LOUISVILLE — If you crossed the Ohio River to buy a used car with a trade-in, you might be eligible for cash back.

        Kentucky officials will notify more than 830,000 residents early next year that they could be eligible for partial refunds on the sales tax they paid for used cars purchased out of state.

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For more information on forms to apply for the tax refund on used vehicle sales involving a trade-in in another state, contact your county clerk: Boone County, (859) 334-2108; Campbell County, (859) 292-3850; Kenton County, (859) 491-6316; or click on the Revenue Cabinet's section of the Commonwealth's Web site at www.state.ky.us

        Some Cincinnati-area auto dealers say that while only about 10 percent of their sales go to Kentucky residents, the change in how Kentucky taxes out-of-state car purchases is significant.

        Officials estimate that about 80,000 people could qualify for an average refund of $300, reducing the state's Road Fund by $24 million.

        “In the current budget situation, $24 million is a lot of money,” said Revenue Cabinet Secretary Dana Mayton.

        Earlier this month, Jefferson County Circuit Judge Lisabeth Hughes Abramson granted class-action status to a lawsuit challenging Kentucky's sales-tax disparity on used vehicles.

        In 1999, James Pinkley Jr. and Vickie Richardson, both of Louisville, and Norma McGaren of Brandenburg sued the state, saying a different tax treatment for used passenger vehicles bought in Kentucky and elsewhere violated the U.S. Constitution by infringing on interstate commerce.

        Under the old tax setup, a Kentuckian who bought a $5,000 used car with a $3,000 trade-in paid 6 percent tax on the difference when the car was registered in Kentucky. But a resident who bought the same car out of state — even if it was just across the Ohio River — paid taxes on the entire $5,000.

        Judge Abramson has since equalized those tax rates.

        “I hadn't heard about it, but I'm sure our title department is aware of it,” said Mark Postallian, used-car sales manager for Jake Sweeney Chevrolet in Tri-County. “I would say perhaps 10 percent of our (used car) business is from Kentucky residents, and a lot of them have trade-ins.”

        Duane Reid, owner of Stylin' Rides used cars in Cheviot, also said perhaps 10 percent of his sales are transferred to Kentucky. “But the Kentucky dealers have had a big advantage because of the way the tax was collected,” he said. “This will certainly help to even things up.”

        The judge's recent decision to make the lawsuit a class action, prompting the notification requirement, makes it more likely that the trickle of claims since her initial ruling will become a torrent, officials and attorneys for both sides say.

        The money will come out of the state's $1.4 billion Road Fund, which already is facing a $123 million deficit. The judge's order equalizing tax rates likely will cost it an estimated $6 million to $7 million a year, state officials say.

        “There may be some projects that just have to wait” if 80,000 residents were to make claims, said Mark Pfeiffer, a spokesman for the Kentucky Transportation Cabinet.

        About 20,000 vehicles registered in Kentucky from other states are estimated to involve trade-ins, Motor Vehicle Usage Tax supervisor Wyatt Gregory said during a deposition.

        Still undecided is what proof will be required for a refund and whether the cost of notification, which could surpass $500,000, will be paid by the state or from refund money, said Revenue Cabinet attorney Doug Dowell.

        In January, the Revenue Cabinet placed claim forms in county clerks' offices and on their Web site. About 855 people applied.

        Widespread notification is critical, said Irvin Foley, a lawyer for the plaintiffs.

        Residents eligible for the refund are those who bought out-of-state used cars with a trade-in and then registered them in Kentucky between March 10, 1997, and January 2001, when the disparity was eliminated, according to Judge Abramson's November ruling.

        Determining exactly how many Kentuckians are eligible for refunds is difficult because the state didn't keep records on whether out-of-state purchases included trade-ins. That's why the state is sending more than 830,000 notices to everyone who registered a used car in Kentucky during those four years.

        “Nowhere near as many” will qualify, said Cabinet attorney Debra Eucker.

        Enquirer Reporter Terry Flynn contributed.
       
           

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