OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-3

AN ACT CONCERNING THE LICENSING OF NEW AND USED CAR DEALERS.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Resources of the General Fund

GF - Revenue Gain

Potential

Potential

Department of Motor Vehicles

TF - Revenue Gain

up to $10,000

up to $10,000

Note: GF=General Fund; TF=Transportation Fund

Municipal Impact: None

Explanation

The bill results in a potential revenue gain of up to $10,000 to the Special Transportation Fund by expanding car dealer license eligibility to additional manufacturers, which is dependent on the number of licenses issued by the Department of Motor Vehicles.

The bill also increases the potential sales tax revenue to the General Fund. The actual revenue gain in sales tax would be dependent upon any potential shift in consumer purchases from out-of-state to in-state purchases.

Connecticut requires sales tax to be paid on vehicles registered for less than thirty days in another state, upon registration of the vehicle in this state; however, Connecticut does provide credit for sales tax paid out-of-state if the registrant provides supporting documentation.

Of the adjacent states, Massachusetts is the only state that charges sales tax on the purchase of motor vehicles on nonresidents.1 Vehicle purchases from Massachusetts are therefore likely to qualify for the sales tax credit for out-of-state purchases. Any potential shift in sales from Massachusetts to Connecticut under this bill, would result in the full sales tax payment in Connecticut, rather than an out-of-state sales tax credit, and therefore may result in a potential revenue gain.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to the number of new or used dealers established in Connecticut.

1 New York State does not currently tax purchases of motor vehicles by nonresidents. Rhode Island does not charge Connecticut residents on the purchase of motor vehicles.