In February, New York State Assembly Bill A4645 was introduced which would exempt low-emission and energy efficient vehicles from retail sales and use taxes. Although their bill is capturing increasing attention, numerous other states are leading the charge with similar exemptions and tax breaks.
“Sales tax exemptions on vehicles will likely be a significant factor in the decision making process.”
New York’s proposed Exemption
If passed, the bill would provide a sales and use tax exemption for any owner of a “low-emission and energy efficient vehicle” in New York. Qualifying vehicles must be certified by the US Environmental Protection Agency or achieve an air pollution score and a greenhouse gas score of nine or better on the Green Vehicle Guide. The New York Department for Taxation and Finance (Department) would be responsible for publishing a list of qualifying vehicles by make and model to the Department’s website.
Although the minimum benchmark for greenhouse gas and smog ratings has significantly increased in recent years, newer electric vehicle models should have no issues qualifying for the sales tax. As expected, it is the older models, hybrid vehicles, fuel-efficient gasoline cars and alternative fuel vehicles that may not meet the rigid requirements.
Sales tax savings by state
New York joins the list of states with various “clean vehicle” sales tax exemptions already in effect. Many states modified their existing laws with an effective date of January 1, 2023. For example, Arizona made a use tax exemption on both alternative fuel and alternative fuel vehicles effective January 1, 2023. Alternative fuel includes propane, natural gas, electricity, hydrogen and a blend of hydrogen with propane or natural gas.
Additionally, California introduced a program also effective January 1, 2023, known as the “Clean Cars 4 All” program which provides a sales tax exemption for a number of vehicles including designated hybrid and zero-emission cars. California has several other air quality protections in place, including the “zero emission standards” established by the California Air Resources Board. New Jersey modeled its sales and use tax exemption after these standards and provides a sales tax exemption to any zero-emission vehicles certified pursuant to the Board.
Not all states limit their exemptions to new cars. Washington offers a sales and use tax exemption for new or used alternative fuel or hybrid vehicles. The exemption went into effect August 1, 2019, and expires July 1, 2025. Unlike other state laws, this exemption applies to used vehicles, provided the vehicle is exclusively powered by a clean alternative fuel or can travel at least 30 miles on battery power alone.
The initiative to improve greenhouse gas and air pollutant emissions from vehicles will likely take off in the coming years. Remember, if you are planning to purchase a “green” vehicle in Arizona, New York, California or any other state with a similar exemption, review your state’s sales and use tax exemption provisions as part of your car buying research!