Monday, March 30, 2009

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. Douglas Weber Life memberMarch 31, 2009 at 7:07 AM

    Here's how I pronounce "ad valorem"...HIGHWAY ROBBERY!

  2. I would like OOIDA to also address the new pass through tax many states are adopting now. Why should we pay Corporate income tax to a state just because we roll through that state. Also why should we have to pay them back to the year they implemented the tax. That seems to me it should be illegal. After all they are not the IRS, (which I think should be illegal) but that is another issue. Trucking has gotten to the point that you pay out in taxes more than you are able to save.
    Carol Edwards

  3. Forewarned is forearmed. Thanks. A more pragmatic reason OOIDA does not go to court could be lack of attorney fees being ordered in any award against a state(s). (?)
    Perhaps you could also explore the overweight / oversize enforcement "system" of North Carolina. "Tickets" amounting to $2 to $4,000 are called an 'assessed tax'; Overweignt charged all weight not difference between legal and load weight jacking up "tax"; $ must be paid to move; only one tax judge in the state; NO trucker prevails;
    Lack of means to pay lawyers seems to mean no legal action.
    Bah Humbug

  4. This BS tax has bothered me since it started. I wrote them a comment once asking how many dumb arsses they have to employ to run this part of their tax department. More wasted government employees. Simply add 1 cent to the fuel tax and be done with it...

  5. Many states have the ad valorem or property tax assessed by counties or towns. If this tax theory prevails, what's to stop any county or town you drive thru in those states from charging a driver for the tax they assess on residents then?


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