District of Columbia: Sales Tax Handbook
How are vehicle sales taxed in District of Columbia?
District of Columbia Sales Tax on Car Purchases:
Vehicles purchases are some of the largest sales commonly made in District of Columbia, which means that they can lead to a hefty sales tax bill. This page covers the most important aspects of District of Columbia's sales tax with respects to vehicle purchases. For vehicles that are being rented or leased, see see taxation of leases and rentals.
The District of Columbia collects a 6% state sales tax rate on the purchase of all vehicles that weigh under 3,499 pounds. A tax rate of7% is charged if the vehicle weighs between 3,500 and 4,999 pounds, and 8% is charged for vehicles that weigh at least 5,000 pounds. The District of Columbia, however, does not charge state sales tax for any hybrid vehicles that can reach 40 mpg.
In addition to taxes, car purchases in District of Columbia may be subject to other fees like registration, title, and plate fees. You can find these fees further down on the page.
Do District of Columbia vehicle taxes apply to trade-ins and rebates?
How are trade-ins taxed?
Many dealerships allow you to trade-in your old car in exchange for a credit applied to the price of a new vehicle. For example, you could trade-in your old car and receive a $5,000 credit against the price of a $10,000 new vehicle, making your out-of-pocket cost only $5,000.
In District of Columbia, the sales tax applies to the full price of the vehicle without considering trade-ins. Thus, the taxable price of your new vehicle will still be considered to be $10,000 despite your trade-in accounting for $5,000 of the price.
How are rebates and dealer incentives taxed?
Many dealers offer cash incentives or manufacturer rebates on the sticker price of a vehicle in order to encourage sales. For example, a $1,000 cash rebate may be offered on a $10,000 car, meaning that the out of pocket cost to the buyer is $9,000.
District of Columbia taxes vehicle purchases before rebates or incentives are applied to the price, which means that the buyer in this scenario will pay taxes on the vehicle as if it cost the full $10,000.
Other taxes and fees applicable to District of Columbia car purchases
In addition to state and local sales taxes, there are a number of additional taxes and fees District of Columbia car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the District of Columbia Department of Motor Vehicles and not the District of Columbia Office of Tax and Revenue.
Average DMV fees in District of Columbia on a new-car purchase add up to $4971, which includes the title, registration, and plate fees shown above.
District of Columbia Documentation Fees
Dealerships may also charge a documentation fee or "doc fee", which covers the costs incurred by the dealership preparing and filing the sales contract, sales tax documents, etc. These fees are separate from the taxes and DMV fees listed above.
The average doc fee in District of Columbia is $3001, and District of Columbia law does not limit the amount of doc fees a dealer can charge. Because these fees are set by the dealerships and not the government, they can vary dealership to dealership or even vehicle to vehicle.
1 - Average DMV and Documentation Fees for District of Columbia calculated by Edmunds.com
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