How Much Tax Do You Pay on Used Cars in Ontario
How Much Tax You Pay on a Used Car in Ontario: Taxes are added up on everything in Ontario, dollars are taxed from the moment you make them to the moment you spend them…and everything in between.
How much tax you pay when buying a car
Privately sold and bought cars were escaping some taxes few years back when GST and PST was separate. Nothing escapes HST anymore and used cars are no exception. Tax on used cars in Ontario is 13%, same as on everything else you buy. It doesn’t matter if you buy a car from a dealer or private seller, tax is set at 13%.
Taxes on cars are bit different from other stuff. When you buy something, a new TV set for example, taxes on that TV set will be paid once when purchased new and that’s it. Cars on the other hand are sold and bought several times during vehicle lifespan.
Every single time cars will be charged 13% sales tax, repeatedly. If a car has changed a handful of owners over the years, taxes paid on it are probably higher than price of the car when purchased new.
How is Tax Calculated on Car Sales in Ontario
1) Taxes on Dealer Purchases
If you are purchasing a used car from a dealership, taxes will be 13% of total amount owed. Total amount includes price of vehicle plus any other extra charges form dealership. Let’s say, you bought a used car from a dealership for $10,000 and a safety certification charge (or any other charges) is added for $500. You will pay 13% tax on total of $10,500.
2) Taxes on Private Sales
Retail sales tax for private sales is collected by Ministry of Transportation Ontario every time ownership of a car is transferred from a person to another one. There are few exceptions such as Estates or gifts between family members.
Tax is calculated based on Ministry of Transportation vehicle value book (Red Book). However if your purchase price is higher than book value, tax will be charged on your purchase instead.
Example: You bought a car from private seller for $10,000. Ministry of Transportation book value is $8,000, they will charge you tax on $10,000. If you purchase price is $5,000 but their book says $8,000 then they will charge you tax on $8,000.
Tax Exceptions for Car Sales in Ontario
Circumstances when HST is not charged: Gifts between close family members. Gifts received from an Estate Will regardless if a close relation or not. If you are moving from another province to Ontario. Indian Status holders are also excluded from paying HST on vehicle purchases.
Do You Pay or Receive Tax When Selling a Car in Ontario
1. HST on Privately Owned Vehicle Sales
Selling a car is different from buying a car when it comes to taxation in Ontario. When you sell a personal car (sold privately or at a dealer doesn’t matter) you do not pay any taxes. Whatever money you receive for your car is yours to keep. Also, you can not charge nor receive receive any taxes either from buyer when you sell your car privately.
2. HST on Company registered Vehicle Sales
If you have a company and car is registered under your business, you should receive 13% tax when selling your car to a Licensed Car Buying Company or a Dealer. You need to provide your HST number and RIN number when you sell your business registered vehicle in Ontario, HST received from vehicle sale should be declared on business yearly tax filing, same as any other HST received.
3. Ontario RIN Number
RIN is short for Registrant Identification Number. RIN has 9 digits and is used by Ministry Of Transportation Ontario as a unique number to identify and register vehicles owned by businesses in Ontario.
As opposed to private car registration which use driver’s license number as identification number, a company vehicle registration ownership will have a RIN number instead. Procedure and documentation of selling a company owned car is the same as selling a privately owned car in Ontario. HST tax received is the only difference.
(If you are also looking for a fast and easy solution to sell your car, details here on “How To Sell Your Car Fast In Ontario”. )
If you need to buy a used car: What to Check When Buying a Car.
Comments: If you have any questions or suggestions related to this post or Used Car Toronto in general, don’t hesitate to use comment section below.
