Tax Type
Taxes of Other Agencies
Description
Application of Rate Increase to Vehicle Purchased Out-of-State
Topic
Computation of Tax
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
03-10-1987
[Opinion - Virginia Attorney General: 1987 at 336]
REQUEST BY: Honorable Virgil H. Goode, Jr. Member, Senate of Virginia
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask whether the increased motor vehicle sales and use tax rate adopted by the 1986 Special Session of the General Assembly is applicable to a motor vehicle purchased in North Carolina prior to January 1, 1987, but titled in Virginia subsequent to that date.
I. Applicable Statutes
Chapter 11, 1986 Va. Acts 24, 29 (Spec. Sess.) amended § 58.1-2402 of the Code of Virginia, effective January 1, 1987, to increase the rate of tax levied on the sale or use of a motor vehicle in Virginia from two percent to three percent of the sale price. As amended, § 58.1-2402(A) provides, in pertinent part, as follows:
There is hereby levied, in addition to all other taxes and fees of every kind now imposed by law, a tax upon the sale or use of motor vehicles in Virginia, other than a sale to or use by a person for rental as an established business or part of an established business or incidental or germane to such business.
The amount of tax to be collected shall be determined by the Commissioner by the application of the following rate against the gross sales price . . .:
1. Three percent of the sale price of each motor vehicle sold in Virginia. . . .
2. Three percent of the sale price of each motor vehicle . . . not sold in Virginia but used or stored for use in this Commonwealth. When any such motor vehicle . . . is first used or stored for use in Virginia six months or more after its acquisition, the tax shall be based on its current market value.
Although § 58.1-2402 provides that the tax is levied on the sale or use of motor vehicles in Virginia, the tax is not actually imposed until the motor vehicle is titled in Virginia. § 58.1-2404 provides, in pertinent part, that
[t]he tax on the sale or use of a motor vehicle shall be paid by the purchaser or user of such motor vehicle and collected by the Commissioner at the time the owner applies to the Division of Motor Vehicles for, and obtains, a certificate of title. . . . No tax shall be levied or collected under this chapter upon the sale or use of a motor vehicle for which no certificate of title is required by this Commonwealth. [Emphasis added.]
II. Motor Vehicle Sales and Use Tax Imposed at Time of Titling, Not Purchase
Unlike the retail sales and use tax1 and the motor vehicle sales tax imposed by other states, the Virginia motor vehicle sales and use tax is not imposed until the vehicle is titled in Virginia.2 The Virginia motor vehicle sales and use tax is collected directly from the purchaser or user of the vehicle by the Commissioner of the Department of Motor Vehicles, and not by motor vehicle dealers as it is in other states.3 A motor vehicle purchased by a Virginia resident from a North Carolina motor vehicle dealer, for example, is subject to the North Carolina sales and use tax because that tax is imposed and collected by motor vehicle dealers at the time the vehicle is sold.4 North Carolina Gen. Stat. § 105-164.4 (1985). In contrast, a motor vehicle purchased in Virginia by a North Carolina resident normally will not be subject to the Virginia motor vehicle sales and use tax because the vehicle will be titled in North Carolina and not in Virginia.
III. Conclusion: Increased Motor Vehicle Sales and Use Tax Rate Applies
As discussed above, the Virginia motor vehicle sales and use tax is actually imposed at the time the motor vehicle is titled. It is my opinion, therefore, that the tax should be imposed at the rate in effect at that time, and not at the rate in effect when the vehicle was actually purchased.
1 Section 58.1-600 et seq.
2 Although it is denominated a sales and use tax in the Code, the motor vehicle sales and use tax is commonly referred to as the "titling tax" in Virginia.
3 The motor vehicle sales and use tax in North Carolina, like the retail sales and use tax both in North Carolina and Virginia, is actually a license or business privilege tax on the seller. See N.C. Gen. Stat. § 105-164.4 (1985) and Va. Code § 58.1-603. In contrast, the Virginia motor vehicle sales and use tax is clearly a tax on the purchaser or user, not on the seller.
4 When the Virginia resident titles the motor vehicle in Virginia, a credit will be given on the Virginia sales and use tax for the amount of the tax paid in the state in which the vehicle was purchased. § 58.1-2424.
Attorney General's Opinion