How to Pay Your Arizona Excise Tax

Arizona’s excise tax is $2.80 for every $100 of your new vehicle’s value or $2.89 per $100 of a used vehicle’s value each year.
Written by Tiffany Leung
Reviewed by Jessa Claeys
background
Arizona
motor vehicle owners are required to pay a yearly excise tax (known as the Vehicle License Tax or VLT) as part of their vehicle registration fees. The excise tax rate is $2.80 for every $100 of a
new vehicle
’s value or $2.89 for every $100 of a used vehicle’s value.
Income tax, property tax, excise tax—taxes can be a real financial strain, not to mention confusing! However, knowing the rules surrounding various taxes is important since missing a payment can bear serious consequences. That’s why
Jerry
, the vehicle expert and trusted
car insurance
broker, is here to break down Arizona excise tax (known as Vehicle License Tax in AZ).

What is an excise tax in Arizona?

All drivers who
register a motor vehicle
in the state are required to pay an annual excise tax to the Arizona Motor Vehicle Department (AZ MVD). This tax is known as the Vehicle License Tax (VLT) and is part of car owners' yearly registration fees. 
The VLT collected is then distributed to various funds including the State Highways Fund and city/town roads. This tax should not be confused with the
Arizona car sales tax
, which is a one-time payment when you purchase the car. 
An excise tax is imposed on certain manufactured goods and often applies to those that cause harm to the environment or a person’s health. For example, cigarettes and alcohol are subject to excise taxes as they can threaten consumers’ health. Excise tax applies to motor vehicles as the emissions from driving play a part in damaging the environment.
Here’s what you need to know about the excise tax in Arizona: 
  • The excise tax rate is $2.80 per $100 of a new vehicle’s value
  • The excise tax rate is $2.85 per $100 of a used vehicle’s value
  • The excise tax rate is based on 60% of the MSRP in the designated year of manufacture and is reduced by 16.25% each year since the vehicle was first registered
  • The rate is further reduced by 15% each year if the vehicle was purchased before August 1, 1998
  • Excise tax is charged for a full calendar year
Excise tax will be charged at every registration and renewal. This tax, together with the rest of your registration fees, goes directly to the MVD. 
If your vehicle doesn’t need an emissions test, you can renew your registration up to six months ahead of the expiration date. If an emissions test is required, you can renew up to three months before expiration. The MVD must receive the payment by the expiration date—so be sure to leave enough time to complete your emissions test!
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Calculating your excise tax payment

You will be told the amount of VLT due when you renew your vehicle registration. However, you can calculate how much your tax will be in advance! This will also confirm if you’re billed the correct amount. The table below will help you calculate your excise tax rate. 
Year you bought your vehicle
How to calculate excise tax
Model year
60% of MSRP
Second year after model year
43.75% of MSRP
Third year after model year
27.5% of MSRP
Fourth year after model year
11.25% of MSRP
For example, if you purchased a brand new 2020
Hyundai Elantra GT
with an original MSRP of $21,625, the value of your vehicle for calculating the VLT would be $9,461. With the VLT rate of $2.80 per $100 of the vehicle’s value, you would be paying approximately $125

Penalties for nonpayment

Since excise tax is included in vehicle registration fees, missing your expiration date could result in penalties. Your online or phone renewal must be postmarked by the due date to avoid any penalty fees. 
In the most serious case where you delay your bill payment for an extended period, the tax collector has the power to restrict your driver’s license and vehicle registration renewal, leaving you without a street-legal vehicle. 
The tax collector can also add a 12% annual interest rate to your original bill, racking up additional debt on top of the tax itself. In addition, you could be liable for the following collection costs: 
  • Initial late fee: $8
  • Additional fee for each month overdue: $4
  • Invalid checks: $25
If a check is returned by a financial institution, your vehicle registration and driving privileges may be canceled.

How to avoid excise tax in Arizona

Generally, you can’t avoid paying excise tax in Arizona since it is included with your annual vehicle registration renewal.
However, taxpayers who meet certain requirements may be eligible for an exemption depending on their work, their car, and their location. The following are exemptions available at the time of renewal: 
  • Non-resident health officer
  • Leased school bus drivers
  • Non-government emergency service providers
  • Non-profit organizations
  • Purple Heart medal recipient
  • Religious institution
  • School (non-profit)
  • Supplemental Security Income (SSI)
  • Survivor of a fallen responder
  • Survivor of a fallen military member
  • Indigenous American tribe member
  • Vehicle purchased with VA grant
  • VA disability
  • Widow/widower or totally disabled person
For details surrounding each exemption, you can visit the
ADOT Vehicle License Tax Exemptions page
on azdot.gov. If you’re eligible, you will need to submit the appropriate forms (as listed on the website). 
In some cases, you could be eligible for a reduced VLT rate if: 
  • You drive an alternative fuel vehicle—for vehicles registered before January 1, 2023, powered only by liquefied petroleum gas, natural gas, hydrogen, or solar
  • You convert your vehicle to operate only on alternative fuel—you must be issued an Alternative Fuel Certificate from the Arizona Department of Environmental Quality
  • You drive an electric vehicle—totally electric-powered and not supported by a fuel supply
If you sell your vehicle and complete a sold notice right away, you may be eligible for a VLT credit. You should apply for the credit as soon as possible, as the amount will be based on the time until the registration expiration date from when you submit the application
You can complete the sold notice and request a registration credit from
azmvdnow.gov
. Keep in mind that there will be a $12 processing fee applied and once you request the credit, the vehicle will no longer be registered.

How to save on car insurance in Arizona

Arizona
car insurance
rates are on par with the national average, which can still be quite expensive. The good news is that there’s probably a policy with better rates out there waiting to be discovered. 
If you don’t want to jump through hoops to find the best quotes,
Jerry
can help. Just download our
trusted car insurance comparison app
, answer some basic questions, and Jerry will fetch you customized quotes from over 55 insurance partners. You won’t have to handle any paperwork and Jerry can help you save an average of over $800 a year on car insurance. 
“I would 11/10 recommend
Jerry
. I was originally quoted $700+ for insurance for my new car, but by using Jerry I got my payments down to $320 a month. They also have a great support team ready to answer any questions!” —Tobias F.
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