Do You Pay Michigan Sales Tax on Cars Bought Out of State?

Yes. If you buy a car out of state and bring it to Michigan, you owe Michigan’s 6% use tax when you title and register the vehicle at the Secretary of State’s office. Michigan calls this a use tax rather than a sales tax, but the rate is identical and the money comes out of your pocket the same way. If you already paid sales or use tax to the state where you bought the car, Michigan credits that amount against what you owe here, so you only pay the difference (if any).¹

The Secretary of State collects the tax before your title transfer goes through. You cannot register the vehicle without paying, so plan for it as part of the purchase, not an afterthought.²

How the Credit for Tax Paid to Another State Works

Michigan does not double-tax you. Under the Use Tax Act, you get a dollar-for-dollar credit for sales or use tax already paid to another state, provided that state extends the same courtesy to Michigan residents.³

The math is simple. If the other state’s rate was 6% or higher, you owe Michigan nothing extra. If the other state’s rate was lower, you pay Michigan the gap. A car taxed at 4% elsewhere leaves you owing 2% to Michigan. A car bought from a private out-of-state seller with no tax collected leaves you owing the full 6% at the Secretary of State counter.

Bring your receipt or the bill of sale showing the tax the other state collected. Without proof, the office has no way to apply the credit.

What Price Does the Tax Apply To?

The 6% applies to the full purchase price of the vehicle, including cash, credit, and any other charges rolled into the deal.² Two adjustments change the number that actually gets taxed.

Trade-In Credit at a Licensed Dealer

When you trade a vehicle in through a licensed dealer as part of the same transaction, Michigan reduces the taxable amount by the trade-in value. For calendar year 2026, that reduction is capped at $12,000 or the agreed-upon trade-in value, whichever is less.⁴

Say you trade a car worth $18,000 toward a $40,000 purchase. The taxable amount is $28,000, not $22,000, because the trade-in credit stops at $12,000. The credit applies whether the new vehicle came from a Michigan dealer or an out-of-state one, as long as the trade happens through a licensed dealer in the same deal. Recreational vehicles traded toward another recreational vehicle have no dollar cap.

Private-Party Purchases Use Fair Market Value

Buy from a private seller and Michigan taxes the purchase price or the vehicle’s fair market value, whichever is greater.⁵ Writing $1 on the bill of sale accomplishes nothing. If you report $5,000 for a vehicle with a retail value of $12,000, you pay tax on $12,000.²

Family Transfers Skip the Tax Entirely

If the vehicle is coming to you from an immediate family member, no use tax is due. Qualifying relationships are:

Spouse
Parent (natural or adoptive)
Child (natural or adopted)
Brother or sister, including half-siblings
Grandparent or grandchild
Stepparent, stepchild, stepbrother, or stepsister
In-laws: father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, grandchild-in-law
Legal ward or legally appointed guardian, with a certified letter of guardianship

Step-relationships come with a wrinkle. The exemption survives if the biological parent died while still married to the stepparent. It ends if the parents divorced before the title transfer.⁶ Cousins, aunts, uncles, and friends are not on the list. Those transfers are taxed at the full 6%.

15 Days to Title, and What It Costs

You have 15 days from the date of sale to transfer the title into your name. Miss that window and Michigan tacks on a $15 late fee. Driving an unregistered vehicle on Michigan roads can also get it impounded.⁷

Budget for the following at the Secretary of State’s office, on top of the 6% use tax:

Title transfer fee: $15, or $16 if there is a lien on the vehicle
Vehicle registration: $15 for one year, $29 for two years
Plate transfer: $10 to $15

Documents to Bring

A missing document means a wasted trip. Come with all of these:

The original vehicle title. Photocopies and electronic copies are not accepted. The title must show a complete odometer reading, the seller’s signature, and a completed purchaser’s section.
The Application for Michigan Title and Registration (Form RD-108). A dealer may have filled it out already; a private-party buyer completes it at the office.
Proof of Michigan no-fault insurance covering personal protection, property protection, and residual liability. Get the policy in place before you visit.⁸
A lien statement from your lender if the vehicle is financed.
Proof of tax paid to the other state, if you’re claiming that credit.

Ask an out-of-state dealer for a detailed bill of sale showing purchase price, trade-in value, and any tax collected. It makes the tax math at the Michigan counter straightforward.⁹

Driving It Home Legally

You need legal authority to drive the vehicle from the seller’s state to Michigan. Some states issue temporary tags that Michigan recognizes. If the selling state doesn’t, or if a Michigan dealer hasn’t yet processed the paperwork, you may receive a BFS-4 Temporary Registration Permit. It costs $1, lasts 15 days, and displays in the rear window or where a plate would normally sit. If the RD-108 hasn’t been processed by the time the 15 days run out, the permit expires and the vehicle can be cited or impounded.¹⁰

Penalties for Skipping or Underreporting

Underreporting the purchase price or ignoring the tax carries real consequences. The Michigan Department of Treasury monitors registrations and can audit when the numbers look off. Deficiency assessments include both penalties and interest accruing from the original due date. The department has four years from the filing deadline to assess a deficiency, and gets two extra years from the date fraudulent concealment is discovered.¹¹

Interest is not trivial. For the first half of 2026, the Treasury charges 8.48% annually on underpayments, running from the date the tax was originally due.¹² Owe $2,400 in use tax on a $40,000 vehicle and ignore it for a year, and interest alone adds roughly $200, before any penalty.

Paying at the counter when you title the vehicle is cheaper than dealing with Treasury later. Bring the paperwork, claim any credit you’re owed, and walk out clean.

1
Michigan Legislature. Michigan Compiled Laws 205.93 – Use Tax Act
2
Cornell Law School. Michigan Administrative Code R 205.54 – Automobile and Other Vehicle Sales
3
Michigan Legislature. Michigan Compiled Laws 205.94 – Use Tax Act, Exemptions
4
Michigan Department of Treasury. 485, Instructions for Michigan Vehicle Dealers Collecting Sales Tax from Buyers
5
State of Michigan. Buying, Selling, or Leasing – Vehicle Ownership
6
State of Michigan. Transferring a Vehicle Title to a Relative
7
State of Michigan. Title Transfer and Vehicle Registration
8
Michigan Legislature. Michigan Compiled Laws 500.3101 – Insurance Code
9
Michigan Department of State. Out-of-State Residents
10
State of Michigan. Issuing a BFS-4 Temporary Registration Permit
11
Michigan Legislature. Michigan Compiled Laws 205.27a – Revenue Division, Penalties and Interest
12
Michigan Department of Treasury. Interest Rate Due on Underpayments and Overpayments