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MOTOR VEHICLES (GENERAL); TAXES - PROPERTY;

OLR Research Report


March 1, 2010

 

2010-R-0067

STATEWIDE MOTOR VEHICLE PROPERTY TAXES

By: John Rappa, Principal Analyst

You asked which states impose a statewide property tax on motor vehicles and how they do it.

SUMMARY

A computer search found that at least 15 states impose statewide motor vehicle taxes or fees based on a vehicle's value, but only Kansas and Mississippi refers to their tax as a property tax. (Mississippi refers to its tax as an ad valorem tax, the term usually associated with property taxes.) Each state sets a uniform, statewide assessment or tax rate, but differs on whether the state or localities levy the tax and keep the revenue. Based on these differences, we divided the states into three groups:

1. states where counties or municipalities levy the tax or fee at a state-determined rate and keep the revenue generated (Kansas, Maine, Massachusetts, Mississippi, Montana, Nebraska, and Utah);

2. states that levy the tax or fee and redistribute the revenue to counties and municipalities according to statutory formulae (Arizona, California, and Indiana); and

3. states that levy the tax or fee and keep the revenue generated (Colorado, Iowa, Michigan, Minnesota, and Nevada).

STATE SETS RATE AND MUNICIPALITIES LEVY TAX

Kansas

Kansas counties levy a motor vehicle property tax based on a rate set by the state's revenue secretary. The rate varies from county to county. It is based on a vehicle's depreciated value, determined according to a statutory schedule, and the average tax rate for the county where the vehicle is registered.

The latter equals (1) the total amount of state, county, and local property taxes levied within the county two years before the first full year the vehicle was registered under its owner's name and (2) the total assessed value of all property within the county. Certain school district property taxes are excluded from the average rate calculation. The minimum tax is $24 (Kan. Stats. Ann., 79-5105).

Maine

Maine has an annual motor vehicle excise tax based on the auto maker's list price. The tax rate decreases for older vehicles. The minimum tax is $5. Tax rates are shown below:

Model Year

Mills per $1

of list price

First or current

24.0

Second

17.5

Third

13.5

Fourth

10.0

Fifth

6.5

Sixth and succeeding

4.0

(36 Maine Rev. Stats., 1482).

Massachusetts

Massachusetts requires local governments to collect an excise tax in lieu of any local property tax. The tax is $25 per $1,000 of valuation (2.5%). The minimum tax is $5.

The state motor vehicle commissioner determines the valuation based on the manufacturer's list price for a vehicle's model, make, and year. The tax rate applied to this value depends on each vehicle's model year and the year it was purchased. The rate starts at 50% for vehicles

purchased in a year before the designated model year (e.g., purchasing a 2011 Honda Accord in 2010), jumps to 90% in the second year and drops to 10% in the fifth and subsequent years. The rates are shown below:

Model Year

Maximum Valuation

(% of List Price)

Year preceding manufacturer's design year

50%

New or first

90%

Second

60%

Third

40%

Fourth

25%

Fifth and succeeding

10%

(Mass. Gen. Laws, Chap. 60A, 2)

Mississippi

Mississippi motor vehicle owners pay an ad valorem property tax on their vehicles when they pay their registration fees. County tax commissioners collect the tax and the revenue goes to counties and municipalities.

Counties set the tax mill rates and the State Tax Commission sets the uniform statewide assessment rate, which is 30% of the manufacturer's suggested retail price, reduced by certain percentages for depreciation over 10 years. The minimum assessed value for passenger vehicles is $100. The State Tax Commission also sets an annual credit against the tax according to the projected balance in the state fund used to reimburse localities for the lost revenue. The credit is currently 5% (Miss. Code, 27-51-7 to 19).

Montana

Montana allows counties to tax registered motor vehicles based on their value or a flat fee. Those choosing the former may set a rate of up to 0.7% of value, depreciated according to a statutory schedule. Counties must keep half the tax or fee revenue and distribute the rest to municipalities according to a statutory formula (Mont. Code Ann. 61-3-537).

Nebraska

Nebraska imposes a state motor vehicle tax based on the manufacturer's list price and a statutory schedule. The tax increases with the price of the car and depreciates as the car ages over a 14-year schedule. For example, the tax for a new car worth $22,000 is $340. The tax on that car drops to $272 when it is three years old, $173.40 when it is six years old, and $51 when it is 10 years old. The minimum tax for a new car is $60 (Neb. Code, 60-3,184-3, 60-3, 188).

Utah

Utah charges a flat annual fee ranging from $10 to $150 per year, depending on how old a car is. Larger vehicles, such as campers and medium- and heavy-duty trucks, pay a fee of 1.5% of the vehicle's depreciated value. The value is based on the manufacturer's suggested retail price for the vehicle when new. The Utah State Tax Commission sets depreciation schedules (Utah Code, 59-2-405 et seq.).

