H.B. 107 Vehicle Sales Tax Amendments

What this bill does

The latest version of HB 107 would create a late fee for vehicle registrations paid after the deadline and deposit that money into a restricted account. The account would fund a non-refundable income tax credit tied to vehicle sales tax, with a yearly cap set by dividing the fund among the prior year's applicants.

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Hearings and debates

• Jan 26, 2026 House Revenue and Taxation Committee▶ Watch
  Transcript (32 turns)

  1. Committee chair1:07:41

     I think I saw Oh, he did? Yes. Representative Teuscher is here. We are looking at now. Um, item number three from the agenda. This is the House Bill 1 0 7, and I believe we're going to be looking at second substitute. And correct me if I'm wrong, we're not necessarily asking for any action, correct? We're just gonna be discussing, correct. Okay. Yes.

  2. Rep. Jordan D. Teuscher1:08:04

     Yep. That's right. Mr. Chair. Thank you, uh, members of the committee for giving me some time today. And, uh, I do have a flyer, if that's okay, Mr. Chair, to hand out to the members of the committee. Yeah. Is that okay? Yeah, will do. Yep. Thank you. All right. And, uh, as the good chair, uh, mentioned, um, uh, because there was a substitute that just came online a few minutes ago, it, uh, it moves in a little bit different direction from sub one, and I want to explain that. And so I, in, in an effort to try to have the work done in committee and work through it and make sure that you're all comfortable with the approach, um, I'm not asking for you to take any, um, action on the bill today. And I would hope to come in in your next agenda. And then if there's any concerns resolved, those there might have to be, 'cause I, I think the tax commission hasn't had a chance to fully see sub two. So they might have a couple tweaks they're looking for, but have that all done in committee so it's ready to go to the floor, assuming the committee, uh, likes the approach. And if you don't like the approach, then, then we have a good chance to discuss it today. But, um, I think all of you are familiar with kind of the underlying concept of, uh, HB 1 0 7. Um, that was a bill that, uh, was presented in this committee, received, uh, unanimous support, uh, had unanimous support in both the house chamber and then in the Senate committee. Um, unfortunately, it carries with a, a large fiscal note and, uh, just to remind everyone what, uh, that problem was trying to solve. And that is, um, a lot of you are familiar, if you were to go to a dealership and purchase a new vehicle and also trade in a vehicle at the same time, then they deduct the trade-in from the overall purchase price. And you only pay sales tax on the net difference between the two. So if you, uh, purchase a $20,000 car, uh, trade in a $10,000 car, you only pay sales tax on $10,000, which seems fairly fair. Now, if I do the exact same thing in a private transaction, um, I sell, I buy a new car for $20,000. I sell a car for $10,000, I owe sales tax on $20,000. And so what the original bill was trying to do is to, to make it act exactly the same way that you wouldn in a dealership. And you only have to pay the difference, um, on the two. Unfortunately, as I, as I mentioned, that comes with a fairly, uh, hefty fiscal note. And so I've been working with the tax commission, um, our fiscal analyst to come up with what's a good way for us to be able to find that money, especially in a, a lean year to, um, advance this policy. One, uh, issue that has come up, and this is, uh, actually was brought to me by one of my constituents, was the number of people that are failing to pay their registration on time. Uh, the task commission believes that it's around only 50 to 60% of people are actually paying their, their registrations on time. And as you'll see as you drive around, um, that seems to match my experience. A lot of people driving around without, uh, their, the registration being paid on time and my constituent reached out really begged the question, why am I paying mine on time if everyone else is able to pay late or, or really not pay at all? Can I push it off? You know? 