1) I bought my car outside the state. Why do I have to pay a use tax to Phoenix?
Both the City and State collect a vehicle use tax on vehicles purchased out-of-state if there was no tax paid previously. When the vehicle is registered with the Arizona Motor Vehicle Division (MVD), the buyer presents the documents needed to transfer the title. This documentation should list any sales tax (state, city, or both) paid at the time of purchase. If no sales tax was paid on the purchase, MVD collects the state use tax of 6.6% (5.6% prior to June 1, 2010), listed on the registration form as a "DOR fee." Only the state use tax is collected by MVD. MVD reports the names and addresses of residents who pay DOR fees to each city based on the registration address. Each city bills use tax based on the information provided by MVD.
2) What is use tax?
Use tax is a one-time tax on the original purchase price of items stored or used in the city, such as a motor vehicle or aircraft, which have been purchased without a payment of a local sales tax typically from outside of Arizona.
3) How is the use tax computed?
The Phoenix use tax rate is 2.0% of the total cash price, less any trade-in value amount. If you believe this billing is in error because 1) you purchased the vehicle from a private party, 2) a local sales tax was paid at the time of purchase, or 3) the vehicle value is incorrect, mail or fax us a copy of your invoice or other satisfactory evidence to support your claim. This evidence must be provided within 45 days of receiving the initial billing. A City representative will review all documentation and a written response will be mailed within 10 working days.
4) Why doesn’t the State collect the vehicle use tax?
The City and State are separate taxing authorities. The State collects only for cities in the State collection program (mostly smaller cities). However, the State provides the registration information to the “non-program” cities for billing.
5) I no longer own the car. Do I still have to pay this tax?
Yes. The tax is based on the purchase of the vehicle, just like any other retail sale. Subsequent sale or destruction of the vehicle does not preclude the liability for the tax.
6) I did not know about this tax before and I don’t have the money to pay it all at once. Can I make payment arrangements?
Arrangements for a payment schedule may be set up. Please contact our Tax Collections section.
7) I used my office address or P.O. Box for registration purposes, but I don’t live in Phoenix. Why do I have to pay this tax?
Generally, the Phoenix use tax applies because you first registered the vehicle to a Phoenix address. If the vehicle was not located in Phoenix, written documentation must be presented, such as property tax records, indicating a permanent address where the vehicle is garaged. As most Arizona cities have a similar tax, you will owe a vehicle use tax if this address is in another city.
8) The value of my vehicle is wrong. How can I fix that?
The information the City receives comes from the Arizona Department of Motor Vehicles, and is based on the DOR fee listed on your Title and Registration application. If the State use tax has been computed incorrectly, you may want to contact DMV at 602-255-7011 for clarification. The City of Phoenix will accept copies of the bill of sale or purchase invoices as sufficient documentation to correct the billing.
9) When is payment due?
To avoid penalty (10% of the tax) and monthly interest on the unpaid tax balance, payment must be received by the last working day of the month following the date of the initial letter. Postmarks are not considered evidence of timely payment. A written request for the waiver of any penalty, with an explanation as to why the tax was not paid on time, must be received within 45 days of the penalty being assessed. Please note that interest cannot be waived.