HF3562

Purpose

• To modify how Minnesota calculates the motor vehicle registration tax for passenger automobiles and hearses, moving toward a depreciation-style, percentage-based method tied to the vehicle’s price (MSRP) rather than a simple flat or single base rate. The change aims to apply a declining tax as a vehicle ages, with special rules for older registrations and caps to limit total tax when a vehicle has been previously registered.

Main Provisions

• Who it covers

  • Applies to passenger automobiles as defined in Minnesota law and to hearses.

• Tax base and how it's determined

  • The registration tax is calculated as a percentage of the vehicle’s Manufacturer’s Suggested Retail Price (MSRP).
  • MSRP must be determined using:
  • List price published by the manufacturer or a recognized third-party source, or
  • If a dealer does not use the MSRP label, the actual sales price, or
  • If MSRP cannot be determined by these methods, the registrar may use any other available source or method.
  • The calculation must not include:
  • The cost of optional equipment or accessories added to the vehicle,
  • A destination charge, except for vehicles that were previously registered in Minnesota before November 16, 2020.
  • The registrar must use information available to dealers and deputy registrars at the time the initial registration is submitted.

• Rate schedule (by year of vehicle life)

  • The tax rate is expressed as a percentage of MSRP and changes based on how many years the vehicle has been in use (first year through beyond the tenth year, with a special rule for 11th and later years).
  • Yearly percentages (as specified in the bill text):
  • Year 1: 100% of MSRP
  • Year 2: 95%
  • Year 3: 90%
  • Year 4: 80%
  • Year 5: 70%
  • Year 6: 60%
  • Year 7: 50%
  • Year 8: 40%
  • Year 9: 25%
  • Year 10: 10%
  • Year 11 and each subsequent year: 20% (per the bill’s stated provision)
  • For vehicles previously registered in Minnesota, the total amount due under this subdivision must not exceed the smallest total amount previously paid or due on the vehicle.

• Adjustments and applicability

  • The tax is subject to adjustments described in other parts of the bill (referred to as adjustments in paragraphs e and f).
  • The new calculation method is intended to apply when determining the registration tax in the scenarios described above and for the specific vehicle types noted.

Significant Changes to Existing Law

• Replaces or supplements the prior method of calculating the motor vehicle registration tax for passenger cars and hearses with a tiered, MSRP-based schedule that decreases the tax as the vehicle ages (capped by the “smallest total previously paid” rule for previously registered vehicles).
• Separates how destination charges are treated based on whether the vehicle was previously registered before a specific date (November 16, 2020).
• Requires the registrar to base the tax on MSRP determined from manufacturer data or recognized sources, with fallback to actual sales price or other sources if MSRP cannot be determined.
• Prohibits counting the cost of optional equipment or accessories toward the tax, aligning the tax base with the vehicle’s MSRP rather than the full sale price including add-ons.

Implementation Details

• Tax calculations must be based on information available at the time of initial registration.
• Determination of MSRP can rely on manufacturer list price data or third-party data; if unavailable, actual sales price can be used.
• The new schedule applies to the defined vehicle types and is subject to existing adjustments in the statute.

Relevant Terms - Passenger automobile - Hearse - Registration tax - MSRP (Manufacturers Suggested Retail Price) - List price - Destination charge - Optional equipment / accessories - United States Code Title 15 Section 1232 (MSRP label reference) - Actual sales price - Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a - Dealer data / dealer information - Deputy registrar - Vehicle lifecycle year (1st year, 2nd year, …, 11th year and beyond) - Cap: smallest total amount previously paid or due on the vehicle - Adjustments (paragraphs e and f)