General Rules

Effective August 1, 2009, under Massachusetts sales and use tax provisions, the purchaser, transferee or user having title to or possession of a motor vehicle is directly responsible for the payment of the 6.25% sales or 6.25% use tax. (Prior to August 1, 2009, the sales/use tax rate was 5 percent.) The sales tax, which is imposed by Massachusetts General Laws chapter 64H, applies to transfers of title or possession through retail sales by Massachusetts dealers or lessors in the regular course of business. The use tax, which is imposed by Massachusetts General Laws chapter 64I, applies to all other types of transfers of title or possession where the vehicle transferred is thereafter stored, used, or otherwise consumed in Massachusetts.

Calculation of the Tax:
The sales tax rate is 6.25% of the sales price if the sale is made by a motor vehicle dealer or lessor registered with the Department of Revenue. If the motor vehicle is sold in a casual and isolated sales transaction, however, the use tax rate is 6.25% of the actual amount paid for the vehicle or the clean trade-in value (book value) of the vehicle, whichever is greater.
 


Book Value - Tax Assessed on Non-Dealer Sales

The amount of sales/use tax assessed on casual sales (non-dealer sales) is based on the higher amount of:

  • the actual amount paid for the vehicle; or
  • the clean trade-in value of the vehicle adjusted by either the high mileage adjustment (decreases value) or the low mileage adjustment (increases value).

The Registry of Motor Vehicles makes the proper adjustment for mileage at the time of registration. Adjustments to value based on the mechanical or structural condition of the motor vehicle are not provided for under current sales/use tax law. For example, if the car engine or doors need replacing, no adjustment will be made to the book value of the vehicle.

Exception to above Rule - Vehicles Sold with a Salvage Title:
A salvage vehicle is any vehicle that has been determined by an insurance company to be a total loss due to fire, theft, collision, flood, or similar event and that has been issued a title stamped or otherwise labeled "salvage" by the Registry of Motor Vehicles. If a motor vehicle has been titled to the seller by the Registry of Motor Vehicles as a "salvage vehicle," the sales/use tax is computed on the actual amount paid by the purchaser.
 


Exemptions from Motor Vehicle Sales and Use Tax

Family Transfers:
Provided that the transferor previously paid any applicable Massachusetts sales or use tax, the casual and isolated sale or transfer of a motor vehicle or trailer to a parent, spouse, child, brother, or sister, is exempt from the sales and use tax. A vehicle owned jointly by a husband and wife may be treated as owned by either.

In order to claim this exemption, a properly completed and signed Form MVU-26, Affidavit in Support of a Claim for Exemption from Sales or Use Tax for a Motor Vehicle Transferred Within a Family pdf format of mvu_26.pdf , must be presented to the Registry of Motor Vehicles together with Form RMV-1, Application for Title and Registration .

Same-Sex Joint Filers:
For Massachusetts state income tax purposes, beginning May 16, 2004, Massachusetts recognizes the right of same-sex couples to be married. Massachusetts recognizes valid same-sex marriages for tax periods that end on or after May 16, 2004, but will not recognize same-sex marriages for tax periods ending prior to May 16, 2004. Effective May 16, 2004, this exemption applies to transfers between same-sex spouses.

Gifts:
Provided that the transferor previously paid any applicable Massachusetts sales or use tax, the transfer of complete ownership of a motor vehicle, trailer, or other vehicle by a donor to a donee, without consideration and with an intent on the part of the donor that the transfer is a gift, is exempt from the sales and use tax. In order for this exemption to apply, all of the following must be true:

  1. neither party made or received payment in any form in connection with the transfer;
  2. neither party made a promise of payment for the vehicle, and neither party expects payment in the future;
  3. neither party assumed any debt in connection with the transfer; and
  4. at the time of the transfer, the donor intended to make a gift of the vehicle to the donee.

In order to claim this exemption, a properly completed and signed Form MVU-24, Affidavit in Support of a Claim for Exemption from Sales or Use Tax for a Motor Vehicle Transferred as a Gift pdf format of mvu_24.pdf must be presented to the Registry of Motor Vehicles together with Form RMV-1, Application for Title and Registration.

Out-of-State Purchasers:
Generally, the purchase of a motor vehicle or trailer outside Massachusetts that is later brought to or used in Massachusetts is exempt from Massachusetts use tax if all of the following requirements are met:

  1. the purchaser of the vehicle paid a sales tax to the state or territory in which the purchase occurred;
  2. this tax was legally due to that state or territory;
  3. the purchaser of the vehicle has not received and has no right to receive a refund of the tax from the state or territory where the purchase occurred; and
  4. the state to which the tax was paid allows a corresponding exemption for motor vehicle sales tax paid to Massachusetts.

