Rhode Island: Sales Tax Handbook
How are vehicle sales taxed in Rhode Island?
Rhode Island Sales Tax on Car Purchases:
Vehicles purchases are some of the largest sales commonly made in Rhode Island, which means that they can lead to a hefty sales tax bill. This page covers the most important aspects of Rhode Island's sales tax with respects to vehicle purchases. For vehicles that are being rented or leased, see see taxation of leases and rentals.
Rhode Island collects a 7% state sales tax rate on the purchase of all vehicles.
In addition to taxes, car purchases in Rhode Island may be subject to other fees like registration, title, and plate fees. You can find these fees further down on the page.
Do Rhode Island 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 Rhode Island, 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.
Rhode Island 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 Rhode Island car purchases
In addition to state and local sales taxes, there are a number of additional taxes and fees Rhode Island car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the Rhode Island Department of Motor Vehicles and not the Rhode Island Division of Taxation.
Average DMV fees in Rhode Island on a new-car purchase add up to $321, which includes the title, registration, and plate fees shown above.
Rhode Island 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 Rhode Island is $2201, and Rhode Island 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 Rhode Island calculated by Edmunds.com
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