'cause it may be, Hey, I'm gonna sell my car in eight months, so I'm just not gonna pay my registration. I'll sell my car, gonna register the new car. And I never had to pay registration for that year. And so, um, one, uh, answer to this solution is to incentivize people to, to pay their registration on time. And that would be to charge a late fee. Right now, there is no penalty If you pay your registration on time, whether it's one month, two months, three months, 12 months, it doesn't matter. There is no penalty. You just come in and pay it. The only risk that you have is that you might be pulled over and receive a ticket for, for having expired registration or maybe your car impounded or something. But, but rarely do we see, um, those kind of draconian, uh, methods used. Usually it's just tell people to go, go in and pay your registration. So a lot of people are, are willing to take that risk, drive around and see what happens. So what we've done is to try to mail these two policies, um, together to create a funding mechanism for, uh, being able to, to cover the cost. And what, uh, HB 1 0 2 with the second substitute does is it assesses a $50 fee. Um, if you're late for your registration, it gives a 30 day grace period from when it's due. So no fee in the first 30 days, but on 30 days, and it would be $50 and it's an additional $50 a month, uh, if you're late, um, capping it out at 12 months. Um, additionally last year, uh, we passed a bill that, um, set up, uh, some, some strict penalties around when, uh, you register a car out of state when it technically should have been registered in state. And, uh, there was a grace period set up for that. Um, this bill would take away that grace period and capture the funds from both the late late fee on the, um, registration fee. And also that late fee of, or the, the fee that's charged for registering a car outta state when you should have registered it in-state and put it into restricted account. Now with the second substitute, what it does, because that still doesn't cover the entire gap of the $38 million that, that the fiscal analysts believe we would need for, for the original bill to go through. Um, so what we've, we've done is simply allowed the, those funds to generate in that restricted account. And then for people to be able to apply for an income tax deduction, it would be, uh, non-refundable. And, uh, with that it allows for, uh, in the, in the exact same way you would, you would still pay the, the tax on the $20,000, but when you go to file your taxes, assuming you actually owe taxes, um, then you'd be able to, to write in the amount of money that you paid, the difference, that same difference of the, the $10,000 times by the state, uh, uh, sales tax rate. And that would be the max that you would be able to receive a non-refundable credit for. But it would, it would be further capped by however much money is in the account. So, for example, let's say the account generated $7 million, uh, and there were, we anticipated that there were, uh, 7,000 people that, uh, were going to take advantage of this. Well, that would put the cap at a thousand dollars, um, that, that everyone would be able to apply. So your, your tax would first be based off of what's the difference between the new car value, the, the car that you sold value times the tax rate. And then you would look at, okay, is it, what is the cap for what everyone is able to pay, um, out in the year based on the amount that's in the fund? And then the third would still be based on that non-refundable tax credit. So if you don't owe any taxes, you wouldn't be able to get any, any credit back. But if you owe taxes, then you'd be able to get the credit back up to those two other caps. Um, the way that cap is generated is essentially we would take whatever was generated in the, uh, fund the year before, they would look at however many people applied for the rate the year before. Then they would just divide that out and say, this is the cap for the next year. And then the next year they'd look at it again and regenerate what the cap would be. So from year to year, it's gonna be different depending on how many fees are generated. So I know that was a lot. Uh, it, it is much more complicated than the bill that I originally presented yesterday, but it definitely moves us in the right direction to get where we need to go. And then we hope that this really solves two problems. One, people will start paying the registration on time, which, uh, gives the state that time value of money that we're not getting today and keeps everyone compliant with the law. But then two allows for those people that are purchasing and selling a vehicle in, in roughly the same transaction, the ability to get some of that tax back. So with that, Mr. Chair, happy to answer any questions, um, from the committee and, and, uh, get any more feedback on the approach.

  3. Committee chair1:16:12

     Perfect. Thank you for that. We do have some questions here. We got first Representative Christofferson.

  4. Rep. Kay J. Christofferson1:16:18

     Yeah. Thank you, Mr. Chair. Um, so on this substitute, I know you don't have a fiscal note on it yet, but do you have any idea how much income that would bring in to offset the cost or the loss of revenue? Yeah, So the, um, the fiscal analyst believe it's, it's between seven and $8 million that this would bring in. So yeah, so that, but maybe after the first year, everybody learned their lesson and wouldn't do it anymore. They, they calculated that into their, their estimate as well. Okay. Well, okay. Thank you. Appreciate it.