However, if the motor vehicle or trailer was purchased outside Massachusetts and brought into Massachusetts within six months of the purchase date, one of the following scenarios applies:

  • If the state or territory of purchase has a reciprocal agreement with Massachusetts (i.e. allows a corresponding exemption/credit for sales/use taxes paid to Massachusetts) and the rate of tax paid to that state or territory is equal to or greater than the 6.25% Massachusetts use tax rate, no Massachusetts use tax is due.
  • If the state or territory of purchase allows a corresponding exemption/credit for sales/use taxes paid to Massachusetts and the rate of tax paid to that state or territory is less than the Massachusetts use tax rate, the purchaser must pay a use tax to Massachusetts. The Massachusetts use tax will be determined by subtracting the tax paid to the other state or territory from the Massachusetts 6.25% use tax.

If the state or territory of purchase does not allow a corresponding exemption/credit for sales/use taxes paid to Massachusetts, the exemption/credit cannot be granted and the full 6.25% Massachusetts use tax is due.

Example #1: An individual is a resident of State X. State X has no sales or use tax provisions. The individual purchases and registers a motor vehicle in State X where it is used for three months. The individual then moves to Massachusetts and registers the vehicle in Massachusetts. A 6.25% use tax is due to Massachusetts because no sales or use tax was paid on the vehicle in State X and the motor vehicle was brought into Massachusetts for use within six months of its purchase.

Example #2: While vacationing in State Z, a Massachusetts resident purchases a motor vehicle for $20,000 and brings it to Massachusetts. The Massachusetts resident is required to pay and does pay a sales tax to State Z computed at the rate of 4% of the sales price (or $800). State Z allows an exemption/credit for motor vehicle sales/use taxes paid to Massachusetts. A use tax is due to Massachusetts, but the tax is computed on the sales price multiplied by the difference between the Massachusetts rate (6.25%) and the rate of tax in State Z (4%). The use tax is therefore $20,000 x 2.25% or $450.

Sales to an Exempt Organization:
The sale or transfer of a motor vehicle, trailer, or other vehicle to an organization qualifying for treatment under I.R.C. § 501(c)(3) is exempt from the sales and use tax only if the vehicle is purchased by or transferred to the organization, registered in its name, and used directly and exclusively in pursuit of the purposes of the organization.

In order to claim this exemption, the purchaser or transferee must hold a valid Certificate of Exemption (Form ST-2) issued by the Massachusetts Department of Revenue. The organization must present a copy of Form ST-2 together with Form RMV-1, Application for Title and Registration , to the Registry of Motor Vehicles when registering/titling the vehicle

Transfers to or from a Business Entity:
The sale or transfer of a motor vehicle, trailer, or other vehicle to or from a business entity is generally subject to the sales or use tax. However, such a transfer is exempt when the transferor previously paid any applicable sales or use tax and:

  • the sale or transfer is pursuant to a transaction which qualifies as a "reorganization" within the meaning of I.R.C. s. 368(a)(1); or
  • the sale or transfer is pursuant to the formation of a partnership or corporate trust, or pursuant to the organization of a corporation, solely in exchange for an ownership interest in the enterprise; or
  • the sale or transfer is to an owner of a business entity solely in exchange for the owner's interest on the complete dissolution of a partnership or corporate trust, or the complete liquidation of a corporation.

Additionally, the transfer must be completed within ninety days of the qualifying occurrence and the transferee must present a properly completed and signed Form MVU-25, Affidavit in Support of a Claim for Exemption from Sales or Use Tax for a Motor Vehicle Transferred by a Business Entity pdf format of mvu_25.pdf to the Registry of Motor Vehicles together with Form RMV-1, Application for Title and Registration .

Transfers to a Disabled Person:
The sale or transfer of a motor vehicle to and for the use of any person who has suffered the loss or permanent loss of use of both legs, or both arms, or one leg and one arm is exempt from the sales and use tax. A vehicle owned jointly by a husband and wife may be treated as owned by either. For purposes of this exemption, loss of use means a loss of function of at least eighty percent (80%). This exemption applies to a single registered motor vehicle purchased for personal use (non-commercial use).

In order to claim this exemption, a properly completed and signed Form MVU-33, Affidavit in Support of a Claim for Exemption from Sales or Use Tax for a Motor Vehicle Transferred to a Disabled Person must be presented to the Registry of Motor Vehicles together with Form RMV-1, Application for Title and Registration . If the claim of exemption is based upon a loss of use, the affidavit must be signed by person's physician. The affidavit must be on a form prescribed by the Commissioner.
 


Motor Vehicle Purchases in Massachusetts by Nonresidents

If a nonresident of Massachusetts purchases a motor vehicle in Massachusetts and takes title to and/or possession of the vehicle in Massachusetts, the sale is subject to the Massachusetts sales/use tax irrespective of whether the nonresident intends to use the motor vehicle within or outside Massachusetts.
 


