Car tax cheaters-- or are they just oblivious?

Charlottesville officials have discovered 58 owners of vehicles in the city got a total of $20,000 in car tax relief for which they weren't eligible. The good news for those owners: so far the state isn't prosecuting for misdemeanor fraud.

When Jim Gilmore was elected governor in 1997 on his promise to eliminate the car tax, he pledged the state would make up the difference in lost revenues to cities like Charlottesville that depended on the reviled tax. With a deficit-ridden state now subsidizing the city's revenues, Virginia is requiring audits to make sure it isn't paying too much.

By now most owners take their 70 percent reduced car tax for granted. But as it turns out, not everyone is eligible for the break. For instance, car tax relief only applies to personal vehicles under 7,500 pounds. If you apply for a city decal or DMV registration and say your ride is for personal use, yet then claim it as a business vehicle on your federal tax returns, the city may come calling to ask for that up to $588 tax break back.

"The state is trying to recoup its money as the car tax has gotten more expensive," says Lee Richards, Charlottesville's commissioner of revenue.

In Charlottesville, deputy commissioner Rosalind Collins is responsible for certifying the 26,564 vehicles that supposedly qualified for the tax break in 2003. And finding 70 out of all those cars is not a big deal, says Collins. "I don't believe most of these are doing it deliberately."

In fact, some people have turned themselves in, she says.

On January 1 of this year, the General Assembly gave localities the tools to go after those ineligible for the car tax break. It started requiring that federal tax forms for business depreciation be filed with state tax returns. And those returns are now ready for city and county revenue departments to compare to DMV and local decal records of car owners claiming their vehicles are for personal use.

Sounds like a major pain. Collins agrees that it is, but she says the state really isn't foisting extra work on localities. In a city where personal property tax revenues total between $7 and $8 million, "a lot of personal property tax administration we were already doing," she says.

And she doesn't think Charlottesville incurred major expenses tracking down that $20K in ineligible tax breaks–- even though the money is ultimately refunded to the state.

Tracking down those trying to save a few hundred bucks in taxes is becoming a more sophisticated process, and Collins says that this fall she expects to find even more violators.

But the penalties are still vague. "Technically, any time you knowingly give false information, a case could be made for that being a misdemeanor," says Collins. "Whether they're prosecuted is another issue."