• Taxes require laying out additional cash, which can break a budget for buying a new car.money money money III image by imagenation from Fotolia.com
  
  A major purchase like a new car gets more expensive when you factor in the tax. Finding out about taxes prior to purchase can make or break a budget. States, counties and cities are responsible for the collection of vehicle taxes, according to applicable law. Sales tax is assessed on both new and used vehicles and is required in order to purchase tags and establish vehicle registration. Several taxes may be assessed, which makes research prior to purchase a sound decision.
  
  

City or County Car Taxes

• Some states assess taxes based on the county or city in which you reside. As a result, vehicle taxes include the state tax rate and the local tax rate. For example, in Missouri, car sales tax includes the state tax plus the local tax where the purchaser resides, which are both sales taxes according to the state's Department of Revenue.
  
  

State Car Taxes

• The state in which a new or used vehicle is purchased assesses the sales tax. The purchaser may or may not be required to visit the motor vehicle department to pay the taxes. Sometimes the dealership handles tax payment, title and vehicle registration. On other occasions--purchasing from a private seller, for example--the purchaser is required to submit payment and retrieve vehicle tags and registration.
  
  

Sales Tax Difference

• Some states require the payment of a sales tax difference, according to the The Unofficial DMV Guide. For example, if a vehicle is purchased in one state at a 4 percent tax rate and you reside in a state with a 6 percent rate, the state where you live may equire payment of the additional 2 percent tax.