What Is Colorado’s Specific Ownership Tax?

The Specific Ownership Tax (SOT) is an annual tax paid by vehicle owners in Colorado. This tax is collected when a vehicle is registered for the first time and upon each subsequent annual renewal. It is calculated based on the vehicle’s original value and its age. The SOT is a graduated tax, meaning the amount owed decreases as the vehicle gets older.

This system is used instead of a personal property tax on vehicles, a method used by some other states. The tax applies to most passenger vehicles, trucks, and trailers and is a component of the total fees due for vehicle registration.

Calculating the Specific Ownership Tax

The calculation of the Specific Ownership Tax is based on two factors: the vehicle’s taxable value and its age. The taxable value is not the price you paid for the vehicle or its current resale value. For most passenger vehicles, it is set at 85% of the Manufacturer’s Suggested Retail Price (MSRP) from when the vehicle was new. This taxable value is established in the vehicle’s first year of service and does not change over the vehicle’s life.

This fixed taxable value is then multiplied by a percentage that decreases as the vehicle ages. For a standard passenger vehicle, the rate for the first year of service is 2.10% of the taxable value. In the second year, the rate drops to 1.50%, and in the third year, it is 1.20%. The fourth year of service is taxed at 0.90%, and for the fifth through the ninth years, the rate is 0.45%. For vehicles in their tenth year of service and for all subsequent years, the SOT is a flat fee of $3.00.

To illustrate, consider a new vehicle with an MSRP of $30,000. Its taxable value would be 85% of that, which is $25,500. In its first year of registration, the SOT would be 2.10% of $25,500, resulting in a tax of $535.50. The following year, the tax would be recalculated at the lower 1.50% rate on the same $25,500 taxable value, amounting to $382.50.

The Vehicle Registration and Tax Payment Process

Paying the Specific Ownership Tax is an integrated part of the vehicle registration process, managed by the county clerk and recorder’s office in the county where the owner resides. When purchasing from a dealership, the dealer often handles the initial title and registration paperwork, including the collection of the SOT. If purchasing from a private party, the new owner must go to their local county motor vehicle office to complete the title transfer and registration, at which point the SOT will be collected.

For annual renewals, vehicle owners receive a renewal postcard in the mail from their county detailing the total amount due. Proof of current vehicle insurance is required to complete the renewal process. Owners can pay this amount through several methods:

• Online through their county’s portal
• By mail
• At a self-service kiosk
• In person at the county motor vehicle office

Individuals moving to Colorado with a vehicle registered in another state must register their vehicle with their local county clerk. The county will calculate the SOT, and this tax must be paid to receive Colorado license plates. New residents will need to provide:

• Their out-of-state title
• Proof of a Colorado vehicle emissions inspection, if required for their county
• Proof of insurance
• A secure and verifiable identification

Distribution and Use of Tax Revenue

After the Specific Ownership Tax is collected by the county motor vehicle offices, the revenue is distributed among various local government entities. The majority of the funds are allocated to the taxing authorities within the county where the vehicle is registered. This distribution is generally proportional to the property tax levies of those entities from the previous year. Consequently, the SOT revenue supports a wide range of local public services.

The beneficiaries of this tax revenue include:

• The county’s general fund
• Cities and towns located within that county
• Local school districts
• Various special districts, such as fire protection, water, and park districts

A small portion of each SOT transaction, $0.50, is retained by the state and deposited into the Highway Users Tax Fund to support the Department of Revenue’s vehicle services operations.

Special Considerations

Leased Vehicles

For leased vehicles, the SOT is typically paid by the leasing company, which then passes the cost on to the lessee as part of the monthly lease payment. The tax is calculated in the same manner as for owned vehicles. Colorado does not offer refunds on registration fees or Specific Ownership Tax if you sell a vehicle, move out of the state, or otherwise dispose of a vehicle during the registration year.