8-5.1 States with No Tax Reciprocity. If a dealer sells a vehicle that will be titled and registered in a state which has no tax reciprocity with Michigan (listed below), no tax is due. However, the law requires the customer to purchase the 14-day in-transit permit regardless of the method of transporting the vehicle.
8-5.2 "No Tax Due" States. Some states do not charge sales tax on the purchase of vehicles or do not give the customer credit if they pay tax in Michigan. These states include:
|
Alaska |
Montana |
|
Arkansas* |
Nevada* |
|
Delaware |
New Hampshire |
|
District of Columbia* |
North Carolina* |
|
Indiana* |
Oklahoma* |
|
Maryland* |
Oregon |
|
Mississippi* |
West Virginia* |
|
*Non-reciprocal (no credit given) |
|
8-5.3 States with Tax Reciprocity. If the purchaser is taking the vehicle to a state which is reciprocal with Michigan, two tax computations are required.
a. Determine the amount of sales tax due in the purchaser's home state. If that state allows a trade-in credit, the full trade-in allowance (100 percent) is used in the first computation.
b. Determine the amount of six percent sales tax in Michigan, as if the purchaser is a Michigan resident.
c. After making the two computations, collect the lower amount. If the out-of-state tax amount is the lower amount, show in the Remarks section on the RD-108 the method used to determine the sales tax, such as five percent Ohio tax with $5,040 trade-in credit.
Example:
The purchaser will be taking her new car to Ohio. The purchase price is $10,760.
She received $5,040 for her trade-in.
First Computation: Ohio tax (five percent tax rate, full trade-in credit):
$10,760 - $5,040 = $5,720 x .05 = $286.00 (Ohio total)
Second Computation: Michigan tax (six percent tax rate, no trade-in credit):
$10,760 x .06 = $645.60 (Michigan total)
In this example, the Ohio computation provides the lesser amount and is the
amount collected.
8-5.4 When Going to Canada or Another Country. If the purchaser is taking the vehicle to Canada or another country (including U.S. territories), collect six percent Michigan sales tax. A 14-day in-transit permit should be obtained, if necessary.
8-5.5 State Sales Tax Used for In-transits. Each state has applicable trade-in credits and tax rates. The following table shows the known trade-in credit and tax rates as of January 1, 1997.
Table
2
State Sales Tax Used for In-transits (As of 1-1-97)
|
State |
Trade-In |
Tax
Rate |
State |
Trade-In |
Tax
Rate |
|
Alabama |
Yes |
2% |
Nebraska |
Yes |
5% |
|
Arizona |
Yes |
5% |
New Jersey |
Yes |
6% |
|
California |
No |
6% |
New Mexico |
Yes |
3% |
|
Colorado |
Yes |
3% |
New York |
Yes |
4% |
|
Connecticut |
Yes |
6% |
North Dakota |
Yes |
5% |
|
Florida |
Yes |
6% |
Ohio |
Yes(2) |
5% |
|
Georgia |
Yes |
4% |
Pennsylvania |
Yes |
6% |
|
Hawaii |
Yes |
4% |
Rhode Island |
Yes(3) |
7% |
|
Idaho |
Yes |
5% |
South Carolina |
Yes |
5%(4) |
|
Illinois |
Yes |
6.25% |
South
Dakota |
Yes |
3% |
|
Iowa |
Yes |
5% |
Tennessee |
Yes |
6% |
|
Kansas |
Yes |
4.9% |
Texas |
Yes |
6% |
|
Kentucky |
Yes(1) |
6% |
Utah |
Yes |
5% |
|
Louisiana |
Yes |
4% |
Vermont |
Yes |
5% |
|
Maine |
Yes |
6% |
Virginia |
No |
3% |
|
Massachusetts |
Yes |
5% |
Washington |
Yes |
6.5% |
|
Minnesota |
Yes |
6% |
Wisconsin |
Yes |
5% |
|
Missouri |
Yes |
4.225% |
Wyoming |
Yes |
4% |
|
(1) Trade-in credit
allowed only when a new car is purchased from a KY dealer. |
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8-5.14 Nonresident Takes Delivery in Michigan. Michigan dealers collect sales tax on the sale of vehicles, watercraft and mobile homes delivered in Michigan.