Car sales tax credit makes Florida appealing roost for snowbirds

The state of Florida allows a partial sales and use tax exemption for motor vehicles purchased by a resident of another state. This makes it easier for snowbirds to buy a new or used car in Florida and have the vehicle titled in their state of primary residence, but it can complicate sales tax compliance for car dealers.

Hundreds of thousands of snowbirds — the kind with second homes, not feathers — settle in Florida each winter. They flee the fierce winds and frigid temperatures of the North and they stay anywhere from one to six months at a stretch. Studies suggest that like their namesakes, they even settle in flocks.

The impact of snowbirds on Florida is significant. Snowbirds fuel an estimated 1.6 million jobs and contribute billions to the Florida economy. Many own homes and rent those homes when not in the state. They also pay Florida sales tax, gas tax, property tax, discretionary sales surtax, short-term rental taxes, and other taxes as required, as they do in their home states.

It seems safe to assume Florida snowbirds wouldn’t want to pay any more taxes than absolutely required, yet their lifestyle can sometimes add to their tax obligations. A partial sales tax exemption for cars purchased in the Sunshine State can help alleviate the burden by reducing the Florida sales tax nonresidents pay on the purchase price of new or used cars subsequently titled in another state.

For car dealers in the state, however, the partial sales tax exemption for nonresidents can make sales tax compliance more burdensome.

If a resident of another state purchases a new car or a used car in Florida, and the transaction qualifies for the partial sales tax exemption, the dealer should collect the amount of sales tax that would be imposed on the purchase price of the vehicle in the purchaser’s home state. This can be less than the amount of tax a Florida resident would pay.

If a nonresident buyer would pay a sales tax rate greater than 6% on the vehicle in their home state and can show they qualify for the partial exemption, the Florida dealer should only collect a 6% tax rate, which is Florida’s sales tax rate. Many Florida counties impose an additional discretionary sales surtax, so depending on the location of the transaction, the total sales tax rate in Florida can be up to 8%. (See how sales tax rates in other states compare.) 

No matter the rate, the sales tax revenue belongs to Florida and so must be remitted to the Florida Department of Revenue.

In order for the partial sales tax exemption to apply at the time of sale, the nonresident purchaser must complete a Form DR-123 (Affidavit for Partial Exemption for Motor Vehicle Sold to Resident of Another State). This declares the purchaser’s intent to register or license the vehicle in their home state within 45 days of the date of purchase.

If the transaction occurs at a dealership, the dealer must have the nonresident purchaser complete a Form DR-123 at the time of sale. The seller must provide their sales tax registration number and the amount of Florida sales tax paid, among other information. To determine the proper sales tax rate to collect from a nonresident buyer, the dealer must use the most up-to-date information from the Florida Department of Revenue. Dealers that cannot prove a transaction was to a nonresident purchaser qualifying for the partial sales tax exemption could be held liable for the full sales tax that would otherwise be due.

In the event of a private transaction between two individuals, the buyer should submit the Form DR-123 directly to the county tax collector’s office or private tag agent when obtaining a temporary tag for the vehicle.

As long as the nonresident buyer licenses the motor vehicle in their home state within the 45-day window, they’re not required to take their new vehicle out of Florida. If they don’t, they may have to get out of Dodge — or at least out of Miami or any other location in the state before day 46.

The partial exemption for car sales tax does not apply to a nonresident corporation or partnership when:

• An officer of the corporation is a Florida resident;
• A stockholder who owns at least 10% of the corporation is a Florida resident; or
• A partner who has at least a 10% ownership in the partnership is a Florida resident.

However, the Department of Revenue notes that a partial exemption may be allowed for corporations or partnerships “if the vehicle is removed from Florida within 45 days after purchase and remains outside this state for a minimum of 180 days, regardless of the residency of the owners or stockholders of the purchasing entity.”

Not at this time, though Florida offers a credit to residents of most U.S. states.

Florida doesn’t allow the credit for residents of Alaska, Montana, or New Hampshire, which have no state sales tax. It doesn’t specify whether the credit applies to the document fee Delaware imposes on car purchases; the Delaware Division of Motor Vehicles provides more information.

The Sunshine State does allow a credit for the 0.5% vehicle use tax Oregon imposes on the retail sales price of certain vehicles. Like Alaska, Delaware, Montana, and New Hampshire, Oregon doesn’t have a state sales tax.

Though Arkansas, Mississippi, and West Virginia impose a sales tax on vehicles, they do not allow a credit for taxes paid to Florida, according to guidance published by the department in December 2023. Residents of these three states “must pay sales tax to Florida at the rate imposed by their home state when they purchase a vehicle in Florida and must also pay tax to their home state when the vehicle is licensed in their home state.”

Additionally, there’s no credit given for the excise tax the District of Columbia imposes on every original certificate of title for a motor vehicle.

Though Florida allows residents of most states to claim a credit for tax paid to their home state if the transaction occurs through a motor vehicle dealer, it doesn’t provide the partial exemption for occasional or isolated sales to residents of many states.

Whether credit is permitted for a trade-in allowance also varies by state.

Florida’s 6% use tax generally applies to a motor vehicle purchased in another state (or the District of Columbia or a U.S. territory) and subsequently titled, registered, or licensed in Florida. However, if the owner can provide documentation showing the vehicle was used outside of Florida for six months or longer before being registered in Florida, Florida use tax generally wouldn’t be due.

If use tax does apply, the Sunshine State may allow a credit to reduce it. 

“Credit against Florida use tax and any discretionary sales surtax is given for a like tax paid in another state, whether the tax has been paid to that state or to a county or city (local taxes) within that state,” explains the Department of Revenue. “If the amount paid is equal to or greater than the amount imposed by Florida, no additional tax is due. If the amount paid is less than the amount due as imposed by Florida, only the difference between the two tax rates is due.”

The Florida Department of Revenue publishes a list of motor vehicle sales tax rates by state that details whether credit for a trade-in is permitted by another state. Like this blog post, the chart is for informational purposes only and doesn’t provide tax advice. The department recommends dealers contact the taxing authority in the nonresident purchaser’s home state to verify whether a credit of Florida sales tax paid will be allowed.

Check out our Florida sales tax guide for more helpful information about Florida sales tax compliance.