Road Tax

What is the Road Tax?

A road tax is a form of tax that is levied on all users of federally-operated highway systems in the United Systems. The majority of developed nations place a road tax on an operator of a motor vehicle; typically the road tax is paid on a motor vehicle at the time of purchase or before it used on a public road.

Those countries who levy a road tax will attach different stipulations and intricacies in regards to the collection effort and the percentages which make up the tax itself. In the United States, each individual state will require an annual registration fee for the legal use of roads in the country. The fees attached to the registration are typically built into the price of the automobile; however, each state will implement its own registration fee.

The road tax will vary in regards to the taxation model depending on each state’s interpretation of the tax. For example, in Massachusetts, the registration fees attached to the road tax are billed separately from excise taxes; the governing agency of the town or jurisdiction in which the vehicle is registered is responsible for supplying the driver with a registration fee for the use of public roads. Typically, as is in the case of Massachusetts, the road tax is delivered as a fixed percentage rate (2.5% fixed rate in Massachusetts).

Within other states, the registration fees for the road tax will vary from county to county—some counties implement a surcharge for the use of each vehicle. An example of such a taxation model is seen in the form of Virginia’s personal property tax.

Other forms of road tax will implement a taxation model based on the vehicle being purchased or used. Some states will attach a registration fee based on the purchase price or total value of the automobile. In California, the road tax is calculated based on the current value of the vehicle in question. If the vehicle is old and relatively cheap, the registration tax will be proportionately low, whereas if the vehicle is new and expensive, the registration fee for the road tax will cost a few hundred dollars. In contrast, however, the state of New York, will charge their road tax based on the vehicle’s weight; these forms of road taxes are charged at the time of registration renewal.

Another form of road tax in the United States is the Federal highway use tax. This levy applies to all highway motor vehicles that possess a taxable gross weight of 55,000 pounds or more, including truck tractors, trucks, and buses. This form of taxation does not apply to vehicles that are driven less than 5,000 miles on public highways during a given fiscal year.

NEXT: Sales Tax Rates by Zipcode