Vehicle Licensing Guide

Motor Vehicle Sales And Use Tax
VLIC-A-4

Original Date: 08/01/1977
Revision Date: 02/25/2011

PURPOSE:

To provide information and instructions on Motor Vehicle Sales and Use Tax (SUT). The following topics are covered:

1. Levy of SUT
2. SUT exemptions
3. Credit of SUT paid in other states
4. SUT refunds

BACKGROUND:

Unless exempted, Virginia levies a 3% tax on the Sale and Use of Non-Rental Motor Vehicles, if the motor vehicle is required to be registered (whether it is actually registered or not).

SUT is collected at the time of titling whenever a vehicle is sold and/or ownership to the motor vehicle changes.

1. LEVY OF SALES AND USE TAX

   The collection of SUT is based on Code of Virginia §58.1-2400 et. seq. In the case of the sale of a motor vehicle, the tax is based on the total price of the vehicle. The total price is the sale price of the vehicle and dealer processing fee, if applicable. (See DETERMINING THE SALE PRICE below.)

   TAX RATE:
   
   The tax rate for the motor vehicle/manufactured home SUT is 3% of the gross sales price with a $35.00 minimum tax.

   If a vehicle is rented for twelve or more months, the vehicle is considered to be a leased vehicle and the owner (lessor) will be taxed based on the sale price of the vehicle.

   NOTE 1: The lessor (the one who leases a vehicle to another person) is the owner of the motor vehicle and is responsible for the SUT. However, the lease contract may state that the payment of the owner's SUT is to be paid by the lessee (the one to whom the vehicle is leased). This is a contractual arrangement between the lessor and lessee. No additional SUT is due from an INDIVIDUAL (NOT a commercial firm, company, agency, corporation, trust or limited liability company (L.L.C.) if:
   
   

   • the lessee subsequently purchases the vehicle from the lessor or dealer who originally leased the vehicle,
   • the same individual is on both the lease and to be on the title,
   AND
   • the individual presents an original copy of the lease agreement or other evidence that he paid SUT to the Commonwealth.

   NOTE 2: If a leasing company and a dealer are handling a vehicle transaction for the "leasing company" they are both defined as the "lessor". Therefore, if the leased vehicle has been assigned to the lessee, the lessee must provide an original copy of the lease agreement or other evidence showing the assigned dealer's name as the lessor. The lessee must also provide evidence that he paid SUT upon initial titling of the vehicle in the lessor's name in order to be exempt from SUT. If the reassigning dealer's name on the title is not the same as the name of the lessor on the lease agreement, the SUT exemption does not apply. SUT exemptions are for individuals only, NOT businesses.

   The tax rate for mobile offices is 2% of the sale price.

   The tax rate for a clean fuel vehicle (fueled by natural gas, liquefied natural or petroleum gas (LNG or LPG), hydrogen or electricity) is 3% of the vehicle's sale price.

   DETERMINING THE SALE PRICE:
   
   The sale price shall include any reduction in price shown on the invoice for a manufacturer's discount or dealer's price discount since they directly reduce the sale price from the dealer to the consumer. SUT should not be collected on these price reductions or discounts.

   The sale price shall not include any credit given by the dealer for a trade-in, rebate, unpaid lien or other unpaid claim against the vehicle. SUT should be collected on these credits.

   When a new owner assumes the payments on a debt obligation of the prior owner, SUT is assessed based on the unpaid balance of the debt plus any payment made to the prior owner.

   If the vehicle was purchased through a CASUAL SALE (does not include vehicles purchased through a dealer), provide source of ownership document.

   For a transaction between private individuals or non-dealer business (CASUAL SALE), the minimum SUT is calculated based on the trade-in value given in the "NADA Official Used Car Guide" UNLESS the customer presents EITHER:
   
   

   • "Affidavit for Procurement of Title" (SUT-1A) if the vehicle is 5 YEARS OLD OR NEWER
   OR
   • "Vehicle Price Certification" (Bill of Sale) (SUT-1) if the vehicle is MORE THAN 5 YEARS OLD.
     
