Kentucky Tax Information

Usage Tax

Usage Tax-A six percent (6%) motor vehicle usage tax is levied upon the “retail price” of vehicles transferred in Kentucky. “Retail Tax” could be 6% of the current average retail listed in the NADA Used Car Guide, 6% of the sale price or 90% of the MSRP (Manufacturer’s Suggested Retail Price) for new vehicles. On used vehicles, the usage tax is 6% of the current average retail listed in the NADA Used Car Guide or 6% of the sale price. The sale price is the total amount given for the vehicle minus any trade-in allowance, if applicable. The customer will only be taxed on the sale price of the vehicle if they have the Application for Title/Registration (Form # TC96-182) completed. The form must be signed by all sellers and buyers and their signatures’ notarized. Note-Penalty provisions for any person who willfully and fraudulently gives a false statement as to the sale price of a motor vehicle shall be guilty of a Class D felony and shall be fined no less than $2,000 per offense. Trade-in allowance applies to used vehicles only and the vehicle that is traded must be previously registered in Kentucky. New vehicles will be taxed on the sale price or the MSRP of the vehicle. A vehicle that is a “gift” will require the Application for Title/Registration (Form # TC96-182) completed. All sellers and buyers must sign the form and their signatures’ notarized. Vehicles that are received as gifts will be taxed on the trade-in value of the vehicle. A new law passed January 1st, 2007 known as 50% Floor will require the buyer to pay no less than 50% of the trade-in value on any vehicle purchased (excluding vehicles 20 years or older, recreational vehicles, motorcycles and any vehicles branded rebuilt). If the sale price of the vehicle is less than 50% of the trade-in value, the vehicle will be taxed on 50% of the trade-in value. If trading vehicles as an even trade, vehicles will be taxed on the difference of the retail values. If trading vehicles that list values on the Affidavit of Total Consideration Given, vehicles are taxed on trade-in values. See below for examples of 50% Floor.

Examples

The 50% Floor would apply to the following example:

Affidavit
NADA-(50% of Trade Value)
Vehicle  3500.00
 3700.00
Less Trade-in -3200.00
-2450.00
   300.00
 1250.00

The column showing the affidavit prices show that the buyer would be taxed on $300.00, which is the difference between the sale price and their trade-in. However, based on 50% Floor the buyer would be taxed on $1,250.00. The 50% Floor Law would override the affidavit price. The buyer would be taxed 6% of 1,250.00.

Affidavit
NADA-(50% of Trade Value)
Vehicle
5500.00
8500.00

This is another example of where 50% Floor Law would override the affidavit price. The customer would be taxed on $8500.00 since the affidavit price is lower than half of the trade-in value.

NOTE-Vehicles that are 20 years or older, motorcycles, recreational vehicles, boats, trailers and all salvage/rebuilt vehicles will not be subject to the 50% Floor Law.

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New Resident Usage Tax

In the case of vehicles brought into Kentucky by new residents, the taxable value is the average trade-in value as listed in the NADA Official Used Car Guide. New residents will be given credit for the percentage of tax that was paid to the state they have moved from. Contact County Clerk for details.

Usage Tax Exemptions

There are several usage tax exemptions allowed on the following types of Kentucky transfers:

  • Charitable/Education Organization
  • Corporation/Proprietorship (LLC)*
  • Corporation/Subsidiary (LLC)*
  • Court Order/Will*
  • Dealer Registration
  • Grandparent/Grandchild*
  • Husband/Wife*
  • Local Government
  • Military Exempt*
  • Name Change*
  • Parent/Child*
  • Repossession*
  • State Government
  • Stepparent/Stepchild*
  • US Government

*Documentation must be provided. For family exemptions complete Motor Vehicle Usage Tax Multi-Purpose Form (71A101). All other exemptions requiring documentation please contact County Clerk for details.

NOTE-Some exemptions are not allowed on out-of-state transfers. Contact your county clerk for details.

