601 KAR 1:146. Fair market rental or lease value of vehicles operated pursuant to a U-drive-it permit.

601 KAR 1:146. Fair market rental or lease value of vehicles operated pursuant to a U-drive-it permit.

RELATES TO: KRS 138.462, 138.463, 138.4631, 281.615-281.670

STATUTORY AUTHORITY: KRS 138.463(9)

NECESSITY, FUNCTION, and CONFORMITY: KRS 138.463(9) requires the fair market rental or lease value of a motor vehicle to be based on standards established by administrative regulation promulgated by the Transportation Cabinet. This administrative regulation establishes the standards for use in determining the minimum amount of usage tax to be reported and paid on a rental or lease vehicle.

Section 1. Definitions. (1) "Lease" is defined in KRS 138.462(3).

(2) "Regularly engaged in the business of renting or leasing to retail customers" means a U-drive-it permit holder who:

(a) Rents or leases vehicles as part of an established business to retail customers who wish to rent or lease a vehicle;

(b) Executes, at a minimum, ninety (90) percent of its rental and lease transactions at fair market value; and

(3) "Rental" is defined in KRS 138.462(2).

(4) "Vehicle type classification" means the motor vehicle classification system established by the National Automobile Dealers Association and set forth in their "Official Used Car Guide".

Section 2. Fair Market Value (FMV) Rental Amount of a Permit Holder. (1) If a U-drive-it permit holder is regularly engaged in the business of renting vehicles to retail customers, the Transportation Cabinet Division of Audit Review shall audit the records of the permit holder to determine an average rental amount per day and per agreement to establish the FMV rental amount per day and per agreement for this permit holder.

(2) The FMV rental amount shall be used to assess the usage tax imposed pursuant to KRS 138.463 on an individual transaction of a U-drive-it permit holder who is regularly engaged in the business of renting or leasing vehicles to retail customers if:

(a) The transaction is for less than the fair market value of the rental of the motor vehicle; or

(b) The information required to be maintained by 601 KAR 1:147 for the transaction is missing or incomplete.

Section 3. Fair Market Value (FMV) Transportation Cabinet Established Rental Amount. (1) The Transportation Cabinet Division of Audit Review shall establish based on the monthly remittance of usage tax pursuant to KRS 138.463 to the Transportation Cabinet which of the U-drive-it permit holders are the ten (10) largest volume permit holders who are regularly engaged in the business of renting motor vehicles to retail customers.

(2)(a) The Transportation Cabinet Division of Audit Review shall survey the ten (10) permit holders to determine the average FMV rental amount for each specific vehicle type classification.

(b) The value for each specific vehicle classification established by paragraph (a) of this subsection shall be the FMV Transportation Cabinet established rental amount for the specific vehicle classification.

(3) The FMV Transportation Cabinet established rental amount for a specific vehicle type classification shall be used to assess the tax imposed under KRS 138.463 for the following:

(a) Every transaction of a permit holder who is not regularly engaged in the business of renting vehicles to retail customers; or

(b) A vehicle being used for which the permit holder regularly engaged in the business of renting or leasing vehicles to retail customers is not reporting the U-drive-it usage tax on his monthly tax return;

(4) The current FMV Transportation Cabinet established rental amount for each specific vehicle classification is listed in the August 1997 edition of the Kentucky Transportation Cabinet's "Fair Market Value Transportation Cabinet Established Rental and Lease Amount Calculations".

Section 4. Fair Market Value (FMV) Lease Amount. (1) If a U-drive-it permit holder is regularly engaged in the business of leasing vehicles to retail customers, the Transportation Cabinet Division of Audit Review shall audit the records of the permit holder to determine an average lease amount per $1000 value of the manufacturer's suggested retail price (MSRP) of the permit holder's lease vehicles.

(2) The FMV lease amount shall be used to assess the KRS 138.463 U-drive-it usage tax on an individual transaction of a U-drive-it permit holder who is regularly engaged in the business of leasing vehicles to retail customers under the following conditions:

(a) The transaction is for less than the fair market value of the lease of the motor vehicle; or

(b) The information required to be maintained by 601 KAR 1:147 for the transaction is missing or incomplete.

Section 5. Fair Market Value (FMV) Transportation Cabinet Established Lease Amount. (1)(a) The Transportation Cabinet Division of Audit Review shall survey the executed lease agreements of eight (8) randomly selected U-drive-it permit holders who are regularly engaged in the business of leasing vehicles to retail customers to determine the average dollar lease amount per $1000 value of the manufacturer's suggested retail price (MSRP) of a vehicle.

(b) The value established as the average dollar lease per $1000 of the MSRP by paragraph (a) of this subsection shall be the FMV Transportation Cabinet lease amount per $1000 of the MSRP.

(2) The usage tax assessed under KRS 138.463 for a lease vehicle of a permit holder who is not regularly engaged in the business of leasing vehicles to retail customers shall be the greater of the following:

(a) The FMV lease amount per $1000 value of the MSRP of the vehicle established in subsection (1) of this section; or

(b) The monthly lease amount assessed by the permit holder.

(3) The average dollar lease amount per $1000 value of the MSRP is listed in the August 1997 edition of the Kentucky Transportation Cabinet's "Fair Market Value Transportation Cabinet Established Rental and Lease Amount Calculations".

Section 6. Material Incorporated by Reference. (1) The following material is incorporated by reference:

(a) The August 1997 edition of the Transportation Cabinet's "Fair Market Value Transportation Cabinet Established Rental and Lease Amount Calculations"; and

(b) The March 1998 edition of "Vehicle Type Classification" as extracted from the National Automobile Dealers Association "Official Used Car Guide" by the Transportation Cabinet.

(2) This material may be viewed, copied, or obtained from the Transportation Cabinet, Division of Audit Review, 641 Teton Trail, Frankfort, Kentucky 40622. The office hours are 8 a.m. through 4:30 p.m. eastern time on week days. The telephone number is (502)564-6760. (24 Ky.R. 1183; Am. 1524; 2365; eff. 5-18-98.)