Request By:
Mr. Robert Hines, Jr.
Assistant County Attorney
McCracken County Courthouse
Paducah, Kentucky 42001
Opinion
Opinion By: Robert F. Stephens, Attorney General; Joseph R. Johnson, Assistant Attorney General
This letter is in response to your request for an opinion of this office, dated June 12, 1979.
In your letter, you stated that a friend of yours purchased a new automobile in Florida upon which a four percent (4%) sales tax was charged. The owner did not actually register the vehicle in Florida but received a temporary license tag. When the vehicle was presented for licensing and registration in Kentucky, an additional five percent (5%) motor vehicle usage tax was collected.
The question is whether the owner should have received a credit for the four percent (4%) sales tax paid in Kentucky on the motor vehicle usage tax collected on the vehicle when it was presented for licensing and registration in Kentucky.
KRS 138.460(1) and (2) provide that the county clerk shall collect a five percent (5%) use tax on the purchase of a motor vehicle at the time the vehicle is first offered for registration in the state or upon the transfer of ownership of any motor vehicle previously registered in this state.
KRS 138.460(5) states as follows:
When a resident of this state offers a motor vehicle for registration for the first time in this state which was registered in another state that levied a tax substantially identical to the tax levied under this section, such person shall be entitled to receive a credit against the tax imposed by this section equal to the amount of tax paid to the other state. No credit shall be given under this subsection for taxes paid in another state if that state does not grant similar credit for substantially identical taxes paid in this state.
Clearly, the legislative intent is to protect Kentucky residents from the evil of being forced to pay the full Kentucky Motor Vehicle Usage Tax in addition to the sales tax of the foreign state in which the vehicle was purchased. This objective is achieved by using a two-pronged approach.
(1) A Kentucky resident is credited with having paid the sales tax of the foreign state when he registers the motor vehicle in Kentucky.
(2) Other states are encouraged to enter into reciprocal agreements with Kentucky in that the credit is not allowed to Kentucky residents who purchase motor vehicles in the foreign state if the foreign state does not grant a similar credit for the same taxes paid by their residents who purchase motor vehicles in Kentucky.
The laudable goal of the statute in question is to avoid penalizing Kentucky residents who purchase their motor vehicles in foreign states while preventing foreign states from penalizing their residents who purchase motor vehicles in Kentucky. The effect obviously has a very beneficial and healthy impact on interstate commerce.
The problem arises because the statute uses the term "registered in another state." Thus, in the problem you have presented, a Kentucky resident purchases a new automobile from an out-of-state dealer but does not register it in the foreign state. At first blush, it might seem that he would not be entitled to credit for the amount of the sales tax paid in the foreign state because of a mere procedural quirk. That is, because the automobile was not registered in the foreign state but was instead registered for the first time in Kentucky, he is not entitled to the privilege granted by KRS 138.460(5). Because such a construction of the statute does violence to the legislative intent, we specifically decline to adopt such an interpretation herein.
One rule of statutory construction in this Commonwealth is that a statute must not be interpreted so as to bring about an absurd or unreasonable result. George v. Alcoholic Beverage Control Board, Ky. 421 S.W.2d 569 (1967). As stated above, the legislative intent was to prevent Kentucky residents and non-residents alike from paying two similar taxes on the same purchase. The purpose of the statute was not to encourage the foreign registration of motor vehicles brought into Kentucky. This office is of the opinion that the Kentucky General Assembly did not intend the absurd, unreasonable and unjust result of requiring a Kentucky resident to pay both the sales tax of the foreign state and the vehicle usage tax of Kentucky for the simple reason that the Kentucky resident failed to register the motor vehicle in the state of its purchase. Such a result is diametrically opposed to the intent and spirit of the reciprocal agreements for which the statute provides.
In George v. Scent, Ky. 346 S.W.2d 784 (1961), Kentucky's highest court denounced an interpretation of the motor vehicle usage tax provision which would require a Kentucky resident to in effect pay two (2) similar taxes on the same purchase.
Taxing laws should be plain and precise, for they impose a burden upon the people. That imposition should be explicitly and distinctly revealed. If the legislature fails so to express its intention and meaning, it is the function of the judiciary to construe the statute strictly and resolve doubts and ambiguities in favor of the taxpayer and against the taxing powers. . . . [W]hile taxes levied by distinct sovereignties, each for its own purposes upon the same tax basis are technically not double taxation and are usually valid . . . as a matter of fact, the appellant and others of his class would have to pay twice for the same privilege of use, i.e., a sales tax or its equivalent. A construction of a statute which avoids double taxation in any form is favored where the intention of the Legislature is not clear in respect thereto. . . . Id. at 789-790.
Applying the above authorities to the problem presented in your letter, it is the opinion of this office that a Kentucky resident should without exception be credited with the tax paid in the foreign state when registering his motor vehicle in Kentucky upon proof that the sales tax was in fact paid in the foreign state.