Buying a car is a significant investment, and understanding the associated taxes is crucial, especially when purchasing from out of state. If you are an Illinois resident considering buying a vehicle from another state, such as Missouri, it’s important to understand your obligations regarding Illinois State Sales Tax On Cars. This guide clarifies how Illinois handles sales tax for vehicles bought out of state and brought into Illinois for registration.
When you purchase a vehicle from an out-of-state dealer and register it in Illinois, you might be required to pay the difference in sales tax if the state where you bought the car has a lower sales tax rate than Illinois. Illinois has a state sales tax of 6.25%. For instance, Missouri’s state sales tax is currently 4.225%. This difference means Illinois residents buying a car in Missouri will likely owe additional sales tax to Illinois.
To calculate the additional tax, you need to consider both state and local sales taxes. In Illinois, local sales taxes can add to the state rate. For example, in Cook County, there’s an additional local sales tax of 1%. Therefore, if you purchase a $20,000 vehicle in Missouri and register it in Cook County, the calculation would be as follows:
The difference in state sales tax is 6.25% (Illinois) – 4.225% (Missouri) = 2.025%.
Adding Cook County’s local sales tax of 1%, the total difference becomes 2.025% + 1% = 3.025%.
The additional tax owed would be 3.025% of $20,000, which is $605.
It’s important to note that local sales tax rates vary across Illinois counties. Here are a few examples:
- DuPage, Kane, Lake, McHenry, and Will Counties: Use 7% combined sales tax for calculation purposes.
- Madison and St. Clair Counties: Use 6.5%, except outside the Metro East Transit District, where the rate is 6.25%.
These taxes must be paid when you register your vehicle in Illinois through the Secretary of State. You will need to complete Illinois tax form RUT-25, titled Vehicle Use Tax Return for Out-of-State Purchases. This form and payment are due within 30 days of bringing the vehicle into Illinois. You can access and download Form RUT-25 directly from the Illinois Department of Revenue website.
It’s also worth mentioning that some states, like Alaska, Delaware, Montana, New Hampshire, and Oregon, do not have vehicle sales taxes. Conversely, a few states have higher vehicle sales taxes than Illinois, with California being among the highest at 7.5%.
Private Party Vehicle Purchases
The above information applies to vehicles purchased from out-of-state dealerships. If you buy a car from a private individual or acquire it as a gift or transfer, the tax rules are slightly different. In these cases, you must pay the Private Party Vehicle Use Tax, and you will need to use form RUT-50, titled Vehicle Use Tax Return for Private Party Purchases.
Instead of paying the difference in sales tax, the Private Party Vehicle Use Tax is a fixed amount based on the vehicle’s purchase price or fair market value. You can find these specified amounts in the Private Party Vehicle Use Tax Chart provided by the Illinois Department of Revenue. Remember that local municipalities and counties may also impose additional taxes on private party vehicle purchases. Form RUT-50 is also due no later than 30 days after the vehicle purchase date.
Understanding Illinois state sales tax on cars, especially for out-of-state purchases, is vital to avoid penalties and ensure compliance with state law. Whether you are buying from a dealer or a private party, make sure to use the correct forms (RUT-25 or RUT-50) and pay any due taxes when registering your vehicle in Illinois.
