The North Carolina Department of Revenue recently released guidance on the taxability of modified utility vehicles. The state defines "modified utility vehicle" as a four-wheeled vehicle meeting certain size requirements that is designed for off-road use, has a maximum speed capability of 40 miles per hour or greater, and does not require an operator or passenger to straddle a seat. These vehicles do not include all-terrain vehicles, golf carts, utility vehicles, or riding lawn mowers.
Motor vehicles are generally exempt from sales and use tax in North Carolina and are instead subject to highway use tax. However, modified utility vehicles are subject to sales and use tax because they do not qualify as motor vehicles. "Motor vehicles" are designed primarily for use on highways. Modified utility vehicles, while operated on highways in limited circumstances, are not designed primarily for use on highways. As a result, these vehicles are subject to sales and use tax rather than highway use tax.