There are two situations where a customer may pay an in-lieu tax instead of the 6.5 percent sales tax.
$10 In Lieu Tax
When does it apply?
The $10 in lieu tax is charged on passenger vehicles (defined under Minnesota Statutes, 168.011, subd. 7) that meet all of the following criteria:
- Vehicle is in the tenth or subsequent year of vehicle life at the time of sale (e.g., on January 1, 2008, a 1999 or older model year qualifies)
- Purchase price is less than $3,000 - this is the initial purchase price before any credits or trade-in allowance is given.
- Fair market value is less that $3,000
What about trade in allowance?
- If the sale qualifies for the $10 in lieu tax, but the trade-in listed on the title is of equal or greater value, no sales tax is due.
- If the sale qualifies for the $10 in lieu tax, but the trade-in does not reduce the new purchase price to zero, the $10 in lieu tax is due, even if it is greater than 6.5 percent of the net purchase price.
- If the vehicle is valued at $3,000 or more before the trade-in allowance, it does not qualify for the $10 in lieu tax and 6.5 percent sales tax is due on the net purchase price of the vehicle.
How to determine the fair market value:
- Check the price guide links located on ESupport or refer to a nationally recognized price guide book (e.g. Kelly's Blue Book, NADA's Used Car Guide, etc.).
- Unless a vehicle is in need of repair, mileage is the only factor that may affect the value. Normal wear and tear ( worn tires, shocks, etc.) is already taken into account by price guide books when establishing vehicle value.
- Use the lowest value when using these price guide links.
- Call the Public Information Center (PIC) if you need assistance. Be ready to provide:
- Purchase price
- Vehicle year and make
- Vehicle style (2D, 4D, Convertible, etc.)
- Vehicle model (Standard, Deluxe, Master, etc.)
- Motor (V-8, 6, Hemi, 444,427 etc.)
- Condition of the vehicle: Is it running? Are there any missing parts? What is the condition of the body, engine and interior?
Change of Registration Class: If the vehicle registration is changed to one of the collector classes within one year of the date that the transfer was submitted, an additional $140 sales tax is due (see $150 in lieu tax below).
$150 In Lieu Tax
The $150 in lieu tax applies only to passenger vehicles and fire trucks registered in, or converted to one of the collector classes at the time of sale. It does not apply to other types of vehicles registered in the collector classes (e.g., one ton pickups, motorcycles, trucks, etc.)
If, within one year of the transfer, the registration is changed to the passenger class, the in lieu tax no longer applies and the owner may owe additional sales tax if the fair market value of the vehicle is $3,000 or more, since the 6.5 percent sales tax would now apply. Credit the customer with the $150 already paid towards any tax due.
If, within one year of the transfer, the registration is changed from passenger class to collector the customer must pay the $140 difference between the $10 passenger in lieu tax as well as the one-time collector registration tax and the appropriate plate fee.