HF3397

Purpose

This bill changes how Minnesota calculates the motor vehicle registration tax for passenger automobiles and hearses. It shifts to a depreciation-based system using the vehicle’s value (MSRP) and the vehicle’s age, instead of a single upfront rate. It also updates how MSRP is determined and how the destination charge and other price elements are treated in the tax.

Main Provisions

• Scope

  • Applies to passenger automobiles and hearses.

• Tax base and calculation

  • The registration tax is calculated using a base amount plus a percentage of the manufacturer’s suggested retail price (MSRP) of the vehicle, with adjustments for certain parts of the price.
  • Destination charges are included in the calculation only for vehicles that were first registered in Minnesota before November 16, 2020; for vehicles first registered on or after that date, the destination charge is not included in the tax.

• Determining MSRP

  • The registrar must determine the MSRP using the list price published by the manufacturer or a nationally recognized price source.
  • If the MSRP cannot be determined from those sources, the registrar may use the actual sales price.
  • If the MSRP still cannot be ascertained, the registrar may use any other available source or method.

• Depreciation schedule by vehicle age

  • The tax amount (as a percentage of MSRP) changes based on how old the vehicle is:
  • Year 1: 100% of MSRP
  • Year 2: 95% of MSRP
  • Year 3: 90% of MSRP
  • Year 4: 80% of MSRP
  • Year 5: 70% of MSRP
  • Year 6: 60% of MSRP
  • Year 7: 50% of MSRP
  • Year 8: 40% of MSRP
  • Year 9: 25% of MSRP
  • Year 10: 10% of MSRP
  • Year 11 and each year after: 20% of MSRP

• Cap on total tax

  • The total amount due under this subdivision cannot exceed the smallest total amount previously paid or due on the vehicle, effectively capping how much can be charged over time.

• Existing ownership and prior registration

  • The cap applies to vehicles previously registered in Minnesota, regardless of prior ownership.

• Exclusions and clarifications

  • The tax must not include the cost of accessories or optional equipment separately added to the vehicle.
  • The destination charge is generally excluded (except as noted above for older vehicles).
  • The registrar, dealers, and deputy registrars use information available at the time of initial registration submission to calculate the tax.

Significant Changes to Existing Law

• Replaces a flat or single-rate approach with a depreciation-based registration tax tied to the vehicle’s age and MSRP.
• Introduces a tiered percentage schedule that decreases the tax as the vehicle ages, with a final 11th-year-and-beyond rate of 20% of MSRP.
• Adds a cap so the total tax due on a vehicle cannot exceed the smallest amount previously paid or due.
• Refines how MSRP is determined (official list price sources first, then actual sales price, then other sources if needed) and clarifies the treatment of the destination charge and accessories in the calculation.

Terminology / Key Concepts Mentioned

• registration tax
• passenger automobile
• hearse
• manufacturer’s suggested retail price (MSRP)
• destination charge
• initial registration
• Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a
• registrar
• list price information
• retail price label
• United States Code title 15 section 1232
• actual sales price
• dealer
• deputy registrar
• depreciation schedule
• percentage of MSRP
• cap (smallest total amount previously paid or due)

Relevant Terms - registration tax - passenger automobile - hearse - MSRP (manufacturer’s suggested retail price) - destination charge - initial registration - Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a - registrar - list price information - actual sales price - cap - depreciation schedule - percentage of MSRP - dealer - deputy registrar