Once the calendar turned over to July 1 this summer, big rigs purchased by Kentucky truck drivers could have an extra fee attached. The result was quite a jolt to many owner-operators’ pocketbooks.

The state’s new budget law, effective the first of July, included a revision to the collection of Kentucky’s motor vehicle usage tax by the state’s Department of Revenue.

The revision was intended to focus on those who fail to register their personal vehicles in the state, but many owner-operators and other truckers were caught in the middle of it.

The motor vehicle usage tax is a tariff on the privilege of traveling Kentucky highways, due at the time of registration.

The usage tax is levied at 6 percent, the same amount collected on the state’s sales tax, and is to be paid on every motor vehicle used in the state. However, vehicles in excess of 44,000 pounds gross weight are exempt from the one-time tax.

Before the new budget rule went into effect, a vehicle owner was only required to title the vehicle in the state, with no taxes due.

In an effort to encourage more titleholders statewide to register their vehicles, the new law, previously HB267, required the sales tax to become due any time a vehicle was titled without also registering it.

That rule took effect July 1.

At that time, if an owner titled their vehicle and paid the 6 percent sales tax, and at a later date registered the vehicle, they would get credit for sales tax paid against the motor vehicle usage tax.

For truckers base plating in Kentucky, the new rule had no effect. They simply continued to title and register their trucks, with no sales tax or motor vehicle usage tax being due because of the exemption allowed.

But for truckers with base plates outside the state, they were forced to pay the sales tax at time of title. Because they too are exempt from the usage tax, they had no opportunity to earn a credit on their payment.

Ainsley Snyder, a section supervisor with the Kentucky Department of Revenue, said once the new rule was implemented the question quickly came up concerning large trucks titled in the state but registered elsewhere.

“Because Kentucky exempts trucks with a gross weight of at least 44,001 lbs. from paying the motor vehicle usage tax, they don’t have the option of getting the credit for making the truck legal to run on the road,” Snyder said.

Shortly after the rule took effect, the Revenue Department became inundated with calls from the trucking industry about how this new tax collection adversely affected owner-operators.

Snyder said truckers understood the advantage of registering the vehicle in the state but because many were leased to an out-of-state company it wasn’t practical for them to register the truck in Kentucky.

“At that point we had to re-evaluate how we were administering it, because all of a sudden one year we exempted all these large trucks and now all of a sudden they owe a sales tax if they are doing a title only,” Snyder told Land Line.

As a result, the agency dropped the requirement that owners of large trucks who only title their vehicle in the state pay a sales tax.

“We have sent out a memo to all our county clerks about how they are to exempt large trucks, and how to go about doing that in the statewide title and registration system we have set up here,” Snyder said.

Fortunately, truckers who were forced to pay the sales tax upon titling their truck can apply for a reimbursement.

Anyone who would like to request a tax refund, should submit a written request to the following:

Division of Sales and Use Taxes
PO Box 181
Station 53
Frankfort, KY 40602-0181

For the department, Snyder said the problem with the new law for owner-operators was simply something that wasn’t envisioned.

“In July, it was really a test to see how smoothly this would run. … We’ve had to review our procedures and tweak things a little bit. You never know what’s going to happen when you implement something this large. Things have to be reevaluated, and rightly so,” she said.

Snyder was apologetic about the confusion the rule created for truckers.

“We’re taking the position of when we implemented this we were administering it incorrectly. It was never our intention to start taxing all these large trucks,” she said.

– By Keith Goble, state legislative editor
keith_goble@landlinemag.com