The US states, not the national government, manage vehicle registration.
Sales tax and registration fees are due in the state in which a vehicle is registered.
If you buy your vehicle from a private seller (an individual), you don’t have to think about this at all. You simply pay sales tax and registration fees in the state where you register your vehicle, upon registration.
But auto dealers are required to collect sales tax on behalf of the state for “in-state” buyers.
For example, if you live in New York and buy a vehicle from a New York dealer, you are considered an “in-state” buyer, and the dealer will collect New York sales tax and registration fees at the time of sale.
But “out-of-state” buyers are usually exempt from sales tax.
For example, if you live in New Jersey and buy a vehicle from a New York dealer, you are considered an “out-of-state” buyer, and the dealer will exempt your purchase from sales tax and registration fees, knowing you’ll be charged New Jersey’s taxes and fees when you register the vehicle there.
Private sellers (individuals) aren’t required to collect sales tax on behalf of the state, so, again, if you buy your vehicle from a private seller, you simply pay sales tax and registration fees when you register the vehicle.
This is how the sales tax process works in most states. But the state of California plays by its own rules.
California requires California auto dealers to collect California sales tax on all vehicles sold and delivered within the state of California - even for out-of-state buyers.
Only California residents should pay California sales tax. So, if you’re a traveler who wants to buy a vehicle from a California dealer, how should you manage the sales tax process?
The answer lies in the delivery of the vehicle: dealers can exempt vehicles delivered to out-of-state buyers, outside of the state of California, from sales tax.
If you’re buying a vehicle in the San Francisco Bay Area, dealers will have arrangements with transporters to deliver vehicles to out-of-state buyers in Reno, Nevada. Los Angeles area dealers deliver vehicles to out-of-state buyers in Las Vegas, Nevada. And San Diego area deliver vehicles to out-of-state buyers in Yuma, Arizona.
Some California auto dealers issue “one-trip permits,” a type of temp tag, to out-of-state buyers, and exempt them from California sales tax, while letting them the vehicle off the lot in California. It depends how strictly the dealer adheres to California’s rules.
So if you’re planning to buy a vehicle from a California auto dealer, ask up front about their sales tax policies for out-of-state buyers. And understand that, in order to manage your tax burden, you may have to plan for some extra logistics.