is subject to a one-time 6% excise tax based on the vehicle’s book value, notarized “Bill of Sale” purchase price, or the vehicle’s exact purchase price, as determined by the vehicle’s age.

Like any other good that poses a known health or environmental risk, motor vehicles titled and registered in Maryland are subject to an excise tax—at least, some vehicles are. In some situations, a title-holder may be exempt from paying an excise tax if their vehicle meets certain qualifications.

As with anything tax-related, making sense of Maryland’s excise tax can be challenging—that’s why we put together the following guide breaking down what excise tax in the Old Line State actually is, how to calculate it, and which vehicles are exempt from it.

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What is an excise tax in Maryland?

Any person who purchases and/or registers a vehicle in the state of Maryland is required to pay a one-time excise tax upon the purchase and/or registration of said vehicle.

But what is an excise tax in the first place? In the fundamental sense, an excise tax is a tax levied against certain manufactured goods, particularly those that pose some sort of environmental or health risk. Similar to how alcohol and cigarettes are subject to an excise tax due to their known health risks, motor vehicles are also subject to an excise tax due to the environmental damage caused by their emissions.

The exact details outlining the state’s excise taxes are laid out in Maryland’s Transportation Statute Title 13 (§ 13-808 - § 13-815), but we’ll cover the basics for you below:

Excise tax is a one-time payment, collected before the issuance of a certificate of title.

For vehicles seven years old or newer, Maryland’s excise tax rate is 6% of the vehicle’s book value OR 6% of the vehicle’s purchase price as listed on the notarized “Bill of Sale.”

If the vehicle is older than seven years, the 6% excise tax is calculated on the basis of exact purchase price.

The minimum excise tax charged is $38.40, based on the minimum value of $640.

Excise tax must be paid to the Maryland’s Motor Vehicle Administration (MVA).

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Calculating your excise tax payment

In all reality, you should never need to calculate your excise tax completely by yourself, as the MVA will help you determine the amount that needs to be paid once you have the vehicle registered—but if you want to know before you get there, or if you think you’ve been charged the wrong amount, you can calculate the tax yourself using the information below.

For cars seven years old or newer

If you buy a new car off the lot from a dealership, you’ll need to calculate the assessed excise tax, which is based on the agreed upon price of the vehicle after any trade-in consideration, dealer rebates, or discounts are applied (all of which are non-taxable, save for manufacturer rebates). This can be expressed as:

0.06 x purchase price (after trade-in consideration, rebates, or discounts) = excise tax payment

You will, however, need to have any discounts or rebates clearly marked on a notarized bill of sale to avoid being overcharged when it comes time to pay the excise tax.

If you are buying a vehicle that is less than seven years old from a private seller, your excise tax payment is calculated based on the purchase price as verified by a notarized bill of sale, or:

0.06 x purchase price = excise tax payment

For cars older than seven years

If you’ve bought a used car that is older than seven years, calculating the excise tax is as simple as multiplying 0.06 by the exact price you purchased the vehicle for or the minimum book value of $640, whichever is higher—in practice, this can be expressed as:

0.06 x vehicle purchase price/book value = excise tax payment

This means that, if you purchase something like a 2008 Honda Civic LX Coupe priced at $5,550, you can expect to pay an excise tax of approximately $333, which can be expressed as:

0.06 x $5,550.00 = $333.00

Penalties for nonpayment

If you fail to pay your excise tax in the state of Maryland, you’ll be found guilty of a misdemeanor and, upon conviction, subjected to a fine not exceeding $1,000.

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How to avoid excise tax in Maryland

Generally speaking, there aren’t many ways for the average Maryland car owner to get out of paying the state’s excise tax if their vehicle was titled within state borders, unless said vehicle is being given as a gift to an immediate family member.

Maryland state law defines an “immediate family member” as any of the following:

Spouse

Child (includes adopted)

Grandchild

Stepchild

Mother or father

Stepmother or stepfather

Sibling (includes half-siblings)

Grandmother or grandfather

Child-in-law

Mother-in-law or father-in-law

Aunt or uncle (65+ years old) to niece or nephew

Other vehicles not subject to Maryland’s excise tax include:

Ambulances, fire engines, rescue vehicles

Mobile homes over 35-feet in length

Vehicles owned or leased by the state

Rental vehicles

For a full list of all motor vehicles exempt from paying excise tax in the state of Maryland, consult section 13-810 of Maryland’s Transportation Code Title 13.

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