STATE LEVIES TAX OR FEE AND REDISTRIBUTES REVENUES TO MUNICIPALITIES

Arizona

Arizona shares its motor vehicle tax revenues with counties and cities. The tax applies to the vehicle's “taxable value,” which is 60% of the manufacturer's base retail price for the first year after initial registration. The value is decreased by 16.25% for each succeeding year. The state taxes each vehicle at four rates, including separate rates for counties and cities and towns. The rates are shown below:

 

Tax Rates

Recipient

First Year

Subsequent Years

Arizona Highway User Revenue Fund

$1.26

$1.30

County General Fund

0.69

0.71

Arizona Counties Highway User Revenue Fund

0.16

0.17

Cities and Towns

0.69

0.71

Total

2.80

2.89

Revenue from the tax is distributed according to a statutory formula to the state, counties, and incorporated cities and towns. Distribution to counties and incorporated cities and towns is based on relative population (Arizona Rev. Stats, 28-5801, 28-5808).

California

California's basic annual vehicle license fee for noncommercial vehicles is currently 1.15% of the vehicle's purchase price, depreciated over an 11-year period. The rate was originally .65% when the legislature increased it by 0.5% in 2009, to 1.15%. It is scheduled to drop back to .65% on June 30, 2011, but it may be extended until 2013. The state redistributes most of the revenue to cities and towns. (Cal. Rev. & Tax Code, 10754, Ch 5 (S.B. 22), Laws 2000, Executive Order S-1-03, 11/17/03).

Indiana

Indiana levies an annual license excise tax. The state determines a vehicle's value when it is first offered for sale in the state using the factory-advertised or port-of-entry price adjusted for any increase in the average price for new cars for the year. Vehicles are divided into 17 classes based on price and taxed at various rates, with more expensive cars taxed at higher rates. The rates decrease each year for 10 years as the vehicle ages and its value depreciates.

For example, the annual tax on a $22,000 car (Class XIII) is $300 when the car is new, $150 after five years, and $30 after 10 years. The minimum tax is $12. The tax is payable for each year the car is registered in the state.

Revenue from the excise tax is distributed to counties (Indiana Rev. Code, 6-6-5-1 to 6-6-5-10).

STATE LEVIES AND RETAINS TAX OR FEE

Colorado

Colorado's annual ownership tax is based on a vehicle's “taxable value,” which is 85% of the manufacturer's suggested retail price, excluding federal excise taxes, transportation or shipping costs, and preparation and delivery costs.

Tax rates for passenger motor vehicles are:

Age of Vehicle

Tax Rate

1st year

2.10%

2nd year

1.50%

3rd year

1.20%

4th year

0.90%

5th through 9th years

0.45%

10th year or older

$3.00

(Col. Rev. Stats., 42-3-107)

Iowa

Iowa's transit fee for passenger vehicles is 1% of the vehicle's value plus $0.40 for each 100 pounds of weight. The minimum fee is $10. If the vehicle is more than seven years old, the value-based part of the fee is reduced as shown below:

Vehicle Age

Value Part of Fee

8 to 9 model years old

75% of new

10 to 11 years model years old

50% of new

12 model years or older

$50.00

Fees for 1993 models or older cars sold after January 1, 2002 are not based on value and weight, but are set by statute as follows:

Model Year

Fee

1990-1993

$27

1970-1989

$23

1969 or older

$16

(Iowa Code, 321.109; 321.113)

Michigan

Michigan's motor vehicle registration tax is based on a motor vehicle's list price and varies according to a statutory schedule. For a new or newly registered car, the tax starts at $30 if the sales price is less than $6,000. It increases to $148 for a car priced between $29,000 and $30,000. For each additional $1,000 or fraction of the price over $30,000, the tax increases by $5.

The tax drops to 90% of the first year's fee in the second year, 90% of the second year's fee in the third, and 90% of the third year's fee in the fourth and each subsequent year (Mich. Compiled Laws, 257.801).

Minnesota

Minnesota's tax is $10 plus 1.25% of a car's base value. The base value is the manufacturer's suggested retail price, including destination charges. For new cars in their first or second years of life, the tax is on 100% of the base value. The tax base depreciates as follows: 90% for the third and fourth years, 75% for the fifth and sixth years, 60% for the seventh year, 40% for the eighth year, 30% for the ninth, and 10% for the 10th and $25 in the 11th and each subsequent year. The minimum annual tax is $35 (Minnesota Stats. Ann., 168.013).

Nevada

Nevada imposes a 4% state motor vehicle tax. The tax base is 35% of the manufacturer's suggested retail price in Nevada, excluding options and extras, at the time the particular make and model is first offered for sale in Nevada. Cars are depreciated over nine years to a minimum value of 5% of their original base.

Nevada also allows counties, after holding a referendum, to add 1% to the state car tax to finance limited access highway projects (Nev. Rev. Stats., 371.030 – 371.060).

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