Purchasing a vehicle, especially from out of state, can be an exciting endeavor. However, it’s crucial to understand the tax implications, particularly concerning Illinois Sales Tax On Cars. Many Illinois residents are surprised to learn that buying a car in another state doesn’t necessarily exempt them from Illinois taxes. This article clarifies Illinois sales tax regulations for vehicle purchases, ensuring you’re informed and prepared when you buy your next car.
Navigating Illinois Sales Tax for Out-of-State Car Dealer Purchases
If you’re an Illinois resident and decide to buy a car from a dealership in another state, you might think you only need to pay that state’s sales tax. However, Illinois law mandates that if the sales tax rate in the state where you purchased the vehicle is lower than Illinois’ rate, you are responsible for paying the difference to the Illinois Department of Revenue.
Currently, Illinois has a state sales tax of 6.25%. For instance, Missouri has a state sales tax rate of 4.225%. This difference of 2.025% means Illinois residents buying cars in Missouri will likely owe additional tax in Illinois. This calculation becomes even more nuanced when considering local sales taxes.
For example, in Cook County, the local sales tax adds an additional 1%. Therefore, if you purchase a $20,000 vehicle in Missouri and register it in Cook County, you would owe 3.025% in additional tax (2.025% state difference + 1% local Cook County tax). This amounts to $650.
Sales tax rates can vary across Illinois counties. For residents of DuPage, Kane, Lake, McHenry, and Will counties, a 7% sales tax rate is applicable. Madison and St. Clair counties have a 6.5% rate, except outside the Metro East Transit District, where it aligns with the state rate of 6.25%.
These taxes are not optional. They must be paid when you register your vehicle in Illinois through the Secretary of State. You will need to complete and submit Illinois tax form RUT-25, officially known as the Vehicle Use Tax Return for Out-of-State Purchases. This form is due within 30 days after bringing the vehicle into Illinois. You can find this form and further instructions on the Illinois Department of Revenue website.
It’s worth noting that some states, like Alaska, Delaware, Montana, New Hampshire, and Oregon, do not impose vehicle sales taxes. Conversely, California has a higher vehicle sales tax rate than Illinois, at 7.5%.
Understanding Private Party Vehicle Use Tax in Illinois
The rules differ slightly when you purchase a car from an individual, or acquire a vehicle through a gift or transfer. In these situations, you are subject to Private Party Vehicle Use Tax in Illinois. Instead of form RUT-25, you will need to use form RUT-50, the Vehicle Use Tax Return for Private Party Purchases.
For private party transactions, you don’t pay the difference in sales tax. Instead, the tax is a specified amount determined by the purchase price or fair market value of the vehicle. These amounts are detailed in the Private Party Vehicle Use Tax Chart provided by the Illinois Department of Revenue. Remember that your local municipality and county may also impose additional taxes on private vehicle sales. Form RUT-50 is also due no later than 30 days after the vehicle purchase date.
Stay Informed About Illinois Car Sales Tax
Navigating vehicle sales tax can seem complex, especially when purchasing from out of state or through private sales. Understanding your obligations regarding Illinois sales tax on cars is essential to avoid penalties and ensure a smooth vehicle registration process. Always refer to the Illinois Department of Revenue website for the most up-to-date forms and information when you are dealing with vehicle taxes in Illinois.
