In simple terms, an automotive vehicle includes cars, trucks, trailers, semitrailers, mobile homes. It does not include devices moved by human power or used only on stationary rails or tracks. (See the Arvada Municipal Code for more information)
Vehicles purchased by Arvada residents or businesses must be registered at the purchaser’s address in Arvada. Arvada sales tax is due on the net sale price of the vehicle (total sale price less any amount allowed by a licensed dealer for a trade-in). If sales tax was not remitted at the time of sale, Arvada use tax will be due. The County Clerk will collect the tax before or at the time of registration.
The taxable price includes mandatory fees such as “delivery”, “dealer preparation”, or “dealer handling” fees. Optional, extended warranties and gap insurance are not subject to tax. Charges for title and lien recording fees are not taxed, provided they are charged through at actual cost without markup.
Vehicles moved into Arvada are not subject to use tax if:
- the owner was a nonresident at the time of sale
- the vehicle was registered, titled and licensed outside the City
Upon moving to the Arvada, residents must register their vehicle in Arvada.
Vehicles Purchased in Other States
Sales tax may be collected on vehicles purchased in other states, depending upon the state’s tax laws. Credit is allowed for such tax paid in another state, up to the amount of use tax due in Arvada. The credit compares the tax that would have been due had the sale been made locally, to the sales tax collected at the time of sale. Before registering the vehicle with the County Clerk, the buyer must get a letter from Revenue authorizing a tax credit. Or, the purchaser may pay the full City use tax to the County Clerk and file a claim for refund form with the City.
Trade-Ins and Rebates
The taxable sale price is reduced by the fair market value of any automotive vehicle taken in trade by the seller. The trade-in deduction does not change even if the balance of a loan for the trade-in exceeds the fair market value of the vehicle.
Dealer incentives and rebates from the manufacturer do not reduce the taxable sale price. These amounts are portions of the price paid by the manufacturer as opposed actual reductions in the price by the seller.
Vehicles may be financed by the seller, or a third party, under a secured loan. The lender retains a security interest in the vehicle while the loan is repaid. Other finance charges are not subject to tax. The tax itself may be financed and paid over the term of the loan, but the tax is due up-front at the time of the sale. There are no refunds or credits allowed in the event that the vehicle is repossessed.
Vehicles leased by Arvada residents or businesses must be registered at the lessee’s address in Arvada. City sales tax is due on each periodic lease payment. Registering the leased vehicle requires evidence that the lessor is licensed to collect Arvada sales tax.
When sales tax is paid to the County Clerk at the time of registration, the sales tax is calculated by subtracting the value of the vehicle when the lease expires from the cost to the lessor at the time of the lease transaction (capitalized cost). This figure is then multiplied by the applicable sale tax rate. All taxes collected on the lease are based on the lessee’s location (see registrations guidelines) for vehicles when the lease began. If the lessee moves to a different taxing jurisdiction the taxes must change to the new jurisdiction. The “buy out” of a lease is a separate transaction from that of the original lease. It should be taxed at the current tax rate for those jurisdictions where the lessee resides.
If the lease began outside of Arvada and moves to Arvada during the lease period, the vehicle must be registered in Arvada at the time of the move. Arvada sales tax is due on all periodic lease payments after registration.
Vehicles must be registered at the person’s principal or primary home unless the vehicle is always used at another address . The following can determine residency:
- voter registration
- the address listed on the driver’s license
- the address shown on the vehicle insurance policy
- the storage location of the vehicle
- utility billing address
- other public records
Registration requirements for vehicles owned and operated by a business are based on the business address. This is the address where the vehicle is always operated and maintained. The following are used to determine that address:
- the address as shown on the vehicle insurance policy
- the location where the vehicle is kept
- the address used to receive insurance, lease, vehicle maintenance and repair bills
Vehicles Received as a Gift
Vehicles claimed as gifts between family members that are truly gifts without consideration are not subject to the tax. Yet, assumption of a debt (lien) between family members is consideration and subjects the transaction to the Arvada tax. The taxable value of the vehicle would be the debt plus any other consideration given.
The donor and the recipient are family members if one of the following relationships exists:
Gifts to others are still required to pay Arvada tax. The exchange of a vehicle is taxed at fair market value as determined using the Kelly Blue Book average wholesale value. If unrelated parties insist the change of ownership is truly a gift, the new owner may appeal to the Revenue Office for review and evaluation. If the claimed gift is in fact a gift, it is not subject to Arvada tax.
- Donald decides to give his old Buick to his granddaughter. Donald holds free and clear title to the vehicle. He submits a notarized statement to the county declaring the transaction of title to be a gift. The transfer of title and registration to his granddaughter is a tax-free gift.
- Joe, the owner of an RV, was recently laid-off from his job and finds he is unable to make the loan payments. Joe offers to transfer the title to his brother, Harry, if Harry will assume the loan payments. Harry accepts. Because Harry will be making payments, Arvada tax is due on the loan balance.
- Jerry lives in unincorporated Jefferson County and owns a business in Arvada. He purchases a truck for his business and registers it at his personal address. The business is making monthly truck payments, pays for all maintenance, gas and insurance. The vehicle appears on the business depreciation schedule and is being depreciated. Because the truck is operated and maintained by his business, the vehicle is illegally registered. Jerry will pay penalty and interest and the City tax when the City discovers the illegal registration.
- Harvey owns a home in Arvada and a ranch in the mountains. He works in Arvada and votes in Jefferson County. Last month, after purchasing a new car, Harvey paid the Arvada sales tax to the dealer and registered his vehicle in Arvada.
- Harvey also buys a 4-wheel-drive vehicle that is permanently operated and maintained at his ranch in the mountains. This vehicle is registered legally in the mountain county and no sales or use tax is due to Arvada.
- ABC Corporation is an Arvada business which leases 15 vehicles for their sales representatives. Ten of the vehicles are operated and maintained in and around the Denver metro area. These ten vehicles are registered at the Arvada business address. The other five vehicles are operated and maintained out of state, where the sales representatives live. Their permanent location is outside of Arvada. These five vehicles are registered elsewhere and no tax is due to Arvada.
Note: Automotive parts and accessories are taxable when sold and installed in Arvada. The registration location does not matter.
*This information is a summary in layman's terms of the relevant Arvada tax law for this subject, industry, or business segment. It is not intended for legal purposes to be substituted for the full text of the Arvada tax code. However, the tax guide shall be used in conjunction with the Arvada tax code (chapter 98) in determining tax liability.
- by Finance