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Municipalities Enacting an Auto Decal Charge

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Reviewed Date: May 14, 2020

Original Author: 
Carrier, Angie
Date of Material: 
Apr 6, 2018

Motor vehicles--Laws and regulations

Municipalities Enacting an Auto Decal Charge

MTAS was asked to review the auto decal charge implemented by the City of Chattanooga and advise whether it was feasible for this town to implement.

Dear Mayor,

Earlier this week I received an e-mail from your town requesting MTAS review the auto decal charge that has been implemented by the City of Chattanooga and determine if it could be feasible for your town to implement. 

The MTAS legal staff has researched case law as well as current Tennessee Code Annotated. In 1937, the State of Tennessee declared that the right to license for the purpose of driving motor vehicles on roads, streets and highways was exclusively a state privilege and that no municipality could tax for this purpose. In 1943, Chattanooga's local ordinance was challenged and upheld by the Courts. To summarize, the validity of the Chattanooga ordinance was upheld by the courts, with the rationalization that the City of Chattanooga's charter was not superseded by the State of Tennessee Chapter 242 of the Public Acts of 1937. 

Over time, other cases have changed the face of this specific decision, in that courts have ruled that municipalities may not charge for the operation of a motor vehicle for the purpose of collecting revenue. For this reason, there is a fine line in the validity of such a program operated and established by a municipality. The State has full authority to place a privilege tax for driving motor vehicles on public highways and licensing motor-driven vehicles. However, a municipality's right for a licensing provision as a policing measure, has been held to be valid since the fees charged via the ordinance are for the purpose of enforcement and are not considered a revenue measure. HERMITAGE LAUNDRY CO., Inc. et al. v. CITY OF NASHVILLE et al. Your town could pass such a provision, however, to implement this type of auto decal program for the purpose of introducing a new revenue stream would most likely be declared invalid by the Courts. 

For futher information on this topic, please refer to T.C.A. §6-55-501. If you have questions or need further assistance, please let me know. 

Thank you for this opportunity for MTAS to serve your community. 

Angie Carrier
MTAS Municipal Management Consultant 

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Information written by MTAS staff was based on the law at the time and/or a specific sets of facts. The laws referenced may have changed and/or the technical advice provided may not be applicable to your city or circumstances. Always consult with your city attorney or an MTAS consultant before taking any action based on information posted to this website.