Legislature House of Representatives House Research Taxes Major State Aids & Taxes
Major State Aids & Taxes: Motor Vehicle Sales Tax
The motor vehicle sales tax is imposed on new and used motor vehicles at the
time of sale. It is imposed in lieu of the general state sales tax on the sale price
of motor vehicles, minus any trade-in allowance. (A flat tax of $10 is imposed
upon most motor vehicles that are ten or more years old in lieu of the motor
vehicle sales tax; the flat tax in lieu is $150 for certain collector vehicles and fire trucks.)
The general sales tax is imposed on the lease of a motor vehicle. Beginning with this update, the motor vehicle
sales tax presented in this report includes the general sales tax collected on motor vehicle leases. (The sales tax on motor vehicle leases is only available on a fiscal year
basis. This report allocates collections in fiscal years using 50 percent of the revenue in each
of the corresponding calendar years.)
The rate of the motor vehicle sales tax is 6.5 percent, which is the rate of the general state sales tax
prior to the 2008 passage of the constitutional amendment that increased the
general sales tax rate to 6.875 percent (with the increase
dedicated to outdoor heritage, clean water, parks and trails, and arts and
cultural heritage). The increase did not apply to the motor vehicle sales tax. The rate of the general sales tax
applied to motor vehicle leases is 6.875 percent.
Motor vehicle sales tax revenue is distributed 60 percent to the Highway User Tax Distribution fund and
40 percent to transit, which is further split 36 percent to Twin Cities metropolitan area transit and 4 percent to
transit in greater Minnesota.
In 2014, the first $32 million collected under the general sales tax on motor vehicle leases went to the general
fund, with the balance distributed between the County State-Aid Highway fund and the greater Minnesota transit account. The
highway aid section includes distributions of the sales tax on motor vehicle leases in the county highway aid category.
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Tax Amount and Reporting
Calendar Year 2014 Motor Vehicle Sales Tax: $746.4 million
The total 2014 motor vehicle sales tax is $746.4 million. The historical table has been adjusted to include the sales
tax on motor vehicle leases for 2010 through 2014. In 2014, the motor vehicle sales tax was $675.3 million, and the general
sales tax on motor vehicle leases was $71.1 million. The Department of Public Safety collects the motor vehicle sales tax.
Due to the method of collection, the amount of actual tax liability from each county is not available. The state total is allocated to counties
based on two equally weighted factors:
- the number of passenger vehicles and pickup trucks registered in
each county, as reported by the Department of Public Safety
- motor vehicle registration tax by county, as estimated by the Department of Public Safety
Vehicle counts served as a proxy for the residence of vehicle owners, who pay the sales tax. Motor vehicle registration tax
estimates serve as a proxy for the value of vehicles purchased.
Motor vehicle sales tax data was obtained from the Department of Transportation.
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Recent Law Changes
At the 2006 general election, the voters approved the
constitutional amendment dedicating all motor vehicle sales tax revenue to
transportation purposes. The constitutional language also requires that "no more than 60
percent" of the revenue go to the Highway User Tax Distribution (HUTD) fund, and
"not less than 40 percent" go to public transit assistance (Minn. Const. art.
XIV, sec. 13). These distribution limits establish a ceiling for
allocation to highways. Within the distribution limits, the Constitution allows
legislation to set the actual division between highways and transit.
2007 legislation established a motor vehicle sales tax phase-in schedule, that occurred over fiscal years 2008 to 2012.
Starting in fiscal year 2012, the revenues will be distributed 60 percent to highways and 40
percent to transit, with the transit portion divided 36 percent for the
metropolitan area and 4 percent for greater Minnesota.
As part of the 2010-2011 budget, the motor vehicle sales tax phase-in
schedule was adjusted to provide additional funds to both Twin Cities metropolitan and
greater Minnesota transit.
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Per Capita Maps
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The Past Five Years of the Motor Vehicle Sales Tax
The table below shows the distribution of motor vehicle sales tax in thousands of
dollars for the past five years for the state and economic development regions.
The graph shows total dollars of motor vehicle sales tax for that same time period in
nominal and constant (inflation-adjusted) dollars.
|Motor Vehicle Sales Tax: Calendar Years 2010 to 2014
|Nominal dollars, in thousands
||5-Yr. Chg. Aid
West Central (4)
East Central (7E)
|Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southeastern MN (10)
Statewide Motor Vehicle Sales Tax
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