SF3923

Purpose

• Update how Minnesota calculates the motor vehicle registration tax for passenger automobiles and hearses, moving to a depreciation-based method tied to the vehicle’s age and original price.

Main Provisions

• Registration tax basis and timing
  • The tax calculation depends on when the vehicle was first registered in Minnesota (before vs. on/after November 16, 2020).
  • The tax uses a percentage of the Manufacturer’s Suggested Retail Price (MSRP) and, in some cases, the destination charge. The calculation excludes the cost of accessories or optional equipment added to the vehicle (and generally excludes the destination charge, except for vehicles first registered before November 16, 2020).
• How the tax is determined (depreciation schedule)
  • In the first year of the vehicle’s life, the tax uses 100% of the MSRP price (as the basis for the tax).
  • Each subsequent year reduces the percentage of the price used to compute the tax: 95% (2nd year), 90% (3rd year), 80% (4th year), 70% (5th year), 60% (6th year), 50% (7th year), 40% (8th year), 25% (9th year), 10% (10th year).
  • For the 11th year and each year after, the tax uses 20% of the price.
• How MSRP is determined
  • The registrar determines the MSRP using the manufacturer’s list price or data from a nationally recognized source. If the list price label is unavailable, the registrar may use the actual sales price. If MSRP cannot be determined by those methods, other sources may be used.
• Caps and constraints
  • The total amount due under this section cannot exceed the smallest total amount previously paid or due for that vehicle, regardless of ownership changes.
• Additional drafting details
  • The regulation references adjustments described in other parts of the statute (paragraphs e and f) and maintains theう relationship to existing provisions for calculating the tax.
  • If the vehicle was previously registered in Minnesota, the rule about the destination charge and the cap applies as described, with exceptions noted in subdivision 23.

Significant Changes to Existing Law

• Replaces a fixed registration tax approach with a depreciation-based schedule tied to the vehicle’s age and MSRP.
• Introduces a tiered percentage scale that reduces the tax substantially over the first decade of a vehicle’s life, with a continued 20% basis in later years.
• Adds specific rules for how MSRP is determined and how the tax base is calculated (including treatment of destination charges and accessories).
• Incorporates a cap to prevent paying more than the smallest amount previously paid on the vehicle.

Administrative and Implementation Notes

• Registration determinations will use information accessible to dealers and deputy registrars at the time of initial registration.
• If MSRP data is unavailable, alternatives include the actual sales price or other credible sources.
• The changes involve amendments to Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a.

Potential Impacts (What this could mean for you)

• For newer vehicles (first year), the tax could be based on a higher percentage of MSRP, but the exact base depends on the date of first registration.
• As vehicles age, the annual tax amount declines following the stated percentages, potentially lowering annual registration costs for older vehicles.
• The cap provision could limit how much one owes over the vehicle’s lifetime registration costs, even if ownership changes.
• The treatment of destination charges and accessories may affect the tax base differently for some vehicles, depending on when they were first registered and how the MSRP is determined.

Relevant Terms - motor vehicle registration tax - passenger automobile - hearse - Manufacturer’s Suggested Retail Price (MSRP) - destination charge - initial registration date - depreciation schedule - year-by-year percentages (100%, 95%, 90%, 80%, 70%, 60%, 50%, 40%, 25%, 10%, and 20% for 11th year and later) - registrar / registrar’s determination - actual sales price - list price information - Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a - adjustments in paragraphs e and f - vehicles previously registered in Minnesota - cap on total amount due - subdivision 23 (referenced exception)