  5. Committee chair1:17:00

     Okay. We've got Representative Erland Strong, strong. Oh, is it strong? Oh, I'm sorry.

  6. Rep. Mark A. Strong1:17:05

     Represents, yeah, it's good. Oh, strong. I'm sorry. Yeah, no Worries. Okay. Few things. $50 late fee. You missed my, my van speech I gave a few minutes ago, but there this piece of trash van and we're deciding, um, if we're gonna renew the registration or just wait and then drive it for a few more months and gamble on it. I'm just kidding. Mm-hmm. But I think the registration's on it, it's an old van, it's not worth much. The registration's on it, 125 bucks and we're talking about a $50 late fee on $125 fee, a hundred, a hundred, 150, whatever it is. It's, it seems like it's a pretty heavy amount and it might, it might overly impact people with that are driving less expensive cars. I don't, 50 sounds like a pretty heavy fee. Um, especially when my whole registration is maybe only twice that. Um, just one thought, one observation. Um, now on this cap, so you have this fund, let's say you collect, you know, $7 million and you got, you know, 10,000 people that are going to draw from that. What happens when, when the fund is empty, if you happen to apply for that after you, you're out, or do they wait till the end of the year?

  7. Unknown speaker1:18:36speaker not certain

     Here it is, and then you take the total number and divide it up and you get, get it back. It's at the end of the year.

  8. Rep. Jordan D. Teuscher1:18:41

     Yeah. So, so they look at it in, in retrospect. And so they say, okay, how, how much do we have in the fund now? How many people applied for it last year? Divided it out? Divided Out. And, and that's where it's capped at. We don't know what the exact amount's gonna be. Some years it might be a little bit more, some years it might be a little bit less than what they had anticipated. And then that would go into the calculation for the next year of what the cap is.

  9. Unknown speaker1:19:03speaker not certain

     It's like a swollen up. It's like a what, like Swallow? Yeah. Um, okay.

  10. Rep. Mark A. Strong1:19:14

      And so if the fund's small, then you're not gonna get to partake much and you would change your business decision otherwise. I mean, I might, if the fund doesn't collect much, I might go, well, it's better for me to sell my car to the dealer. I, in principle, I love this, this is, this needs to happen and we just need to say, you know, this is the fair, this is the right thing to do. Forget about the, you know, trying to pay for it in, in this creative attempt. But, um, it just, I don't know. I'm, I'm struggling with, uh, this process. I'm highly supportive of this. In fact, my parents used to live in Idaho. In Idaho, you sell your car to your family member and there's, you don't pay tax at all. Uh, you can gift it to them, basically. And I don't think we can do that here. So, um, very supportive. I'm just a little bit, um, I mean, depending on what's in that fund could change the way you do your transaction on your car. So you're kind of gambling, well, let's hope that we cover that and we get back what we were thinking. Uh, or do we just go to the dealer or do we private sell? It's, that's kind of the whole conundrum we have every time we are doing a, a transaction like this is, do we private sell it or do we trade it in? And in earlier times in my life when I was much, much tighter for cash, I mean, I would always sell the car privately. And now maybe outta convenience, I'm, I'm like, yeah, just take this car off my hands. I don't wanna waste my time on ksl.com trying to sell my car. So it's, um, love the policy, a little bit concerned about the, the workaround. So, Um, Mr. Chair could, do you mind if I just please give a couple thoughts on that?

