How are people who move from a vehicle-tax state to another vehicle-tax state able to claim they are not paying any tax by not updating their registration/plates?

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People in my area keep an out-of-state tag when moving to our state. They say (and I’m aware this is illegal) it saves them from a tax. But I don’t understand how this works.

If your car is registered out of state, isn’t that state still going to tax you because they aren’t aware you moved? Isn’t one state getting the tax somehow? How are people from two vehicle tax-charging states claiming they aren’t paying ANY tax?

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Many states don’t charge vehicle taxes every year. They charge a tax when you buy it, and then perhaps a small registration fee every other year. Since the local police are unlikely to ticket an out-of-state with expired tags, you might even forgo paying the registration fee. As you said, this is illegal and there are no doubt significant fines when they are caught. It’s also unclear how you sell a car with no valid registration.

Not all states and not all jurisdictions within states tax personal property/vehicles at the same rate.

They are also, potentially, telling their old state they don’t live there anymore so don’t owe taxes and are hoping their new state doesn’t pick up on expired out of state registrations.