Why are rental cars suddenly using Apportioned tabs?

[calzp]

Jurisdiction

Washington

In the state of Washington I've noticed that many rental cars (e.g. Hertz, Enterprise) are using Apportioned tabs. This seems to have started this year; did the law change or are the companies just using an existing procedure to try and cut costs?

 

[army judge]

This seems to have started this year; did the law change or are the companies just using an existing procedure to try and cut costs?

The laws regarding apportionment, ie... apportioned plates have changed very little over time, other than the amounts collected.

As to the issue of cutting costs, some MIGHT think so.
Frankly, very few ever successfully best the taxation systems/schemes!



What Is the Purpose of Apportioned License Plates?
Apportioned license plates and apportioned registration refer to the same exact concepts. In fact, IRP (International Registration Plan) also involves apportioned plates. The plates position US commercial vehicles to operate across jurisdictions. Every state then gets a "portion" of the fees applied to vehicle registration. The apportioned fees get based on miles traveled within each state. Check out When to Update Your MCS-150 .

Why Does Having Apportioned Plates Help a Motor Carrier?
Say that your trucking company chooses not to use apportioned plates. That means your fleet cannot travel interstate. Your company would have to register in every single state. A carrier could receive big-time fines if a vehicle travels interstate without plates. This is an example of why apportioned registration is crucial for trucking companies. Without the plates, your business could get fined into nonexistence. Visit Dot Audit How to Prepare for a Compliance DOT Audit

How Much Does an Apportioned Plate Cost?
Each state's registration fee per plate will vary. The apportioned plate fee differs based on the base state where a carrier operates. But that's not the only factor when it comes to the cost of a plate. The DOT and FMCSA also assesses GVW (gross vehicle weight). The specific states where a company needs to register also affects the fee total. Here's the standard cost of a state fee for an 80,000 pound vehicle. It's about $1,500 to $2,000. But again, the registration fee total will vary based on your base state. Also check out DOT Clearinghouse Enforcement DOT Clearinghouse Enforcement | Registration llc

What Does Apportioned Plate Mean?
Every US state receives part of a commercial vehicle's apportioned registration fees. The portion of the fees gets based on miles that a vehicle travels per state. Plates with apportioned status function in the same manner as license plates. The plates get issued to companies with commercial vehicles. Then, the carrier can affix a plate to a motor vehicle. Think of apportioned registration as official DOT registration for every carrier. Registration must take place in the same state where a fleet has its home base. Visit also Top 3 DOT Violations All About DOT Violations - Learn about DOT violations ....


Apportioned Plates


Apportionment
Updated February 2021

Businesses that are taxable in Washington and another state may use our apportionment formula to determine how much of their apportionable income is subject to business and occupation (B&O) tax in Washington (RCW 82.04.462).

Apportionable income means gross income from engaging in apportionable activities after taking exemptions and deductions (other than the interstate and foreign sales – apportionment deduction) (RCW 82.04.460).

Starting Jan. 1, 2020, taxable in another state means the business meets any of the following requirements in the current or prior calendar year:

Is subject to a business activities tax by another state or country on income received from engaging in apportionable activity.
Has a physical presence nexus in the other state or country.
Has more than $100,000 in gross receipts sourced or attributed to the other state or country.
Is organized or commercially domiciled in the other state or country.
In determining whether a business has exceeded the receipts threshold, apportionable income attributed to another state or country is included along with its retail and wholesale sales sourced to the same state or country.

If you do not meet any of the above requirements then your gross income is taxable in Washington and is not eligible to be apportioned to other states or countries.

For requirements before Jan. 1, 2020, see our Out of state businesses reporting thresholds and nexus.

Apportionment formula
Taxable income is determined by multiplying a taxpayer's apportionable income from each apportionable activity by the receipts factor for that apportionable activity.

This formula is:

B&O taxable income = Apportionable income X Receipts factor

The receipts factor is a fraction.

The numerator is the total gross apportionable income attributed to Washington during the current tax year.
The denominator is the total gross apportionable worldwide income during the current tax year minus throwout income.
Receipts factor = Washington income / (Worldwide income – Throwout income)

https://dor.wa.gov/education/industry-guides/apportionment

 

[Tax Counsel]

Frankly, very few ever successfully best the taxation systems/schemes!

Bingo! Give that man a prize.

States are getting more aggressive seeking sources of revenue. After the Supreme Court several years ago struck down the old sales tax rule from the Quill case that limited out of state sales taxation to states where the business collecting the tax had a physical presence in the state it opened arguments for extending remote taxing power to other things too. In this case, some states are now enacting rules that all business vehicles that routinely cross state lines need apportioned tabs to ensure they get their share of revenue from interstate travel, not just the long haul semi trucks. It won't be long, I think, before this is common in all states.

 

[army judge]

In this case, some states are now enacting rules that all business vehicles that routinely cross state lines need apportioned tabs to ensure they get their share of revenue from interstate travel, not just the long haul semi trucks. It won't be long, I think, before this is common in all states.

You're correct, sir.

Taxation entities are feeling the squeeze.

Next on the cancellation agenda, we'll see more states AXING income taxes.

Dissatisfied residents are voting with their feet, moving to one of the Nine States With No Income Tax.

States With No Income Tax
Though not included in the following list, two states have relatively benign tax structures: New Hampshire only taxes dividend and interest and Washington exclusively taxes capital gains.
Alaska
Alaska once had an income tax, but it was repealed in 1980. The state doesn't have a sales tax either (though some localities do charge a sales tax). What's more, every resident receives extra money every year from the Alaska Permanent Fund Corporation.

