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I Short Subjects Updated: November 2005 HOUSE RESEARCH John Williams The Motor Vehicle Sales Tax Transfer: Current Law After a nearly ten-year hiatus, the legislature in 2000 again began dedicating revenues from the motor vehicle sales tax (MVST) to transportation-related purposes. A constitutional amendment proposed by the legislature in 2005 would, if adopted, eventually result in 100 percent of MVST revenues going to transportation. What is MVST? How MVST revenue used to be dedicated How MVST revenue is now dedicated - . ; r ; :.~;:"~: The motor vehicle sales tax, or MVST, is the 6.5 percent sales tax applied to the sale of new and used motor vehicles. During the 1980s, the legislature dedicated MVST revenue to highways and transit, intending that the money supplement other spending for those purposes. This dedication was periodically changed or suspended, and it was abolished entirely' beginning in fiscal year 1992. Beginning in fiscal year 2000, the legislature restored the MVST transfer to dedicated transportation funds, not to augment spending but provide tax relief. In 2000, the legislature put limits on license taxes for passenger cars. Since those taxes go to the highway user tax distribution fund (HUTDF) and are dedicated exclusively to highways, some means had to be found to make up the loss to highway revenue. The legislature made up tl}e losses to dedicated highway funds from reduction of automobile license taxes, and for losses to transit systems of revenue formerly coming from pr9perty taxes. _'. . . .. .;" j.: :.~;"'.~: . In the 2003 session, the legislature made another significant change in the j\1VST distribution by Increasing the percentage to dedicated transit funds at the expense of the share for dedicated highway funds. The transit funds' shares were intended not just to replace property tax revenue but also to make up for budget cuts in general fund appropriations for transit assistance. This allocation is intended to be in effect through fiscal year 2007. The distribution of MVST revenue is now as follows: . 30 percent to HUTDF, the fund dedicated exclusively to state and local highways. By constitutional dedication this money is further divided a~ollg ~he state trunk highway fund, th~ county state-aid ~ig~yv~y fund, and the municipal state-aid street fund. - . · 0.65 percent directly to the county state-aid highway fund, in addition to its share of the 30 percent above · 0.17 percent directly to the municipal state-aid street fund, in addition to its share of the 30 percent above . 21.5 percent to the Metropolitan Council to replace revenue lost when the