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Legislature > House of Representatives > House Research > Taxes > Major State Aids & Taxes

Major State Aids & Taxes: Motor Vehicle Sales Tax

Program Description

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

2005 Laws:

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 Laws:

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.

2009 Laws:

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

Map of motor vehicle sales tax per capita by countyMap of motor vehicle sales tax per capita by economic development region

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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
2010 2011 2012 2013 2014 5-Yr. Chg. Aid
State $503,603 $584,945 $633,692 $684,153 $746,370 48%

Northern Regions
Northwest (1)
Headwaters (2)
Arrowhead (3)
West Central (4)
Five (5)
East Central (7E)
9,327
7,325
31,385
22,099
16,340
16,094
10,812
8,475
36,136
25,626
18,840
18,527
11,797
9,156
38,965
27,777
20,244
19,922
12,735
9,881
41,718
29,980
21,729
21,417
13,719
10,728
45,328
32,515
23,687
23,422
47
46
44
47
45
46

Southern Regions
Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southwest (8)
Nine (9)
Southeastern MN (10)
12,045
5,172
38,007
12,801
23,035
47,507
13,967
5,997
44,329
14,942
26,667
54,974
15,123
6,529
48,199
16,167
28,784
59,363
16,315
6,967
52,556
17,437
30,702
63,853
17,685
7,417
57,598
18,735
33,183
69,051
47
43
52
46
44
45
Total Nonmetro $241,137 $279,292 $302,027 $325,290 $353,068 46%

Metro Region
Hennepin County
Ramsey County
Remaining Metro
105,251
42,781
114,435
122,672
49,181
133,800
133,307
52,760
145,599
144,311
56,849
157,704
158,434
62,175
172,693
51
45
51
Total Metro $262,466 $305,653 $331,666 $358,864 $393,301 50%

Statewide Motor Vehicle Sales Tax

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December 2017

House Research Department  ♦  600 State Office Building, Saint Paul, MN  55155  ♦  House.Research@house.mn  ♦  651-296-6753