Ad valorem tax is a property tax based on the market value of property in Alabama on October 1. Ad valorem tax on vehicles is authorized under Section 40-12-253, Code Of Alabama 1975. An ad valorem tax lien attaches to a vehicle when it is first brought into the state by a new resident, or when it is originally sold by a new vehicle dealer. Property tax is an ownership tax and not a usage tax. The tax lien accumulates whether the vehicle is operated on the highway or remains off the highway.

Licensing officials are required to collect all outstanding ad valorem tax due on a vehicle before they register the vehicle (Section 40-12-253a). Licensed dealers and individual sellers must report the previous registration to a buyer to prevent the unnecessary payment of back taxes on a vehicle by the new owner. State law requires the collection of twelve months of back taxes when no registration information is available.  

Alabama dealers should provide the buyer a Motor Vehicle Dealer Affidavit For Ad Valorem Exemption. The form is furnished to dealers each year by the Alabama Department of Revenue for presentation to county licensing officials at registration. If the sold vehicle is currently titled in another state, then the title number may be recorded on the Alabama title application.

When an Alabama resident buys a vehicle with an outstanding property tax lien, then the buyer must:

1. Pay all property tax that has accrued on the purchased vehicle since it was last registered and any interest and penalties on taxes that are delinquent.
2. Transfer the buyer's current plate to the replacement vehicle or purchase a new plate for the vehicle within twenty (20) calendar days of acquisition. 
3. Inquire about a property tax credit voucher if a vehicle is sold or transferred prior to the owner's renewal month.  The application (download) is available within one year of the sale or transfer.

NEW VEHICLES.

The ad valorem tax lien attaches to a new vehicle when it is brought into Alabama by anyone other than a dealer or manufacturer, or when the vehicle is removed from a dealer’s inventory. Ad valorem tax due at the time of registration on a new vehicle registered for the first time with a manufacturer's certificate of origin where the motor vehicle meets the definition of Class IV property (personally owned or personally leased passenger vehicle or pick-up truck), then the property taxes will be deferred until the first renewal month or other subsequent registration, whichever comes first.

USED VEHICLES.

If there are no previous Alabama tax liens outstanding, the tax lien attaches to a used vehicle when it is brought into the state by a non dealer, or when it is removed from a dealer’s inventory. A tax lien that attached prior to a used vehicle being brought into a dealer’s inventory remains in effect and must be paid before the vehicle can be registered. When a motor vehicle enters dealer inventory, no new property tax lien will attach until the vehicle is sold from the dealer's inventory.

LOCAL TAX RATES.

Each year the Alabama Department of Revenue provides vehicle values to all licensing officials for use in calculating the ad valorem tax on vehicles. Ad valorem taxes are a product of the assessed value of the vehicle and the ad valorem tax rate in the location where you live or do business. The tax rate is set by the Alabama Legislature and is approved by the voters in each jurisdiction.

The actual assessed value of your vehicle appears on your tag and tax receipt and is estimated on your renewal mail notice. Privately owned (titled owner) passenger automobiles and pickup trucks are assessed at 15% of market value. All other vehicles are assessed at 20% of market value. To determine the market value assigned to your vehicle, divide the assessed value by the assessment rate (15% or 20%), (1500 assessed value divided by .15 = $10,000 market value). Note: If you are paying taxes for less than 12 months, the assessed value will be prorated for the number of months you owe.

 

Example 1:

Privately owned automobiles or pickup trucks used for personal use and private use are Class IV Property and assessed at 15% of market value.

Example 2:

Motor homes, recreational trailers, motorcycles, semi trucks, semi trailers, utility trailers and commercial vehicles are Class II Property and are assessed at 20% of market value.