Minnesota: Sales Tax Handbook

How are vehicle sales taxed in Minnesota?

Minnesota Sales Tax on Car Purchases:

Vehicles purchases are some of the largest sales commonly made in Minnesota, which means that they can lead to a hefty sales tax bill. This page covers the most important aspects of Minnesota's sales tax with respects to vehicle purchases. For vehicles that are being rented or leased, see see taxation of leases and rentals.

Minnesota collects a 6.5% state sales tax rate on the purchase of all vehicles.

In addition to taxes, car purchases in Minnesota may be subject to other fees like registration, title, and plate fees. You can find these fees further down on the page.

Do Minnesota 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 Minnesota, the taxable price of your new vehicle will be considered to be $5,000, as the value of your trade-in is not subject to sales tax. This means that you save the sales taxes you would otherwise have paid on the $5,000 value of your trade-in.

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.

Minnesota taxes vehicle purchases after rebates or incentives are applied to the price, which means that the buyer in this scenario will only pay taxes on the vehicle as if it cost $9,000.

Other taxes and fees applicable to Minnesota car purchases

In addition to state and local sales taxes, there are a number of additional taxes and fees Minnesota car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the Minnesota Department of Motor Vehicles and not the Minnesota Department of Revenue.

Average DMV fees in Minnesota on a new-car purchase add up to $388¹, which includes the title, registration, and plate fees shown above.

Minnesota 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 Minnesota is $75¹, and Minnesota law caps dealer's doc fees at 1. 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 Minnesota calculated by Edmunds.com