Instead of collecting sales taxes and personal income taxes, the Alaska state government relies on other types of taxes (including excise and severance taxes) to fund its operations. Most of its revenue comes from gas production and oil drilling. But due to the decline in oil prices, the governor has proposed that the personal income tax be reinstated to reduce its budget deficit.

Florida
While Florida's personal income tax was repealed in 1855, its residents are required to pay other kind of taxes, including corporate income taxes and sales taxes. The property taxes in Florida that local governments levy are higher than they are in most states.

Nevada
The Silver State has no trouble operating without a personal or corporate income tax. Thanks to the millions of tourists who visit the state each year, it manages to collect nearly a billion dollars from gambling taxes and fees. Nevada also gets its revenue from its high sales taxes (above 8% in some areas), sin taxes and taxes on the casino and hotel industries.

South Dakota

South Dakota repealed its income tax in 1943 and all attempts to reinstate the tax have failed. To cover its costs, the Mount Rushmore State levies taxes on the purchases of cigarettes and alcoholic beverages. It even has coin-operated laundromat license fees.

South Dakota is one of the most tax-friendly states, especially for retirees. Its sales tax rates are among the lowest in the nation and its average effective property tax rate is just above the national average. Personal and property taxes are collected by local governments and used to provide funding for public school systems and city- and county-level projects and services.

Tennessee
Tennessee does not tax any forms of income. This includes both wages earned through jobs and income from investments, dividends and interest. However, as recently as 2020, Tennessee did have an income tax, which was known as the Hall Income Tax. In 2016, the state's governor signed a bill that reduced the Hall Income Tax rate on investment income by 1% every year until 2021.

In the meantime, the Volunteer State will continue to rely on its high sales tax rates and sin taxes for revenue. It also currently has the highest state tax rate on beer at $1.29.

Texas
The Texas Constitution forbids personal income taxes. Instead of collecting income taxes, Texas relies on high sales and use taxes. When paired with local taxes, total sales taxes in some jurisdictions are as high as 8.25%. Property tax rates in Texas are also high. In fact, only a handful of states have higher property tax rates.

Wyoming
If you want to live somewhere with low tax rates, you might want to consider moving to Wyoming. With no personal or corporate state income taxes, the Cowboy State also refrains from assessing any taxes on retirement income. Its average effective property tax rate is only about 0.57% and its average sales tax rate is just under 5.5%.

To make up for not having an income tax, Wyoming generates most of its revenue by levying property taxes and taxing businesses that produce natural resources, like coal.

Which States Tax Social Security and Retirement Accounts?
Where you live when you retire can have a major effect on your long-term retirement plans. Managing taxes is an important part of retirement planning, so choosing a state with favorable tax treatments of your retirement account withdrawals and Social Security benefits is a good place to start.

Here are all the states that don't tax retirement account distributions whatsoever:

Alaska
Florida
Illinois
Mississippi
Nevada
New Hampshire
Pennsylvania
South Dakota
Tennessee
Texas
Washington
Wyoming
In addition to the above states, Alabama and Hawaii do not tax pension plan withdrawals. However, they do tax withdrawals made from 401(k)s and traditional individual retirement accounts (IRAs).

When it comes to Social Security, 12 states tax Social Security to some degree:

Colorado
Connecticut
Kansas
Minnesota
Missouri
Montana
Nebraska
New Mexico
Rhode Island
Utah
Vermont
West Virginia

Bottom Line

Moving to one of the states with no income tax may seem like a great idea. But it's important to find out whether you'll have to pay additional taxes (like sales taxes and property taxes) in exchange for not having a personal income tax.

If you're moving to a state with no income tax, you probably want to see how your budget will be affected. If you want help with how it will impact your finances or are looking for some assistance to help you meet your financial goals in general, a financial advisor might be useful.

Tax Planning Tips
Taxes claim a major portion of most Americans' paychecks, even if they live in a state that has no income taxes. So if you want to create a long-term financial plan for you and your family, you'll need to account for taxes. A financial advisor can be a great resource during the financial planning process. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
Check out SmartAsset's annual roundup of the best tax filing software. This can help you get through this tax season as painlessly as possible.

9 States With No Income Tax - SmartAsset
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[Tax Counsel]

Moving to one of the states with no income tax may seem like a great idea. But it's important to find out whether you'll have to pay additional taxes (like sales taxes and property taxes) in exchange for not having a personal income tax.

Exactly right. When one retires, typically his/her taxable income goes down but their spending doesn't go down enough to match the decline in income. Moving to a state with no income tax but high sales might end costing you more tax, not less. And if you are planning to own your own home in retirement, be aware that states with no income tax tend to have higher property taxes. In some states, local taxes are high, and that one often gets overlooked by people choosing a new state. People looking to retire need to look at the entire mix of taxes to see where it would be most tax efficient to live.

But I'll repeat what I've before: don't let taxes override all the other factors that go into deciding where to live. Some places with low taxes are not exactly fun places for retirees. Some of those places have poorer quality health care, public transit, little options for entertainment, and other things that are often important to retired persons.

 

[adjusterjack]

Moving to a state with no income tax but high sales might end costing you more tax, not less.

There's also the cost of relocating, which could amount to many thousands of dollars.

 

[cbg]

This is all valuable information as I am looking to retire in less than five years and DH is already semi-retired (he no longer is teaching but he still consults); MA is too expensive a state for us to live in after retirement and we are trying to decide between Maine and New Hampshire.

Thank you both for some important things to think about.

 

[calzp]

I thought we were talking about tabs, not retiring.

 

[cbg]

Sorry for the inadvertent tangent.