Vehicle and Ship Use License Tax
The use tax applies to motor vehicles, trailers, and boat owners who bring, or cause to be brought, vehicles or boats into the country, state, or county for storage, use, or consumption without payment of applicable taxes. The vehicle or boat owners are then liable for the tax. In most places, the use tax is a percentage—typically, 1 to 8 percent—of the price paid for the vehicle or boat.
The tax is also assessed on any vehicles or boats bought in another state (or, in some cases, a foreign country) and brought into the taxing jurisdiction for storage, use, or consumption. However, in most cases, if the vehicle or boat has been purchased in another state and the tax for that purchase is paid, the tax in the second state does not apply.
The use tax helps ensure that revenues from motor vehicle and boat taxes remain within the taxing jurisdiction. This is because buyers of vehicles and boats in other states would not pay motor vehicle or boat taxes or registration fees in the tax jurisdiction, but would enjoy the same privileges and benefits from its infrastructure as those who buy from local businesses and pay appropriate taxes.
In essence, the use tax is an effort to level the playing field, ensuring that anyone who uses a road, bridge, marina, or other infrastructure within a given jurisdiction pays their fair share of taxes that help pay for that infrastructure. The use tax is part of a broader effort to ensure that businesses and individuals pay all applicable taxes, regardless of where they make their initial purchase.
The use tax is typically collected by sellers of used vehicles and boats when they are brought into a jurisdiction by their new owners. The seller is responsible for either collecting the tax or reporting the vehicle or boat to the local taxing authority. Businesses that deal in the sale of new or used motor vehicles or boats must be registered with their local taxing authority in order to properly collect or report use tax.
In addition to taxes, the jurisdiction in which the vehicle or boat is registered typically requires registration of the vehicle or boat and payment of applicable registration fees. Registration is necessary to ensure that the vehicle or boat has all the necessary paperwork, as well as to establish a record of ownership.
When registering a vehicle or boat, the owner must provide proof of payment of the applicable use tax, or, if the vehicle or boat was purchased in another state or country, proof that the original state or foreign taxes have been paid. Purchasers of used vehicles or boats must provide proof of sale and payment of taxes to the local taxing authority.
As noted above, the use tax is charged in order to ensure that everyone enjoys the same privileges and benefits of the local infrastructure while paying their fair share of the associated taxes. It is important that individuals and businesses pay this tax to ensure that the infrastructure remains in good condition and continues to be able to serve all its users.
