OKLAHOMA CITY – Although vehicle tax is certainly not a new subject in the state Legislature, a recent interim study focused on the “criteria” used by state statutes to determine the retail value of vehicles for tax purposes.
Rep. Jim Grego (R-Wilburton) brought the topic before the House Appropriations & Budget Subcommittee on General Government last month at the State Capitol. He said in a legislative press release that the issue was brought to his attention by a neighbor.
“He bought a truck, and there was fluctuation between what he paid and what the value of the vehicle was determined to be. So, my goal is to look at this issue and see if we can make some changes in the system to make this more fair for consumers who purchase vehicles.”
Grego’s neighbor, Joe Mack McAlester of Wilburton, was given an opportunity to outline his experience before the government subcommittee. He said he bought a used truck at an auction for a price that was well under the Kelley Blue Book value. He planned to use the vehicle on his farm, so he wasn’t concerned that it wasn’t in perfect condition.
However, when McAlester went to get his tag and title, he said he was charged excise tax based on the full book value of the vehicle without consideration for the vehicle’s condition. His argument was he should only have been charged based on what he paid – how sales tax is calculated on other purchases – instead of the higher value, which increased the charge by several hundred dollars.
McAlester said he’s discussed his experience with neighbors who have also had similar situations. Grego believes this issue affects numerous people in the state, particularly farmers and ranchers who tend to buy older vehicles to use for work. What is the criteria?
The Oklahoma Tax Commission was created in 1931, and is responsible for administrating and collecting taxes, licenses and fees that impact Oklahomans.
Chapter 60 of OTC’s portion of the Oklahoma Administrative Code, 710:60-1 through 710:60-9, includes more than 100 pages devoted to statutes governing motor vehicles.
Millions of dollars ride on motor vehicle taxes, according to the recent September 2024 Gross Receipts to the Treasury Report by Oklahoma State Treasurer Todd Russ. Motor vehicle tax of $912.1 million is up $35.8 million, or $4.1%, over last year. The pie chart published with the report broke down the top seven revenue sources for the state and Motor Vehicle Tax represented a 5% slice, tied with Corporate Income for seventh place.
A condensed explanation of vehicle tax evaluation, provided by the Oklahoma Policy Institute, states that Oklahoma levies two taxes on motor vehicles. There are selective sales taxes on the purchase of vehicles and ongoing taxes on wealth, the value of the vehicles. OPI notes that this is the largest of Oklahoma’s selective sales taxes in terms of revenue generated. As of July 1, 2017, the state charges a 1.25% sales tax on vehicle purchases in addition to motor vehicle taxes.
Taxpayers pay an excise tax of 3.25% of the price when they buy a new vehicle and a lower tax rate on used vehicles (depending on the sales price). Grego said in the legislative press release that the methodology used to calculate excise tax was “largely” inherited from the OTC. However, lenders explained that loan risk factors based on credit history, collateral values and other “things,” which weren't detailed, all play a role in determining a vehicle’s value. The lenders also said they rely on industry standards, such as those set by the National Automobile Dealers Association.
According to the press release, representatives from Service Oklahoma and Tinker Federal Credit Union also made presentations during the interim study. Both entities shared their methodology for determining a vehicle’s value and how the state assesses taxes.
Rep. Mike Dobrinski (R-Okeene) also participated in the study, giving insight as a former automobile dealership owner. He said he's willing to help Grego draft legislation that might help Oklahoma vehicle buyers pay less tax.