  11. Rep. Jordan D. Teuscher1:21:12

      Um, first talking about the, the fee itself, and I, I get the concern. I mean, but I do also think people need to pay the registration on time, right? And right now there is just, there's no disincentive other than the possibility of getting a, a ticket. But, um, I think our cities and highway patrol are not very motivated right now to, to give tickets for that. They're Juab, they're overworked and need their, their attention is another places than pulling people over for expired registration. And people realize that, and that's why you're seeing a huge increase in the number of people that just aren't paying the registration. So I think it's fair to say, look, even after it's due, we're giving you 30 days no fee at all. But if you hit that, that 30th day, it's 50 bucks. And so pay your registration on time. Um, I, I also, I mean, I wish we could just fund it. Um, I'm trying to get us closer to, to where we can get there and this is the, the best creative option that we've

  12. Rep. Mark A. Strong1:22:10speaker not certain

      Come up with. What's the estimated cost on it?

  13. Rep. Jordan D. Teuscher1:22:11speaker not certain

      38 million. 38.

  14. Rep. Mark A. Strong1:22:14

      Here's, here's part of the challenge that I'm having. There's so much estimating going on on this fiscal note because you're estimating how much is, is a fee going to bring in? How much, um, are people going to take advantage of that? How, how often, you know, what, what is the, the, the difference between what people are selling their new cars for and their old cars?

  15. Rep. Jordan D. Teuscher1:22:35

      Four. And we have some really great fiscal analysts, but I think they're very conservative in their estimates. And that this is part, part of what I'm trying to do here is if we keep this in a restricted account and look at it, we'll actually get some real data and we may come back in and say, oh, it's not nearly as expensive as we thought we would, and in the future year we just come and fund it and get rid of this, this income tax credit altogether. But this will give us the data that we need to kind of move in that direction. One other thing, and we talked about this last year with the bill, but I, I think is another reason why it's helpful for us to kind of move this forward is there's a real incentive for people to not, to understate the amount of money that they're putting or that they're purchasing their vehicles for to try to avoid sales tax. Um, this would change that incentive because you want to be able to, to get the tax credit and so you would put the actual amount due. And so that's another element of tax that the state isn't really collecting right now that would probably come in to help fill some of this gap, but again, not something that our fiscal analysts can take into consideration.

  16. Rep. Mark A. Strong1:23:40

      Yeah, that's a great point too. 'cause this happens so many times you buy a vehicle and they say, oh, I'm not gonna put anything in there. You can put whatever you want in that dollar amount on the sale. And I'm like, no, write it. So I can't afford the cost of not doing that. Right. As a legislator and, and as a, trying to be an honest person. So, great points. Thanks.

  17. Committee chair1:24:05

      Okay, thank you. We've got Representative Kyle.

  18. Rep. Jason B. Kyle1:24:10

      Yes. Uh, I actually really liked the original bill. I, I wish we could get that, that one by through, um, I, I'm trying to, I'm looking in the, the substitute, I'm trying to find the $50 fee can do. Where, where is that listed? Gimme just one second here Or fine fee. What? I'm not sure. I just didn't have it pulled up. So lemme And you're looking in second substitute? I think so, yes. Uh, it's probably right there. Nope, it's not that. Um, hang on. Okay. I, I see something on line two 11 that has including a late legis. Did you find it? I think this is 68 6 65 50. So I, I, it's, uh, line 500, um, and it, it does give the fee, um, it ties it to the uniform fine schedule. Okay. So it's, it's For late registrations. So based on how that's written, it, it would be $50, but it could go up over time. Got you. Based on if They changed the bell schedule. Okay. Got it. Okay. Our, Ours would be a fee, but it's based off of the fine in the bell schedule or I, I guess it is a, we call it a penalty in the code. And then I had, I had a question about line 1 68. Uh, what, what, what's go, what's going on there with the sub? Yes, on the sub. This, this is what we were talking about with, um, if you've register a vehicle like in Montana to avoid it. I gotcha. Um, it, uh, Says you little to Pay penalty of $650. Got it. Got it. Okay. Um, yeah, I I, I, I'm also thinking that the $50 might be a little harsh for, for some things. I, I know I, uh, am guilty of not registering mine on time all the time as well. Probably about half of us in here. But, um, sometimes, like, I'm just thinking about a busy family where, okay, you plan it out, right? But then you go to, you know, you're gonna go get your emissions done, all of a sudden your car light comes on, you gotta replace an O2 sensor or a catalytic converter. Things get pushed out a little bit, life happens, and all of a sudden you're hit with, yeah, maybe you know, your kid's car, that's a beater, and then you have to fix it and then get registered. And I'm, I'm not, I understand why. I understand why, but I'm grasping on, on whether that's what we want to do. So, but yeah, just, And, and if I could just, uh, comment on that one, one thing that is in the bill is, um, say you're in that situation, you plan to pay it on time, you went and did your emissions and it came back and you have to make some sort of change. Um, currently you can go to the DMV, pay your registration and they'll give you a temporary tag, um, so that you don't have to get the emissions done right then. And that gives you more time. And if you did went through that process, there would be no penalty. Okay. So it's only those that aren't going through that process. They haven't paid their registration, they haven't asked for an extension because of, for whatever reason. Okay. Thank you. Just FYI,

