, ensure any liens are paid off before transferring ownership. Contact your financial institution to arrange final payment. Once satisfied, they will provide the lien release letter or the “Notice of Security Interest Filing.”
Important Seller Note: Once the new title is issued to the buyer, your old title and lien release documents are destroyed by the MVA.

Returning License Plates and Canceling Insurance

Return Plates to MVA Before Canceling Insurance: Maryland law mandates vehicle insurance. Uninsured fines start at $150 per day. Unless you are transferring the plates to a new vehicle, return the license plates to the MVA and get a receipt before canceling your insurance.
Plate Return Options: You can return plates in person at an MVA branch or through mail. Keep the receipt as proof of return.

For Vehicle Buyers in Maryland: Your Steps to Ownership

Whether buying from within Maryland or out-of-state, the ownership transfer process is similar. You must visit an MVA full-service office with the following documentation. Remember, you must register the vehicle and obtain Maryland license plates before you can legally drive it.

Required Documents for Vehicle Buyers

Certificate of Title:
- Buyer Signature: Sign the “Maryland Certificate of Title” in the “Assignment of Ownership” section. Co-buyers must also sign.
- Buyer Information: Ensure your name and address are clearly recorded in the “Assignment of Ownership” area.
- Application for Title and Registration Section: Complete the “Application for Title and Registration” section on the title. Co-buyers must sign here as well.
- Name Consistency: Names must match in both the “Assignment of Ownership” and “Application for Title and Registration” sections.
- Out-of-State Titles: If purchasing a vehicle with an out-of-state title, you’ll need to complete an MVA Application for Maryland Title (form VR-005). Co-buyers must also sign this application.

ASSIGNMENT OF OWNERSHIP FORM

Alt text: Close-up view of the Assignment of Ownership form on a Maryland vehicle title, emphasizing signature lines for buyer and seller.

Lien Release Documentation (if applicable):
- Maryland Titled Vehicle with Lien: You’ll need the “Notice of Security Interest Filing.”
- Out-of-State Titled Vehicle with Lien: The title itself needs to show the lien has been satisfied.
- Alternative Lien Release Letter: If the “Notice of Security Interest Filing” is unavailable, request the seller provide a letter from the financial institution (as described in the seller’s section).
MVA “Bill of Sale” (Potentially):
- When Required: 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.
- When Not Required: If the sale price is within $500 of the retail value in the National Publication of Used Car Values, or if the vehicle is older than 7 years, a notarized bill of sale is usually not needed.

Understanding Maryland Vehicle Excise Tax (Car Sales Tax)

This is where Maryland car sales tax comes into play. Maryland doesn’t have a traditional sales tax on vehicles, but it levies an excise tax during titling.

Excise Tax Calculation: An excise tax of 6% is charged. For vehicles 7 years old or newer, this tax is calculated on either 6% of the vehicle’s book value or 6% of the purchase price on a notarized “Bill of Sale,” whichever is higher. For vehicles older than 7 years, the tax is based on the purchase price.
Minimum Excise Tax: Maryland has a minimum excise tax of $38.40, based on a minimum vehicle value of $640.

Vehicle Safety Inspection

Maryland Inspection Requirement: 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).
Inspection Certificate Validity: A “Maryland Safety Inspection Certificate” is valid for 90 days.
VIN Verification: Ensure the Vehicle Identification Number (VIN) on the inspection certificate, title, and all documents match the VIN on the vehicle’s dashboard (visible through the windshield on the driver’s side).
Temporary Registration Option: If you need to get the vehicle inspected or repaired before registering, you can obtain a Temporary Registration at the MVA. This 30-day registration allows you to transport the vehicle for inspection and repairs. You’ll pay title fees, taxes (including excise tax), and temporary registration fees upfront, but the full registration fee is paid after the safety inspection is passed.
Temporary Inspection Waiver: For a temporary registration, you’ll need to complete an MVA Temporary Inspection Waiver (form VR-129).

License Plates and Insurance

You will need to obtain Maryland license plates and show proof of Maryland-compliant vehicle insurance to complete the registration process.

Vehicle History and Salvage Titles: Buyer Due Diligence

Understanding a vehicle’s title history is crucial to avoid potential problems. Always carefully examine the title for any signs of issues.

Title History Importance: Tracing a used vehicle’s title helps verify ownership, odometer readings, and uncover potential problems like salvage history.
Salvage Titles and Brands: A “salvage” title indicates significant damage. Maryland requires a salvage inspection before a salvaged vehicle can be retitled and deemed safe. Maryland salvage certificates have “brands” indicating the severity of damage:
- Damage exceeds market value.
- Damage is less than or equal to market value (title not branded in this case).
- “Not rebuildable” – cannot be retitled.
- Stolen or abandoned.
“Rebuilt Salvage” Brand: If a salvage certificate was branded due to damage exceeding market value or being abandoned, the new title will be branded “rebuilt salvage.”
Maryland MVA Vehicle History Reports: The Maryland MVA can provide basic title history information for vehicles registered in Maryland (excluding previous owner names/addresses due to privacy laws). Request a non-certified or certified record using the MVA Request for Motor Vehicle Administration Records (form DR-057).
Out-of-State Salvage History: Maryland 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/salvaged for that history.
Commercial Vehicle History Services: Services like CARFAX or AutoCheck offer comprehensive vehicle history reports, often including salvage information from various sources.

