Buying a car, especially from out of state, can be exciting but also confusing when it comes to taxes. If you’re an Illinois resident purchasing a vehicle from another state, you might be wondering about sales tax. A common question is: Do you have to pay sales tax in Illinois even if you paid tax in the state where you bought the car? The answer is potentially yes. This guide will clarify how Sales Tax On Cars In Illinois works, particularly when you buy from out-of-state dealers or private parties.
Understanding Illinois Car Sales Tax for Out-of-State Purchases
Illinois requires you to pay sales tax on vehicle purchases, even if you’ve already paid sales tax in another state. However, you won’t be double-taxed on the full amount. Instead, Illinois law ensures you pay the difference if the sales tax rate in the state where you bought the car is lower than Illinois’s rate.
Currently, Illinois has a state sales tax of 6.25%. If you purchase a vehicle in a state with a lower sales tax, like Missouri with its 4.225% state sales tax, you will owe Illinois the difference. This difference is calculated based on the state sales tax plus any applicable local sales taxes in Illinois where you reside.
Let’s break down an example: Imagine you buy a car for $20,000 in Missouri, where the state sales tax is 4.225%. If you live in Cook County, Illinois, the local sales tax is an additional 1%. Therefore, the total sales tax in Cook County is 7.25% (6.25% state + 1% local).
In this scenario, the difference in tax you owe Illinois is calculated as follows:
- Illinois Total Sales Tax (Cook County): 7.25%
- Missouri State Sales Tax: 4.225%
- Difference: 3.025%
Applying this 3.025% difference to the $20,000 vehicle price means you would owe an additional $605 in sales tax to Illinois (3.025% of $20,000).
It’s important to note that local sales tax rates vary across Illinois counties. Here are a few examples to keep in mind:
- DuPage, Kane, Lake, McHenry, and Will Counties: Use a combined sales tax rate of 7% for calculations.
- Madison and St. Clair Counties: Use 6.5%, except outside the Metro East Transit District, where the rate is 6.25%.
You can always check the specific local sales tax rate for your area on the Illinois Department of Revenue website or through local government resources.
How to Pay Illinois Car Sales Tax on Out-of-State Purchases
When you register your vehicle in Illinois with the Secretary of State, you will need to pay any outstanding sales tax. This is done using Illinois tax form RUT-25, titled the Vehicle Use Tax Return for Out-of-State Purchases.
This form is due within 30 days of bringing the vehicle into Illinois. You will need to complete RUT-25 and submit it along with your payment to the Illinois Department of Revenue or when you register your vehicle at a Secretary of State facility. The form requires details about your vehicle purchase, the sales tax paid in the other state, and your Illinois county of residence to calculate the additional tax due.
Sales Tax on Cars Bought from Private Parties
The rules differ slightly when you purchase a vehicle from a private individual rather than a dealership, even if it’s an out-of-state transaction. In these cases, you won’t pay the “difference” in sales tax. Instead, you’ll pay Private Party Vehicle Use Tax.
For private party purchases, gifts, or transfers, you must use form RUT-50, the Vehicle Use Tax Return for Private Party Purchases.
The amount of Private Party Vehicle Use Tax is not a percentage of the sales price but a fixed fee based on the vehicle’s purchase price or fair market value. You can find a detailed breakdown of these fees in the Private Party Vehicle Use Tax Chart provided by the Illinois Department of Revenue. Like out-of-state dealer purchases, form RUT-50 is due within 30 days of the vehicle purchase. Local municipalities and counties may also impose additional taxes on private party vehicle transfers.
States with Different Sales Tax Approaches
It’s interesting to note that not all states impose sales tax on vehicle purchases. States like Alaska, Delaware, Montana, New Hampshire, and Oregon do not have vehicle sales tax. Conversely, some states have higher vehicle sales taxes than Illinois. For example, California has a state sales tax rate of 7.25%, which is higher than Illinois’s 6.25%.
Conclusion
Navigating sales tax, especially when buying a car across state lines, can seem complicated. However, understanding Illinois’s rules for sales tax on cars, whether purchased from a dealer or a private party, can save you from unexpected tax bills. Remember, for out-of-state dealer purchases where the sales tax is lower, you’ll pay the difference to Illinois using form RUT-25. For private party purchases, use form RUT-50 and consult the Private Party Vehicle Use Tax Chart. Always ensure you file the correct forms and pay any applicable taxes when registering your vehicle in Illinois to remain compliant with state law.