  19. Committee chair1:28:08

      Thank you Representative Kyle.

  20. Rep. Mark A. Strong1:28:09

      Um, I do have a couple questions on that if we could. So going back to that fee, so right now, the really, the only penalty to not register your vehicle is the, the odds of you getting pulled over, then you'd pay the registration fee. Is there a fine currently? I can't remember. I don't think there is. Is there, If you get pulled over and right Now Yeah, it's just, it's a ticket. There would be a fine, it's Just the ticket. Yeah, you'd get a ticket and I, I, I don't know how much it is. Maybe 120 bucks or something. Okay. So let's say that, so I'm thinking there, they're being assessed a fee, say 50 bucks each month, is there any collection effort? I mean, what, so really the only way is if they try to go re-register a vehicle, then they'd have to pay that at the time of reregistration, right? And or if they got a ticket. So there's really nothing that says there's nothing, no enforcement entity that's gonna go out there and say you're, you're like a debt collection or anything like that, right? Yeah, That's correct. And, and I will say, um, and I, I can't remember exactly the timeframe, but there is a timeframe after which if you haven't registered your vehicle and you do get pulled over that they can impound the vehicle. Um, or they could also write like a fix it ticket. So, um, you here's a ticket, you have to go register your vehicle or else there's going to be additional penalties. And that would be a way to get them to actually go and do it. So if, I think most people are comfortable, um, kind of running the odds for a number of months, but I, I, I don't think most people are comfortable going, you know, like a year or more, because then you're greatly increase the odds. You're gonna get pulled over and your car's gonna get impounded. Okay. Another question on that is the, um, private cell verification. How, how does that walk me through that process? Because where I'm thinking is how could this be abused is my question? So let's say that you have a car or, or excuse me, I'm trying to sell a car and, and I'm selling it for your example, $10,000. I'm looking to buy one for 20, and I say, Hey, uh, you know, to my friend, I'm gonna, I'm gonna sell my car to you for $18,000. Um, I will give you 5,000 bucks back, or whatever the case may be. You know what I'm saying? Is there any way that, I mean, how do you verify that? What does that look like?

  21. Rep. Jordan D. Teuscher1:30:22

      Yeah, good, good question. If, if you did that and they brought the bill of selling, then that person buying the car now would have to pay significantly more taxes, even though they're gonna get $5,000 under the table. Does that make sense? Because they do have to, on that bill of sale, they do have to go into the DMV and present, here's what I bought the vehicle for, and that's what they base the sales tax on for the, for that vehicle. Um, in terms of on the tax form, I, um, again, it's a non re non-refundable credit. So it's based on taxes actually paid in the state of Utah. And they, and that you owe some taxes, but you would just fill in that based on the calculation and then you'd be subject to an audit. So if you were audited, then you'd have to come forward and show, here's how much I paid, here's how much I I paid for this car, here's how much I received on the other car, and showed the documentation that you didn't commit tax fraud.

