Gov. Dan McKee’s proposed fiscal 2024 budget would add pickup trucks to the list of motor vehicles for which a trade-in allowance is allowed when computing the use tax owed at registration. (Photo Canva)
Rhode Islanders who trade in a used pickup when buying another vehicle would get a tax break under Gov. Daniel J. McKee’s proposed fiscal 2024 budget.
The proposal aims to align the sales tax calculation for the purchase of pickups, vans and other trucks under 14,000 pounds with a trade-in with the method for motorcycles, which took effect July 1, 2022. The same policy applies to car trade-ins, too.
If approved, pickup truck owners would get a tax discount on their purchase of a new or used vehicle equal to the sales tax on the value of the truck they are trading in.
Under current state law, all those who purchase trucks and register them in Rhode Island pay a 7% use tax at registration without any consideration given for the value of the trade-in. Someone trading in a 2019 Ram Bighorn valued at $40,000 to buy a new truck selling for $60,000 now pays $4,200 in sales taxes. Under McKee’s plan, they would pay $1,400, a savings of $2,800.
Residents of Massachusetts, which offers a tax break for truck trade-ins, would pay $1,250 in taxes for the same deal based on the state’s 6.25% sales tax. Vehicle purchases are taxed based on where the buyer lives.
The proposal aims to “promote fairness across vehicle classes,” while matching Massachusetts and Connecticut policies, according to a statement from Derek Gomes, R.I. Department of Administration spokesman.
If the tax break were to take effect Oct. 1 as proposed, the state is projected to see a $3.7 million drop in tax revenue for the remaining nine months of the fiscal year, which ends June 30. In subsequent, full fiscal years, the impact would be a loss of $5 million in sales tax revenue on trade-in trucks. The projections were based on the 8,000 truck trade-ins processed by the R.I. Division of Motor Vehicles in fiscal year 2022, the most recent data available.
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