Arizona motor vehicle owners are required to pay a yearly excise tax (known as the Vehicle License Tax or VLT) as part of their vehicle registration fees. The excise tax rate is $2.80 for every $100 of a new vehicle’s value or $2.89 for every $100 of a used vehicle’s value.

Income tax, property tax, excise tax—taxes can be a real financial strain, not to mention confusing! However, knowing the rules surrounding various taxes is important since missing a payment can bear serious consequences. That’s why

Jerry

, the vehicle expert and trusted

car insurance

broker, is here to break down Arizona excise tax (known as Vehicle License Tax in AZ).

We’ll cover all the details, including how much you owe, where to pay it, and what happens if you miss the payment. And we’ll even share some tips on scoring lower

Arizona car insurance costs

so that you can keep more of your hard-earned money in your pocket.

What is an excise tax in Arizona?

All drivers who register a motor vehicle in the state are required to pay an annual excise tax to the Arizona Motor Vehicle Department (AZ MVD). This tax is known as the Vehicle License Tax (VLT) and is part of car owners' yearly registration fees.

The VLT collected is then distributed to various funds including the State Highways Fund and city/town roads. This tax should not be confused with the

Arizona car sales tax

, which is a one-time payment when you purchase the car.

An excise tax is imposed on certain manufactured goods and often applies to those that cause harm to the environment or a person’s health. For example, cigarettes and alcohol are subject to excise taxes as they can threaten consumers’ health. Excise tax applies to motor vehicles as the emissions from driving play a part in damaging the environment.

Here’s what you need to know about the excise tax in Arizona:

The excise tax rate is $2.80 per $100 of a new vehicle’s value

The excise tax rate is $2.85 per $100 of a used vehicle’s value

The excise tax rate is based on 60% of the MSRP in the designated year of manufacture and is reduced by 16.25% each year since the vehicle was first registered

The rate is further reduced by 15% each year if the vehicle was purchased before August 1, 1998

Excise tax is charged for a full calendar year

Excise tax will be charged at every registration and renewal. This tax, together with the rest of your registration fees, goes directly to the MVD.

If your vehicle doesn’t need an emissions test, you can renew your registration up to six months ahead of the expiration date. If an emissions test is required, you can renew up to three months before expiration. The MVD must receive the payment by the expiration date—so be sure to leave enough time to complete your emissions test!

MORE: Arizona gas tax

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Calculating your excise tax payment

You will be told the amount of VLT due when you renew your vehicle registration. However, you can calculate how much your tax will be in advance! This will also confirm if you’re billed the correct amount. The table below will help you calculate your excise tax rate.

Year you bought your vehicle	How to calculate excise tax
Model year	60% of MSRP
Second year after model year	43.75% of MSRP
Third year after model year	27.5% of MSRP
Fourth year after model year	11.25% of MSRP

For example, if you purchased a brand new 2020

Hyundai Elantra GT

with an original MSRP of $21,625, the value of your vehicle for calculating the VLT would be $9,461. With the VLT rate of $2.80 per $100 of the vehicle’s value, you would be paying approximately $125.

Penalties for nonpayment

Since excise tax is included in vehicle registration fees, missing your expiration date could result in penalties. Your online or phone renewal must be postmarked by the due date to avoid any penalty fees.

In the most serious case where you delay your bill payment for an extended period, the tax collector has the power to restrict your driver’s license and vehicle registration renewal, leaving you without a street-legal vehicle.

The tax collector can also add a 12% annual interest rate to your original bill, racking up additional debt on top of the tax itself. In addition, you could be liable for the following collection costs:

Initial late fee: $8

Additional fee for each month overdue: $4

Invalid checks: $25

If a check is returned by a financial institution, your vehicle registration and driving privileges may be canceled.

MORE: How to get a temporary license plate in Arizona

How to avoid excise tax in Arizona

Generally, you can’t avoid paying excise tax in Arizona since it is included with your annual vehicle registration renewal.

However, taxpayers who meet certain requirements may be eligible for an exemption depending on their work, their car, and their location. The following are exemptions available at the time of renewal:

Non-resident health officer

Leased school bus drivers

Non-government emergency service providers

Non-profit organizations

Purple Heart medal recipient

Religious institution

School (non-profit)

Supplemental Security Income (SSI)

Survivor of a fallen responder

Survivor of a fallen military member

Indigenous American tribe member

Vehicle purchased with VA grant

VA disability

Widow/widower or totally disabled person

For details surrounding each exemption, you can visit the

ADOT Vehicle License Tax Exemptions page

on azdot.gov. If you’re eligible, you will need to submit the appropriate forms (as listed on the website).

In some cases, you could be eligible for a reduced VLT rate if:

You drive an alternative fuel vehicle—for vehicles registered before January 1, 2023, powered only by liquefied petroleum gas, natural gas, hydrogen, or solar

You convert your vehicle to operate only on alternative fuel—you must be issued an Alternative Fuel Certificate from the Arizona Department of Environmental Quality

You drive an electric vehicle—totally electric-powered and not supported by a fuel supply

If you sell your vehicle and complete a sold notice right away, you may be eligible for a VLT credit. You should apply for the credit as soon as possible, as the amount will be based on the time until the registration expiration date from when you submit the application!

You can complete the sold notice and request a registration credit from

azmvdnow.gov

. Keep in mind that there will be a $12 processing fee applied and once you request the credit, the vehicle will no longer be registered.

MORE:

Gifting a car in Arizona

How to save on car insurance in Arizona

Arizona

car insurance

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