  22. Committee chair1:31:15

      Okay, that makes sense. Any other questions from members of the committee? Is there anybody here from the public that would like to comment on this particular bill?

  23. Leif Elder, UDOT1:31:39

      Lay fel, uh, director of policy and legislative Affairs at udot. Um, again, this is another one of those bills, and I have to agree with, I think it was Representative Strong that talked about in the younger years, that's exactly how I sold my cars a a as well, and, and how I purchased my cars often. And, and so I, I, no, no concerns with the policy, right? And it's just, you know, the budget impact, and I think that's also a policy decision in and of itself is, is the amount of revenue that we're raising in the general fund or in, in the transportation fund, is that the right amount or are we looking to cut that? Um, or are we just looking to change the policy and, and, uh, with regards to registration or in this case, uh, how we pay sales taxes on our, on our vehicles. So just something to think about. Again, it's just the concerning piece is the, is the budget piece. So, um, appreciate, uh, the time. Thanks.

  24. Committee chair1:32:40

      Thank you. Anybody else here from the public? Okay. Representative appreciate, uh, your time and presenting that, uh, to us. We will get that on the agenda for, well, I can't speak for that. We need to have, we did have public comment. Yeah. Motion to hold. You can just move. Okay. Oh, yeah, we do need to have a motion to hold or, or move to the next agenda item. So anybody wanna make a motion there? Okay. Representative Daley Provo.

  25. Rep. Jennifer Dailey-Provost1:33:07

      Thank you, Mr. Chair. Representative, do you prefer that we make a motion to move to the next agenda item or motion to hold? Um, I think it's, are you ambivalent? I think it's the same, but move to the next agenda item. Either Way. I think the motion to holds a little more official. So maybe I'll make a motion to move to the next agenda item. I, I want it Ms. Case, Whatever makes it, I'll send it back if you, Uh, whatever, send it to me. Whatever. Okay. Whatever makes it easier to readdress at a future date. So is your motion to agenda Move to the next agenda Item. Move next agenda. Okay. The motion is to move to the next agenda. I item any, um, do I need to go to the, the sponsor? Yeah.

  26. Committee chair1:33:45

      Bill, sponsor. No,

  27. Rep. Jordan D. Teuscher1:33:46

      I, I appreciate the, uh, the feedback here and if you guys have any other great ideas on how we might be able to fund this. Um, we've just been racking our brains and we, I can bring the, I can go back to version one of the bill and we can all say, yep, we love this, and then it doesn't actually go anywhere. So I'd love to see us actually make some movement and test this out. Um, you know, maybe one thing we could do is, you know, put a pilot together or some sort of a Sunset to just be able to gather some of that data and see is it really gonna cost the state $36 million or not? Because if we appropriate $36 million towards it and ends up only costing the state $18 million, which is what I, I think is closer actually to $14 million, um, then we just get sort of a windfall like, oh, we, we collected more than we thought we would. Um, but, uh, it, it, right now it's hurting this policy for moving forward. So if there's any ways that we can creatively find a way to move the policy forward and get the funding, I'm all ears.

  28. Committee chair1:34:48

      Excellent. To the committee for any, um, commentary on the, uh, motion to, was it hold?

  29. Unknown speaker1:34:58speaker not certain

      Yeah. To hold No to, no. To move to the next agenda, move to the next agenda item. Excuse me. I forgot which one we did there for a second.

  30. Committee chair1:35:03

      Thank you. I made that way more confusing than I needed to. I Apologize. There is none. So, back to the make of the motion. Um,

  31. Unknown speaker1:35:08speaker not certain

      My only thoughts on that representative is if you do find some money, I've got lots of places to, to also dedicate that money that you find. So, but thanks for the presentation today.

  32. Committee chair1:35:20

      Okay. So the motion is to move to the next agenda item. All in favor say aye. Aye. Any opposed? Okay. Motion carries. Thank you representative. Okay.