VEHICLE REGISTRATION

USAGE TAX
The 1998 General Assembly passed House Bill 74 relating to the collection of Usage Tax
The Usage Tax has changed dramatically
Usage Tax will no longer be based on the MSRP or the NADA book value
Tax will be based on what you pay for a vehicle

The taxable value of new vehicles will be based on the "Total Consideration Given"

"Total consideration given" is defined in KRS 138.450 as the amount given, valued in money, whether received in money or otherwise, at the time of purchase or at a later date, including consideration given for all equipment and accessories, standard and optional.

What does Total Consideration really mean? It includes the cash given, the amount financed, the value in money of any other items, and the value of any vehicle traded.

Total consideration does not include the following:

Manufacturer or dealer rebates, Interest payments made over the life of a loan, the value of extended warranties and service contracts.

Examples of how new vehicles are taxed.
New Vehicle, No Trade-In:

MSRP
Less discount/rebate etc.
Total Consideration Given
Multiplier %
Tax Due
$23,000
3,000
20,000
X .06
$1,200

New Vehicle, No Trade-In:

MSRP
Multiplier
Taxable Value
Tax Due
$23,000
x .90
20,700
$1,242

New Vehicle, With Trade-In:

Cash or down payment
Amount Financed
Cash value of other items (tractor)
Total Consideration before trade-in
Value of trade-in assigned by dealer
Total consideration given
Multiplier %
Tax Due
$5,000
15,000
2,000
22,000
8,000
$30,000
X .06
$1,800

New Vehicle, With Trade-In:

MSRP
Discount
Sub-total
Trade-In
Sub-total
Trade-In Recorded
Total
Multiplier %
Tax Due
$23,000
5,000
18,000
6,000
12,000
6,000
$18,000
X .06
$1,080

After the buyer and the seller agree on the Total Consideration Given they must complete an affidavit before Usage Tax can be assessed upon this amount.
· Total Consideration Given must be attested to in the affidavit
· The value assigned to any vehicle traded in must also be attested to in the affidavit
· The affidavit must be signed by both the buyer and the seller
· Each signature must be individually notarized
· The Revenue Cabinet will provide the affidavit to the county clerks
· The county clerks provide the affidavit to the public free of charge
· The form is in duplicate, with a copy for the buyer, seller, clerk and Revenue
· The affidavit can be downloaded from the section on forms
· We will accept a fax copy

The affidavit contains:
· Buyer and seller information
· Vehicle/Trade-In information
· A definition of Total Consideration Given
· A place to record Total Consideration Given
· A place to record Trade-In allowance
· Penalty provisions
· Signature block for buyer and seller
· A notary section

The Penalty Provision
Any person who willfully and fraudulently gives a false statement as to the total and actual consideration paid for a motor vehicle under Section 3 of this act shall be guilty of a class D felony and shall be fined not less than two thousand dollars ($2,000) per offense.

So what do you do if you can't get an affidavit?
If an affidavit is not available, tax will be based on the MSRP. This is the same method currently used for assessing Usage Tax on new vehicles. The MSRP will still be required by the county clerk. Usage Tax will be calculated on 90% of the total MSRP. Trucks weighing over 10,000 pounds will be taxed on 81% of the MSRP.

Conversion Vans and Modified Vehicles:
Primary procedure calls for tax to be assessed on Total Consideration given for the complete unit. Secondary procedures allow for tax to be assessed on MSRP, including the MSRP of the conversion package. Conversion vans and modified vehicles seldom, if ever, have MSRP's. Contact the Revenue Cabinet in absence of an affidavit or MSRP.

Used Vehicles:
Used Vehicles fall into one of four categories
· Used vehicles previously registered in Kentucky that are sold in Kentucky
· Used vehicles purchased out-of-state by Kentucky residents
· Used motor vehicles being registered by a new resident for the first time in Kentucky
· Motor vehicles received as a gift

Used vehicles previously registered in Kentucky that are sold in Kentucky:
This is by far the most common occurrence, these vehicles will be assessed Usage Tax on the "Total Consideration Given". Trade-In allowance is granted. Total Consideration Given must be attested to in a notarized affidavit.

What is Total Consideration?
· It includes the cash given
· It includes the amount financed
· It includes the value, in money or any other items
However, it does not include the value of any motor vehicle traded.

Total consideration does not include the following
· Dealer discounts/rebates
· Interest payments made over the life of a loan
· The value of extended warranties and service contracts
· Any amount allowed as a "trade-in allowance"

Trade-In Allowance:
Trade-in allowance only applies to used vehicles. Both the vehicle being purchased and the vehicle being traded in must be registered in Kentucky to receive trade in allowance. "Trade-in allowance" is defined as the value assigned by the seller of a vehicle to a motor vehicle offered in trade by the purchaser. Trade-in allowance must be disclosed in the affidavit.

Examples of how used vehicles are taxed:
Used Vehicle, No Trade-In:

Asking Price
$15,000
Less Discount/rebate, etc.
2,000
Total Consideration Given
13,000
Multiplier %
Tax Due
X .06
$780

 

Used Vehicle, with Trade-In:

Cash or down payment
Amount Financed
$5,000
15,000
Cash value of other items (tractor)
Total Consideration before trade-in
2,000
22,000
Value of trade-in assigned by dealer
Total consideration given
8,000
14,000
Multiplier %
Tax Due
X .06
$840

 

Used vehicles purchased out-of-state by Kentucky residents

These vehicles will also be assessed Usage Tax on the "Total Consideration Given"
· No trade-in credit is allowed
· If a vehicle is traded in, the average trade-in value from the book will be included as part of the Total Consideration Given
· Total Consideration Given before trade-in must be attested to in the affidavit

Example, Out-of-State Purchase:

Total Consideration before trade-in
Less trade-in as assigned by seller
$17,000
5,000
Total Consideration per affidavit
Add average trade-in value from book
12,000
4,700
Total Consideration Given
$16,700
Multiplier %
Tax Due
X .06
$1,002

So what do you do if you can't get an affidavit?
KRS 138.450 gives the Revenue Cabinet the authority to establish a taxable value through the use of the automotive reference manuals prescribed by the Cabinet. Usage Tax will be based on the Average Retail Value from the appropriate reference manual.

Conversion Vans and Modified Vehicles:
Primary procedure calls for tax to be assessed on Total Consideration given for the complete unit. Secondary procedures allow for tax to be assessed on the book value, but The book just gives the base value not the value of the complete unit. If there is no affidavit on conversion vans or modified vehicles, please call the Revenue Cabinet for a taxable value.

Used motor vehicles being registered by a new resident for the first time in Kentucky:
In most cases, there will be no current selling price. The taxable value will be the average trade-in value from the book. Older used vehicles whose values are no longer in the book will be assessed tax on a minimum value of $100. Tax credit will continue to be granted.

Motor vehicles received as a gift:
The taxable value of vehicles received as a gift will be the average trade-in value from the appropriate reference manual.


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