HF4795

Purpose

• To change how the motor vehicle registration tax is calculated for passenger automobiles and hearses in Minnesota. The bill shifts to a depreciation-style tax base that uses a percentage of the vehicle’s Manufacturer’s Suggested Retail Price (MSRP) and applies a yearly schedule over the vehicle’s life. It also clarifies how MSRP is determined, what counts as the tax base (and what does not), and adds a cap on the total tax for vehicles that were already registered in Minnesota.

Scope and Covered Vehicles

• Applies to passenger automobiles and hearses.

How the Tax Is Calculated (Main Provisions)

• Tax base: The registration tax is calculated as a percentage of the vehicle’s MSRP, with special rules about how the MSRP is determined.
• Two initial-rate determinations: The rate depends on when the vehicle was first registered in Minnesota (before or after November 16, 2020). The exact percentage structure references the MSRP and, for some cases, the destination charge, subject to adjustments.
• Exclusions: The calculation must not include the cost of optional equipment or accessories separately added to the vehicle. The destination charge is generally not included, except for vehicles first registered before November 16, 2020.
• Determination of MSRP: The registrar uses the MSRP based on the manufacturer’s list price or data from nationally recognized sources. If those aren’t available, the registrar may use the actual sales price or other reasonable sources.
• Depreciation-style year-by-year rates (tax base as a percent of MSRP):
  • Year 1: 100% of the price
  • 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 year after: 20%
• Cap on total tax: For any vehicle that has been previously registered in Minnesota, the total amount due under this tax may not exceed the smallest total amount that was previously paid or due on that vehicle, regardless of ownership changes.

Administrative Details and Practical Effects

• The registrar and deputy registrars determine the appropriate MSRP and collect the tax according to the schedule above.
• The rule about excluding accessories aims to prevent charging tax on added features separately.
• The cap provides an ultimate floor for how much tax can be charged over the vehicle’s life, protecting owners from very high long-term taxes on older vehicles.

Significant Changes Compared to Current Law

• Shifts registration tax from a potentially flat or simpler structure to a depreciation-style, year-by-year percentage of MSRP.
• Establishes distinct rules based on when the vehicle was first registered (pre- vs. post- Nov 16, 2020).
• Explicitly ties the tax to MSRP and a limited set of price sources (manufacturer data, recognized data sources, or actual sales price if needed) rather than other potentially variable factors.
• Introduces a cap on the total tax for vehicles with prior Minnesota registrations to prevent excessive charges over time.
• Clarifies treatment of destination charges and excludes the cost of accessories from the tax base.

Relevant Terms - registration tax - passenger automobile - hearse - MSRP (manufacturers suggested retail price) - destination charge - list price - actual sales price - United States Code Title 15 Section 1232 (as a price source reference) - initial registration date (before/after November 16, 2020) - Minnesota Statutes - depreciation-style tax schedule - price determination - optional equipment / accessories - cap on total tax - registrar / deputy registrar