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DETERMINING SALES TAX ON 14-DAY IN-TRANSITS

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.
(2) Trade-in credit allowed only when a new car or motor home is purchased from a dealer.
(3) Passenger cars only.
(4) Maximum is $300.

 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.

  1. Requirement. Included in the sales tax collection are nonresidents and out-of-state businesses. (For nonresidents, dealers do not always collect six percent sales tax.) Credit for Michigan sales tax paid can be claimed by the purchaser's home state if that state is reciprocal with Michigan.
  2. Procedures. Michigan vehicle dealers collecting sales tax from a nonresident submit a completed RD-108 even though the vehicle will be titled and registered in another state. (Sometimes an in-transit permit is required.)