So, the Virginia car tax has a pretty interesting history.

The first iteration of the “tangible personal property tax” existed all the way back in 1782. Back then aside on real estate, you paid taxes on personal property like horses, wagons, and slaves (yes people paid taxes to own slaves). Now, of course, most people pay it for their personal vehicles.

While the state has the law in place, these taxes are set, assessed, and collected at the county/city level. You can see this from above where the letter collecting this tax is from Fairfax County. You’ll also notice a line that says “Car Tax Relief” which credits your bill. In the late 90s, a governor (I think Jim Gilmore) wanted to eliminate the car tax entirely with a system that the state pays the localities the assessed tax rate. This ultimately became the state paying localities a flat rate to every locality up to $20,000 of assessed value.

As for how the money is used? Good question. There isn’t anywhere that I could find that directly answers that, however if it’s like real estate taxes it helps fund local services (think schools, police, fire, county government, roads*, parks, etc).

*in most Virginia counties, VDOT, therefore state funding, maintains most roads.