     NOTE: The sale price placed on a title certificate by the seller is the equivalent of a BOS.

   NOTE 1: If the sale price seems unreasonable compared to the "Trade-In Value" on the NADA On-Line Valuation Guide, refer to VLIC-144, Sales and Use Tax on Low Sale Price Vehicles.

   NOTE 2: Customers may be exempt from SUT (Refer to Section 2 below) or they may receive credit for SUT paid to another state (Refer to Section 3 below).

   NOTE 3: Customer may provide one of the following acceptable documents as proof of payment of SUT to another state (All documents provided must have VIN displayed):

   • Bill of Sale showing payment to another state
   • Buyer's Order
   • Receipt for sales and use tax paid
   • Letter from DMV(out of state) or Tax Collection agency on letterhead indicating the amount of sales and use tax paid to that state
   • Lease Agreement indicating sales tax payments

2. SUT EXEMPTIONS

   Certain titling transactions are exempt from the SUT. These exemptions are listed in §58.1-2403.

   If a customer is exempt from the SUT, he may be required to present documentation or complete the "Purchaser's Statement of Tax Exemption" (SUT3) for proof of exemption if:

   • SUT Guideline Chart that follows indicates a requirement,
   • Customer is unsure of their exemption and needs to certify their exemption status,
   OR
   • Customer Service provider can not determine if customer is exempt.

   The CSR notes the reason for exemption on the back of the title or on the "Application for Certificate of Title and Registration" (VSA-17A).

   The SUT Guidelines Chart at the end of this VLIC provides general guidelines on whether transactions require payment of SUT. This chart is not all-inclusive. In cases where the exemption of SUT is questionable, the transaction must conform to one of the exemption categories under §58.1-2403. If the transaction does not conform to one of these exemption categories, SUT is due. If exemption is determined, use the appropriate exemption code listed in the chart to process the transaction. DO NOT USE A CODE THAT DOES NOT APPLY.

   NOTE 1: There is no longer a MISCELLANEOUS reason for exemption. All exemptions must be specifically identified.

   NOTE 2: If a customer feels that he is exempt from SUT but the transaction does not conform to one of the exemptions listed under §58.1-2403, the customer shall pay the SUT. Inform the customer that he has the option of applying for a refund (Refer to section #4 below).

   NOTE 3: If a person or organization is exempt from the Retail Sales and Use Tax based on §58.1-600 et. seq., he is not exempt from the Motor Vehicle SUT unless he also meets one of the exemptions listed in §58.1-2403.

   NOTE 4: If customer's out-of-state title does not include a purchase date, use date indicated on VSA17A as the purchase date.

   NOTE 5: If customer's title and bill of sale have different purchase dates, use purchase date on the bill of sale.

3. CREDIT FOR SUT PAID IN OTHER STATES
   
   The customer is EXEMPT from SUT if the vehicle is being registered for the first time in Virginia and the customer holds a valid, assignable title or registration from another state or a branch of the United States Armed Forces and:
   • has owned the vehicle for more than twelve months
   OR
   • has owned the vehicle for less than twelve months AND provides evidence of a sales tax paid to another state.
     
     NOTE 1: When a vehicle has been purchased by the customer within the last twelve months and the customer is unable to provide evidence of sales tax paid to another state, he must pay the Virginia sales tax based on the NADA trade-in value of the vehicle at the time of registration in Virginia. Reference §58.1-2403 (10).
     
     NOTE 2: If sales and use tax (SUT) is collected by an out of state dealer at the time of vehicle purchase, and the customer did not title the vehicle in the state of purchase, as long as the customer provides a buyer's order showing the SUT collected by the dealer, or a letter on DMV letterhead from the state where the vehicle was purchased showing the amount of SUT paid, the customer only pays the difference between the two states' SUT.
     
