How to Pay Your Texas Excise Tax

Texas residents won’t have to pay an annual excise tax—but a high vehicle sales tax is collected on every vehicle purchase.
Written by Kathryn Mae Kurlychek
background
Texas
is one of the few states where annual motor vehicle excise tax is not collected—instead, residents must pay a steep 6.25% sales tax, in addition to local and county taxes, at the time of vehicle purchase or titling. 
Taxes are the all-feared inheritance of adulthood. From property taxes to sales taxes and more, it can be hard keeping your tax responsibilities straight, let alone understanding where those taxes even go. 
In Texas, property taxes aren’t only assessed on your home and land—they’re also levied on motor vehicle sales. So if you’re buying a new or used car in Texas, there are some important figures you should know. 
Here to break down the basics of Texas vehicle excise tax is
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What is an excise tax in Texas? 

Generally speaking, an excise tax is a payment levied against certain manufactured goods—often those that pose some form of detriment to personal or environmental health. That’s why products like cigarettes and alcohol are also subject to excise taxes.
But where do motor vehicles fall under this? Given the potential for environmental harm caused by vehicle emissions, many automobiles are also subject to an excise tax.
In some states, a motor vehicle excise tax is collected annually, alongside registration and inspection renewals. But Texans are in luck—Texas is one of the few states where you aren’t required to pay an annual motor vehicle tax. Rather, residents pay excise tax in the form of a “
sale and use tax
,” which is collected at the time of the vehicle’s purchase. 
The exact amount of tax collected is typically 6.25% of the purchase price—but for private-party sales, tax may instead be collected based on the standard presumptive value (SPV) of the vehicle. On top of vehicle sales tax, local and county taxes may also be levied on vehicle sales, which can add an additional 1% to 2% to the overall cost of the purchase. 
For additional details on Texas motor vehicle tax law, you can visit the
Texas Department of Motor Vehicles
website, the
Texas Comptroller
website, or your local county tax assessor’s office.  

Calculating your excise tax payment 

For clean-cut vehicle acquisitions from a licensed dealership, a motor vehicle sales tax of 6.25% will be collected at the time of the purchase.
Certain cities and counties may charge an additional local tax rate, to be collected by the county tax assessor-collector’s office upon registering your new vehicle. If you live in one of the following cities, be prepared to pay extra in local sales tax:
  • Austin
  • Dallas
  • El Paso
  • Houston
  • San Antonio
On the other hand, the standard presumptive value is used to calculate sales tax on vehicle sales that do not occur through a dealer—such as a sale between neighbors, family members, or private sellers. 
Standard presumptive value is determined by the Texas Department of Motor Vehicles (TxDMV) based on the average sale price and other appropriate regional and national guides—but SPV is typically assessed based on either one of the following:
  • The sale price of the vehicle 
  • The certified appraisal value of the vehicle
The exact tax you pay is calculated and remitted at your local county tax assessor-collector’s office when you title and register the vehicle—but you can calculate the estimated SPV ahead of time using the
TxDMV SPV calculator
For more information on how SPV is calculated, visit the
Texas Comptroller
website. 

Penalties for nonpayment

Once you’ve purchased a new or used vehicle, you have 30 days to register the car and pay the appropriate taxes at your
local county tax assessor-collector’s office
. Failure to submit payment and register your vehicle within that time could result in the following penalties:
  • Late payment received within one to 30 days past the due date: 5% penalty imposed
  • Late payment received over 30 days past the due date: 10% penalty imposed

How to avoid excise tax in Texas

In most cases, you can’t get out of paying motor vehicle sales tax in Texas—at least, not if you want to legally register your vehicle. The only exception is for new residents who bring in vehicles from out of state. In that case, new residents are required to pay a $90 resident tax in lieu of the excise tax.
That being said, there are certain vehicles that are exempt from motor vehicle sales tax/standard presumptive value tax. Namely, exemptions exist for the following types of vehicles: 
  • Vehicles purchased or leased by a public agency
  • Law enforcement vehicles
  • Vehicles purchased exclusively for out-of-state usage (in this case, the vehicle cannot be registered in Texas, either)
  • Vehicles purchased to be modified for disabled drivers or passengers
  • Vehicles purchased within 90 days of moving out of state
  • Trade-in vehicles
  • Certain agricultural vehicles
Additionally, certain vehicles purchased from private sellers are exempt from SPV if they meet one or more of the following criteria:
If you’re eligible for an exemption, you can apply through the Texas DMV using the
appropriate forms
. If you believe you were erroneously charged a motor vehicle sales tax, you may also be able to
apply for a refund
by mailing your claim to the Texas Comptroller of Public Accounts. 
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How to save on car insurance in Texas

In Texas, you won’t just need to pay motor vehicle sales tax in order to legally register your car—you’ll also need proof of insurance. Luckily,
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