Rebates

If a motor vehicle dealer sells a motor vehicle to a customer who applies a manufacturer's rebate to reduce the sales price at the time of the sale, such rebate is treated as a cash discount and excluded from the sales price subject to tax.

However, if a motor vehicle dealer sells a motor vehicle to a customer who will receive a rebate after the sale, the sales tax is based on the full purchase price of the property. Upon receiving the rebate, the customer is not entitled to a refund of taxes originally paid on the rebate amount.
 


Rescissions of Sale

A purchaser who returns a motor vehicle to the seller within 180 days from the date of sale and receives the full consideration paid less the seller's pre-established handling fees is entitled to a refund of the sales/use tax paid.

In order to claim this refund, you must file Form CA-6, Application for Abatement/Amended Return together with a properly completed and signed Form MV-AB2, Affidavit - Rescission of Sale of a Motor Vehicle pdf format of mv_ab2.pdf and a copy of the Registration Certificate showing the amount of tax paid to the Registry of Motor Vehicles. For more information refer to the section on Motor Vehicle Abatements.

Note: A "Lemon Law" refund from a vehicle manufacturer is not a "rescission" of sale between a vendor and a retail customer. An abatement of tax is not permitted on these transactions. When the retail customer is given a "Lemon Law" refund by the manufacturer, the manufacturer is required to also reimburse the retail consumer for "incidental costs including sales tax, registration fee, finance charges and any cost of options added by an authorized dealer," as provided for by the "Lemon Law" statute.

 


Trade-in Credit

If a motor vehicle or trailer is traded-in or exchanged on the purchase or transfer of another motor vehicle or trailer, the tax is computed as follows:

Sales by Massachusetts Dealers/Lessors:
If the sale is by a Massachusetts dealer or lessor in the regular course of business and the purchaser either previously paid a tax on the vehicle traded-in or is exempt from tax on the vehicle traded-in, the sales tax is computed on the sales price less the amount of the trade-in.

Sales by Out-of-State Dealers/Lessors:
A trade-in credit is only permitted as a reduction to the taxable sales price for out-of-state dealer/lessor sales when all of the following criteria are met:

 

  1. The purchaser either previously paid a tax on the vehicle traded-in or is exempt from tax on the vehicle traded-in;
  2. The out-of-state dealer/lessor is registered with the Massachusetts Department of Revenue or the dealer's/lessor's state or territory imposes a tax on nonresidents;
  3. that state or territory is reciprocal with Massachusetts; and
  4. that state or territory permits a trade-in credit as a reduction to the taxable sales price.

Casual and Isolated Sales:
No reduction in taxable sales price is permitted as a result of a trade-in.

 


Payment of the Tax

Every purchaser of a motor vehicle, trailer or other vehicle, who is required to register or title the vehicle in Massachusetts, must, within ten days following the date of purchase, transfer or use of such vehicle within Massachusetts, file Form RMV-1, Application for Title and Registration and pay any applicable sales or use tax to the Registrar of Motor Vehicles.

Every purchaser of a motor vehicle, trailer or other vehicle, who is not required to register or title the vehicle in Massachusetts, must, by the twentieth day of the month following the date of purchase, transfer or use of such vehicle within Massachusetts, file a completed Form ST-7R, Motor Vehicle Certificate of Payment of Sales or Use Tax pdf format of st_7r.pdf and pay any applicable tax to the Department of Revenue or Registry of Motor Vehicles.

If the sales/use tax is not paid timely, interest and penalties are assessed in addition to the tax.
 


Motor Vehicle Sales/Use Tax Abatements/Amended Returns

A purchaser of a motor vehicle, trailer or other vehicle who wishes to dispute the amount of tax or interest and penalties assessed must file a Massachusetts Form CA-6, Application for Abatement/Amended Tax Return pdf format of CA-6.pdf .


Documentation to Submit with Abatement/Amended Tax Return:

 

  • Copy of Bill of Sale;
  • Copy of Registration Certificate showing the amount of tax paid to the Registry of Motor Vehicles.

  • Additional documentation to submit, if applicable:
    • Exemptions from Tax: related affidavit or exemption certificate form;
    • Challenges to the Book Value used by the Registry of Motor Vehicles: odometer reading at time of purchase;
    • Assessment of penalties: an explanation detailing the reasonable cause for the late filing and payment of the tax due. The assessment of interest is not discretionary and the Department of Revenue does not have the authority to abate interest accrued on unpaid or late paid tax.

  • Additional documentation to submit for Rescissions of Sale
    • completed and signed Form MV-AB2, Rescission of Sale of a Motor Vehicle Affidavit;

Massachusetts References: