Are Vehicles Tax-Exempt in Maryland?

When purchasing a vehicle in Maryland, you might wonder whether it’s subject to sales tax. While vehicles are not subject to the state’s general sales tax, they are not tax-exempt. Instead, Maryland imposes a separate excise tax on vehicle purchases. Here’s what you need to know about vehicle taxation in Maryland.

Are Vehicles Subject to Sales Tax in Maryland?

No, vehicles are not subject to Maryland’s general sales tax. Instead, they are taxed under a vehicle excise tax, which is applied specifically to motor vehicle transactions. This tax is managed by the Maryland Department of Transportation Motor Vehicle Administration (MDOT MVA).

How Does the Vehicle Excise Tax Work?

The vehicle excise tax in Maryland is based on the purchase price or fair market value of the vehicle. The rate is:

• 6% for most vehicles.
• A reduced rate for certain vehicles, such as those meeting specific environmental or economic criteria (e.g., electric vehicles, depending on current state incentives).

The excise tax is collected at the time of titling and registration, making it a one-time cost rather than an ongoing tax like annual property taxes.

What Types of Vehicles Are Subject to the Excise Tax?

The excise tax applies to most motor vehicles, including:

• Passenger cars
• Trucks
• Motorcycles
• Recreational vehicles (RVs)

If you’re purchasing a used vehicle, the excise tax is still applicable and will typically be calculated based on the vehicle’s market value or purchase price, whichever is higher.

Are There Any Exemptions?

While vehicles are generally subject to the excise tax, some exceptions exist:

• Vehicles transferred between immediate family members may qualify for a reduced tax rate.
• Certain vehicles used for nonprofit purposes or owned by government agencies may be exempt.

It’s essential to check with the MDOT MVA to determine if your vehicle qualifies for any exemptions or reduced rates.

Why Maryland Uses an Excise Tax for Vehicles

The excise tax system is designed to fund state transportation infrastructure, including road maintenance and public transit projects. By taxing vehicles separately, Maryland ensures that those using the state’s roadways contribute to their upkeep.

Tips for Buyers

• Factor in the excise tax: When budgeting for a vehicle purchase, include the 6% excise tax in your calculations.
• Review documentation: Ensure that the purchase price or market value is accurately reported to avoid surprises.‍
• Explore exemptions: If you’re transferring a vehicle within your family or purchasing a specialty vehicle, inquire about potential tax breaks.