New or used vehicles sold, given, or donated to a disabled veteran or active-duty service member who receives a U.S. VA grant, are exempt from sales tax for the portion of the vehicle price in excess of the U.S. VA grant. These service members are also exempt from the motor vehicle privilege tax and registration fee. Effective Date: 3/5/18
What the county clerk should know:
SALES TAX EXEMPTION
Section 1 of the Public Chapter states that if a veteran or active duty military member receives an Automobile and Adaptive Equipment Allowance/Grant from the Department of Veterans Affairs to purchase a motor vehicle, the amount of the grant is subject to sales tax. The amount over and above this amount is exempt from sales tax. The grant is typically awarded for the exact price of the vehicle and most of the cars are purchased at dealers, so this situation should rarely present an issues at the clerk offices. However, if the purchase price exceeds the grant, here’s how the tax is calculated:
- Determine the sales price
- Determine the amount of the grant from the VA
- Charge sales tax for the amount of the grant. Dealers and clerks will collect this sales tax (the VA will normally calculate the sales tax and include it in the grant money so the veteran is not left with any tax obligation).
- Exempt the amount of the transaction that exceeds the grant money provided. Again, we are anticipating that this will be a rare situation. However, in the clerk should copy all documents related to the transaction and submit them to Revenue for review.
Click here to view the Sales & Use Tax Notice (#18-15) regarding details of the exemption.
PRIVILEGE TAX EXEMPTION
Section 2 of the Public Chapter states that those receiving the grant are exempt from paying the motor vehicle privilege tax.
REGISTRATION FEE EXEMPTION
The exemption is for the total state registration fee (base registration rate plus $2.75). So, the total state fee amount exempted for a passenger plate is $26.50 ($23.75 + $2.75).
- This exemption applies to passenger, motorcycle, antique, private trailer, mobile home, private bus, low-speed, medium-speed, class I and class II plates (base registration rates in TCA 55-4-111).
- Vehicles operating for-hire and all commercial vehicles are NOT eligible for the exemption.
- The exemption is for the initial registration as well as renewals.
- The exemption applies to the registration of the one motor vehicle purchased pursuant to the grant and would not apply if the plate is transferred to another vehicle.
Accept VA FORM 21-4502, “APPLICATION FOR AUTOMOBILE OR OTHER CONVEYANCE AND ADAPTIVE EQUIPMENT” with section 3 completed and signed by a certifying official from the VA.
The exemption field for the VA Grant is found on the "Vehicle Information" tab in TNClerk. Click on the "Exceptions" button to apply the proper exemption.