Why am I getting another tax bill from the State?

If you are in the state of Kentucky, you are most likely you are receiving a bill from the Transportation Cabinet under their U-Drive-It program.

According to the Kentucky Transportation Cabinet, U-Drive-It (UDI) is an alternative method for the payment of Usage Tax as prescribed by

KRS 138.460. UDI allows for deferment of this tax at the time of registration. Payment will be made based on rental and lease receipts generated by use of the vehicle. The laws governing the UDI program are found in

KRS 138.463 and are supplemented by the following four administrative regulations:

601 KAR 1:140 Applications & Permits
601 KAR 1:145 Tax Reporting. Fleet registration allocation Section 4
601 KAR 1:146 Fair Market Values
601 KAR 1:147 Records & Audits
601 KAR 9:045 Fleet allocation definition and calculation. Sections 1 and 3

Other regulations concerning U-Drive-It:

KRS 138.4631 - Estimated assessment, plus penalty and interest
KRS 138.462 – Definitions for KRS 138.463 and 138.4631
KRS 186.281 – Seat and other vehicle taxes
KRS 186.286 – Apportionment of seat taxes
KRS 281.014 – Definitions for chapter
KRS 281.655 – Bond or insurance policy

Proper accounting systems to record all usage of the vehicles licensed under UDI are a must. The taxpayer should be able to account for all use of the vehicle and revenue generated from its operation on Kentucky highways.

Items to Note:

Tax payments to the Transportation Cabinet for vehicles rented or leased under this program are the DIRECT obligation of the taxpayer who registers the vehicle. The tax due may be passed on to the user of the vehicle. Any tax exempt status of the renter or lessee is not applied to the permit holder.
All transactions will be taxed at the Fair Market Value (FMV) of the vehicle being rented or leased.
Taxpayers should retain every void or damaged rental agreement.
Loaner vehicles are NOT under the U-Drive-It program. Please contact the Department of Revenue at 502-564-2935.