On the go and need your own transportation?
Buying a car or other motor vehicle is an option and a taxable transaction. If you are buying or selling a car for the first time, you may be unaware of how taxes are paid.
There are Sales Tax, Title, and Registration Fees. Sometimes these separate charges can be confusing. You can learn about all these charges and other things like emission inspections on the All Things Car & Driver License webpage.
Below we will explore the Colorado Sales Tax responsibilities when buying or selling a vehicle.
Buying a car may be done through a car dealer or from a private seller. These are two different types of transactions when it comes to paying Colorado state sales tax.
When buying from a car dealer, the transaction is fairly simple. The car dealer will generally calculate and include the taxes and title fees in the total amount that you will pay for the vehicle, and the title work will be completed for you. You then take care of the registration at your local DMV (Division of Motor Vehicles) See link at bottom of webpage for locations.
When purchasing a vehicle from a private seller you agree on the purchase price and when the payment is made, the seller will sign the title of the vehicle into your name. Sales tax will not be collected by the seller in a private sale . Instead, the purchaser must pay any applicable use tax to the county clerk at the time of registration.
Sales tax applies to retail sales of both new and used vehicles. If the purchaser has not paid all applicable taxes to a licensed dealer at the time of purchase, the purchaser will have to pay and applicable taxes to the county clerk when they register the vehicle.
Protect yourself when buying a vehicle, visit vehiclehistory.gov to obtain a vehicle history report. This will tell you vehicle history such as: Junk, Salvage or Flooded. These “brands” could impact the value of the vehicle and your ability to title and register the vehicle. Check out this YouTube video for more.
Selling a car can be done through a couple of different routes.
If you are selling your vehicle to a car dealer, just as in purchasing from one, all of the taxes and title fees will generally be taken care of by the dealer.
If you are selling to another individual, then you would agree to a purchase price and transfer the vehicle into that individual’s name at the local county title office. (scroll down this page to see the link to the DMV Title page information) Taxes would be the responsibility of the purchaser and are based on the agreed upon purchase price.
At the time of sale, the seller is required to provide the buyer with a passing emissions test that has not been used previously to register a vehicle or renew a vehicle registration. To view a full list of counties where an emissions test is required, please visit here.