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Use Tax

Passed in the 2006 session and to be implemented on July 23, 2007, clerks will begin collecting a new type of tax, Use Tax. Use tax is collected on travel and camping trailers, manufactured homes (tangible property sold by dealer, not real property), boats, ATVs, UTVs, personal watercraft and other off road vehicles purchased from out-of-state then titled or registered in Kentucky. All tangible property requires Out-of-State Purchase Use Tax Affidavit (Form # 51A280) to be completed and signed by the buyer for the use tax collection. Exemptions also require the form and may require further documentation. See exemptions below.

Use Tax Exemptions-For all tangible property listed above

  • Purchase for Resale - Must have completed form 51A105
  • Purchase Exemption - Must have completed form 51A126
  • Out-of-State Credit for KY Use Tax - Must have proof of out-of-state tax paid
  • In State Credit on KY Use Tax - Must have proof of KY Tax paid

Use Tax Exemptions-excluding boats

  • Agriculture Exemption - Must have completed form 51A158
  • 5th Wheel Exemption - Per KRS 139.470(22)**

** 5TH Wheels are described as any trailer that is pulled by a motor truck or tractor truck that carries merchandise or freight exceeding 1,000 lbs. (ex. Gooseneck or Semi Trailers-any trailer that hooks into the bed of a motor truck or the wheel platform of a tractor truck.)

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Sales Tax

Sales tax is collected on Title Only Transfers for motorized vehicles that will never be used on Kentucky roads. The county clerk’s office will charge a 6 % sales tax based on the sale price located on the Affidavit of NonHighway Use (NHU Form # 72A007). An Affidavit of NonHighway Use (NHU Form # 72A007) must be completed and signed by buyer certifying vehicle will never be used on Kentucky highway. Buyer’s signature must be notarized. Proof of sale price is required. This form does not apply to any type of trailer (only applicable for motorized vehicles). All information submitted on the Affidavit of NonHighway Use will be verified by the Department of Revenue. If registrants claim an exemption they are not eligible for, they will be billed by the Department of Revenue.

Sales Tax Exemptions

  • Occasional Sale - Purchase from individual/non-retail business
  • Resale Certificate - Must have completed form 51A105
  • Purchase Exemption Certificate - Must have completed form 51A126
  • Apportioned Vehicles - Must know weight
  • Vehicles over 44,0001 lbs - Must know weight
  • Out-of-State Credit for KY Use Tax - Must have proof of out-of-state tax paid
  • In State Credit on KY Use Tax - Must have proof of KY Tax paid

NOTE-Buyers have been billed for stating exemptions that were not valid. If buyer purchases the vehicle from a retailer or individual/entity that is in the business of selling vehicles, buyer cannot claim Occasional Sale exemption. If documentation is not presented to the clerk and an exemption is claimed, buyer will be billed. If the Affidavit of NonHighway Use (NHU Form # 72A007) is not completed and filled out accurately the buyer will be billed.

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Property/Ad Valorem Tax

Every individual who owns a vehicle as of January 1st of each year is responsible for the tax for that year. If at the time of transfer, property tax has not been paid, the seller will be responsible for the tax. If the seller is not present and property tax is delinquent, the buyer would have to pay the property tax to complete the transfer process. To avoid any possible delinquencies, it is recommended that the seller pay property tax at the time of transfer or before. If not, the seller will be sent notification by the Kentucky Revenue Cabinet of the tax due and that tax must be paid within sixty days from the date of transfer. The notification does not relinquish responsibility to pay property tax timely.

Some motor vehicle tax notices may state SEE PVA instead of showing a tax amount. This may be due to incorrect or missing information. Contact your local Property Valuation Office for correction.

Property taxes that have become delinquent will have the following charges applied: $2.00 lien fee; 3% penalty first 30 days; 10% penalty after 30 days; 15% per annum interest. These charges are computed daily, therefore all delinquent taxes must be paid in person to the county clerk.