​​What is U-Drive-It?
U-Drive-It ( UDI ) :
An alternative method for the payment of Usage Tax as prescribed by KRS 138.460.

UDI 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.

Laws governing the UDI program

Located in KRS 138.463 and supplemented by the following four administrative regulations:

601 KAR 1:140
Applications & Permits
601 KAR 1:146
Fair Market Values
601 KAR 1:147
Records & Audits
601 KAR 9:045
Fleet allocation definition and calculation. Sections 1 and 3

Other regulations concerning U-Drive-It

KRS 138.4631
Estimated assessment, plus penalty and interest
KRS 138.462
Definitions for KRS 138.463 and 138.4631
KRS 281.655
Bond or insurance policy

Proper accounting systems to record all usage of the vehicles licensed under UDI are a must. The taxpayer should be able to account for all use of the vehicle and revenue generated from its operation on Kentucky highways.

Items to Note:

  • Tax payments to 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.
  • Loaner vehicles are NOT under the U-Drive-It program. Please contact the Department of Revenue at 502-564-4455.

Application Packet

U-Drive-It Renewal

Kentucky U-Drive-It Permit holder's responsibility to their customers:

  1. The U-Drive-It permit holder or the agents should first explain the U-Drive-It program to their customers and how it relates to paying the usage tax for the state of Kentucky.
  2. Need to provide the U-Drive-It number to their agents, dealerships and customers.
  3. Permit holders should complete paper work for title and registration and include U-Drive-It number on paper work.
  4. U-Drive-It permit holder will receive a pre-printed monthly usage tax report along with bills for any vehicles that have been renewed or added to the program.
  5. When vehicles need to be deleted from the U-Drive-It program the permit holders or their agents/dealerships need to send the proper paper work to the appropriate County Clerk's Office.

FAQs

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Vehicles in the U-Drive-It program generate usage tax, not sales tax.​
This would be part of your contract. The leasing company is responsible to the state of Kentucky, however, they have a right to pass it on to their customers.​
Leasing companies are the permit holders and should give you a permit number for the DMV office in the county where you reside, to register and title vehicles.​
It is a four digit number assigned to the leasing company or rental company to pay usage tax on lease or rental vehicle on a month to month basis to the Department of Transportation Division of Motor Carriers.​
Leasing or rental companies that lease or rent vehicles to customers in the state of Kentucky.​
The U-Drive-It number is assigned to the leasing or rental company through the Transportation Cabinet Division of Motor Carriers after application has been approved. The lessee needs to contact their leasing company to get the UD Number.​
There are two U-Drive-It fees. The first fee is the fee when you first register your vehicle at the clerk’s office under the U-Drive-It program. It is based on the month of incorporation for the leasing company and the month you register the vehicle. The second fee is the renewal fee every year. The renewal fee is $15.00.​
No. They are excluded from inspection under KRS186A.115 (2) part C. Motor Vehicles operated by a motor carrier under a non-negotiable certificate or permit issued by the Department of Vehicle Regulation.​