     EXAMPLE: A customer comes into Virginia to title a vehicle that has not been titled or registered in any other state and has the buyer's order showing proof the SUT was collected in the purchasing state. Since the tax collected by the dealer was $1,200.00 and the tax in Virginia would have been $1,500.00, the customer would pay the difference of $300.00.
     
     NOTE 3: : The purchase date on the title or VSA17A and the current date will determine the length of time the customer has owned the vehicle. If the title does not have a purchase date, use the date indicated on VSA17A as the purchase date.
4. SUT REFUNDS
   
   If a customer believes he is due an SUT refund, provide him with the "Application for Refund of Sales and Use Tax" (SUT2) and inform him of the requirements for applying for the refund. The customer may mail his request or take it to a CSC. The customer or the CSC should mail it to:
   
   Virginia DMV
   PO Box 27412
   Attn: Titles and Registration Work Center
   Richmond, VA 23269

   NOTE: DO NOT process this request in the CSC, ALL requests must be forwarded to headquarters for processing.

   The customer must submit,

   • The completed SUT 2.
   • All supporting documentation.
     • If the customer is requesting a refund based on an incorrect sales price, the customer must attach proof that he paid a lower sales price.
     • If the customer is requesting a refund because SUT was paid in another state, he must attach written evidence from the selling dealer or the state of payment that the tax was paid prior to the vehicle being titled in Virginia, as well as proof of titling and registration there.
     • If the customer is requesting a refund under the Virginia Motor Vehicle Warranty Enforcement Act (VMVWEA), also known as the Virginia "Lemon Law". The customer must attach a written statement from the manufacturer or distributor that the vehicle was "returned under the VMVWEA". It can not say "or other exchange form".
     • Dealers, in addition to the above documentation must also attach a statement or receipt signed by the customer that they have already refunded the SUT to the customer and indicate whether they are a franchised or non-franchised dealer.
     • The Virginia title certificate to be corrected.

   NOTE 1: No photocopies are accepted, the customer must submit the original SUT 2 and documentation. However, the customer can maintain photocopies for their personal records.

   Advise the customer that their request will be reviewed and, if approved, a refund will be mailed to them within 6-8 weeks. If not approved, all documentation that was originally submitted and an explanation of why their request is being denied will be mailed to them.

   The CSC should mail the completed SUT 2 and all supporting documentation to: Titles and Registration Work Center
   Room 320

   All documentation submitted for this request will be microfilmed.

   NOTE 2: Customer may provide one of the following acceptable documents as proof of payment of SUT to another state (All documents provided must have VIN displayed):

   • Bill of Sale showing payment to another state
   • Buyer's Order
   • Receipt for sales and use tax paid
   • Letter from DMV (out of state) or Tax Collection agency on letterhead indicating the amount of sales and use tax paid to that state
   • Lease Agreement indicating sales tax payments

CUSTOMER REQUIREMENTS:

Submit the following:

• Completed Application for Title (VSA-17A).
  
  • If titling a manufactured home, the customer must complete the VSA-17B.
• Completed Bill of Sale, if required to document sale price.


<<<<<REVISION
• Evidence of exemption (if applicable).
  • The SUT3 must be signed and notarized.  END REVISION>>>>>

DMV SERVICE PROVIDER'S PROCESS:

1. Title vehicle according to VLIC-102.
2. Collect the appropriate fees:
   
   • Titling Fees
   • Appropriate SUT
   • Appropriate Registration Fees
3. Process according to data entry procedures.
4. Send all SUT forms and copies of the customer's documents back with the daily work for document preparation for sending to Document Imaging according to VLIC-75.

REFERENCE:

• Code of Virginia: §58.1-2400 through §58.1-2405
• Data Entry: CSC Net
• Refer to the SUT Guidelines Chart that follows

CONTACT:

• Your CSC Manager/Assistant Manager
• DMV DIRECT Help Desk at (804) 367-6646

PROCEDURE PROPONENT:

VSA/Titles and Registration Division