Tuesday, March 18, 2008

Ad valorem: Latin for ‘in proportion to value’

Can we get a little “Tax Man” Beatles music here?

Three states use a tax to bilk bucks out of trucking companies large and small for running miles in their state. It’s called an ad valorem tax, and it’s a property tax used by Kansas, Arkansas and Kentucky.

What a boneheaded “property” tax. It doesn’t matter if you don’t own property in any of these states. If you have registered a vehicle through the apportioned registration in these states, that’s what matters.

You say, “Wait a minute, I registered in Georgia.” Well, through that registration, you have listed these states on your application. Therefore, you’ve registered your vehicle in these states. And they want you to pay for miles run inside their borders. You don’t even have to do any business or buy any fuel or even stop to pee in these states, but if you drive through, they’ve got you.

If you roll through those states in your truck you will be assessed the ad valorem tax, based on miles you ran through the state in the previous year. They use the depreciated value of your equipment – even your leased equipment – and a percentage of jurisdictional miles from your total fleet miles to determine what the tax is going to be.

A question I hear a lot here at OOIDA is: Why should truckers pay an ad valorem tax to those states? Don’t truckers already pay to run the interstate system?

The answer of course is, yes, trucks already pay plenty to run through these states. Small-business truckers pay through UCR, the IRP, and the IFTA. So the crazy question remains, why do they have to pay to roll through these three states? You are not doing business, not delivering, not picking up. The crazy answer is that you’ve registered your vehicle in this state, and you’ve traveled miles there.

The assessment forms come out in January and February and are due back by the end of March. Look for the actual bill in November.

Even if you ran zero miles in one or more of these three states, no matter, the state will still find your name through the state registration system and send the assessment (they call it a rendition).

And if you ran zero miles there, don’t just think you can drop the assessment in File 13. You must put “zero” and send the form back to the state or, bam, you get billed for the maximum that state’s legislation allows.

Kansas will promptly tag you for $100. If they have reason to believe you have five trucks, it’s $500 bucks. When you get that bill, you have 15 days to protest. Kansas will reevaluate at that point and send you a new bill.

Kentucky no longer sends out an assessment or a bill, but has added a tax on the IRP registration. So it will hit you with the ad valorem tax at time of registration.

Why has no one succeeded in getting this killed via the court system? The reason is probably that when taxes are based on miles traveled in a state, it’s not as clear that they are discriminatory.

Can’t OOIDA make some kind of legal challenge?

That’s not on OOIDA’s radar screen right now. The Association has looked at it in the past, and the opportunity to win was not clear. OOIDA President and CEO Jim Johnston told me about a year ago that does not mean the Association won’t look at it again in the future. If the fee becomes excessive and more states find this a great idea, he told me, revisiting the idea of a legal action is not totally out of the question.


  1. Sandi, Loved the article. I know that Alabama has an Ad valorem tax for businesses do they bill truckers as well? If not what does an OO need to look for the avoid this tax. thanks CK

  2. Going against the grain here, but I like the Ad Valorem tax. Let me explain why. I live in and am registered in Kansas. I run 35% of my miles in Kansas and about 12% in Arkansas. The rest is in state that do not have the ad valorem tax YET. When it is time to pay my property taxes on my equipment I only pay on the miles I actually ran in KS and AR and not 100% to Kansas. Since I only run 35% in KS and 12% in AR, I pay about $1600 to those 2 states. If I were assessed like any other type of property tax and paid 100% in KS and nothing anywhere else I would pay around $4500 total. This is also why I think the other states will eventually pick this tax up and run with it.

  3. Here's a crazy thought that should be the American way, but it's not.
    If we paid no taxes at the pump, but paid quarterly for the miles we drive there, like we already do but skip anything complicated like these ad valorem stupid things, and then let anybody manufacture fuel, get rid of those laws that were unlawfully made that protected the big oil producers, and let us buy fuel from the small independant producers. THAT is free enterprise and what America is supposed to be about.

  4. I wonder given the declining value of everything- real estate, cars, etc. if the government will lower ad valorem taxes

    according to this article
    they are happy to raise your ad valorem taxes but never seem to want to lower them


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