Usage Tax U-Drive-It Program (UDI)
Primary Contact: Tammi Jarboe, Branch Manager
The U-Drive-It program is an alternative method for the payment of Usage Tax as prescribed by KRS 138.460. This 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 this program are found in KRS 138.463 and are supplemented by the following four administrative regulations:
 
Proper accounting systems to record all usage of the vehicles licensed under the U-Drive-It program are required. The taxpayer must account for all use of the vehicle and revenue generated from its operation on Kentucky highways.
 
Items to Note:
  • The tax due 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. 
  • You are allowed a reimbursement from insurance or auto manufacturer on service loaner vehicles but may NOT charge the customer for use thereof. Service loaner vehicles may NOT be rented for consideration.
 
Record Retention Requirements
All records must be retained by the taxpayer for a period of six (6) years in accordance with KRS 138.463
 
Rental Operation Records
Rental operation records must include:
  1. Pre numbered rental agreements
  2. Original Vehicle Invoice (copy)
  3. Copies of all executed rental agreements
The rental agreement must include:
  1. Rental Agreement Number
  2. Beginning Date of Rental
  3. Ending Date of Rental
  4. Vehicle Identification (VIN, Make, Model, Year)
  5. Beginning Odometer Reading
  6. Ending Odometer Reading
  7. Amount charged Rental Customer
  8. Details of Customer Charge
  9. Identification of person renting vehicle
Records for loaner program should be the same but may be kept in a log. There should be no charges to the customer for loaner vehicles.
 
Lease Operation Records
Lease operation records must include a completed and signed copy of the lease agreement.
 
The lease agreement must include:
  1. Full name and address of lessee
  2. Beginning and Ending date of lease
  3. Lease Term
  4. Vehicle Identification (VIN, Make, Model, Year)
  5. Certificate of Title (copy)
  6. Lease Calculation Worksheets
  7. Early Termination Documentation
  8. Lease Extension Agreements
  9. Documentation of any alteration to the original lease agreement
Contact
 
Office of Audits
200 Mero Street, 4th floor
Frankfort, Kentucky 40622
Toll Free: 1 (800) 928-6760
Phone: (502) 564-6760
Fax: (502) 564-6766
Hours: 8am - 4:30pm EST, M-F

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