Donating a Vehicle to Charity in Maryland

Donating a vehicle involves title transfer similar to a sale, and understanding Maryland car sales tax (excise tax) exemptions for donations is important for both the donor and charity.

Owner (Donor) Responsibilities:

Assign Title to Charity: Properly assign the title to the charity, just as in a sale. Include the charity’s name and address in the “Assignment of Ownership” section. Do not leave the new owner information blank.
Odometer Reading: Record the odometer mileage on the title.
Lien Release Documentation: Provide the charity with the “Maryland Notice of Security Interest Filing” or a lien release letter if the vehicle was financed.
Remove License Plates: Remove and return license plates to the MVA (unless transferring them to a replacement vehicle) after title transfer. Keep the MVA receipt.
Cancel Insurance: Cancel insurance after returning plates to avoid penalties.

Charity Responsibilities:

Provide Tax Receipt: The charity must provide the donor with a receipt for tax deduction purposes. Consult the charity for details on allowable deductions and Maryland car sales tax implications of the donation (excise tax is still applicable upon titling by the charity, though charities may have exemptions in certain cases).
List of Charities Licensed as Wholesale Dealers in Maryland – This list may be helpful for finding reputable charities.

Gifting a Vehicle in Maryland and Excise Tax Exemptions

Gifting a vehicle to a family member in Maryland can qualify for an exemption from Maryland car sales tax (excise tax).

Eligibility for Gift Exemption:

Immediate Family Members Only: Exemptions apply to gifts between: Spouse, Parent, Child (including adopted/step/grand), Sibling (including half/step), 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.
Certified Statement (Aunt/Uncle to Niece/Nephew): For gifts from aunts/uncles (over 65) to nieces/nephews, a Certified Statement (form VR-299) and a Gift Certification (form VR-103) are required.

Gift Transfer Process:

Maryland Title Required: The vehicle must already be titled in Maryland to be gifted with excise tax exemption.
Gift Certification Form: Submit the Gift Certification (form VR-103) with the Certificate of Title.
Title Assignment: The giver is the “seller,” and the receiver is the “buyer” on the title. Write “gift” in the purchase price section and the transaction date.
Odometer Reading: Record the odometer reading.
Adding Name to Title: To add a name (e.g., gifting to a spouse and adding their name), put both names on the “buyer” line in the “Assignment of Ownership” section.
Lienholder Approval (If Applicable): If there’s a lien, you need written permission from the lienholder to add or remove names from the title.

GIFT ASSIGNMENT OF OWNERSHIP Click to see enlarged form

Vehicle Inspection for Gifts:

Exemptions: Transfers between spouses or parent and child are exempt from inspection if the vehicle is already Maryland-titled.
Other Family Gifts: Safety inspections are required for all other family gift transfers.

Excise Tax (Car Sales Tax) Exemption for Gifts:

Family Gift Exemption: Vehicles gifted within qualifying family relationships and already titled in Maryland are exempt from excise tax.
Out-of-State Gift Exception: A vehicle gifted from out-of-state to a Maryland resident is not tax-exempt unless it was previously titled and registered in Maryland AND the family relationship qualifies.

Plate Transfer and Registration for Gifts:

Insurance Information: You must provide Maryland insurance information to register the gifted vehicle.
Application for Title and Registration: Complete this section on the title with insurance details.

APPLICATION FOR TITLE AND REGISTRATION

Alt text: Detailed view of the Application for Title and Registration section on a Maryland vehicle title, focusing on insurance information fields.

Duplicate Title (If Needed): If the giver doesn’t have the title, they’ll need to get a Duplicate Title (form VR-018) and then sign it over as a gift.
Plate Transfer Rules: Plates can be transferred in limited family gift scenarios (e.g., between spouses, parent/child). New plates are usually required for other family gift transfers.

Avoiding Unlicensed Dealers (“Curbstoners”)

Be cautious of “curbstoners,” unlicensed dealers who may misrepresent themselves in private sales.

Signs of a Curbstoner:

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

Licensed Dealers:

Must display their business license.
Can only sell from licensed locations.
Salespeople must be licensed and show their license upon request.

Types of Dealer Licenses:

New Vehicle Dealer: Can sell new and used vehicles.
Used Vehicle Dealer: Can sell only used vehicles.
Wholesale Dealer: Cannot sell to the general public.

Helpful Transaction Tips for Private Vehicle Sales in Maryland

Seller’s Title and Lien Release: Sellers should have the title and lien release (if applicable) ready for buyer inspection.
Verify Title and VIN: Buyers should verify the seller’s name matches the title, the title is not altered, and the VIN matches the vehicle. Check for title erasures or staples.
Proper Title Completion: Both buyer and seller must complete the title clearly and accurately at the time of sale.
Buyer Name on Title: Ensure the buyer’s name is correctly entered in the “Assignment of Ownership” section.
Bill of Sale When Needed: Use a notarized Bill of Sale (form VR-181) if required (vehicle 7 years or newer and sold below book value).

By understanding these steps and Maryland car sales tax (excise tax) rules, private vehicle transactions in Maryland can be straightforward. Remember to always double-check information with the MVA directly for the most up-to-date guidelines. And for all your car maintenance and diagnostic needs, visit us at cardiagnosticnearme.com!