Is the CARS rebate being taxed

[DrJon]

What about AZ. Somewhere we need a compilation of all states where we know the "unofficial" law so customers are better prepared at the dealership!

[vapor8]

FYI for folks living in Virginia:

I just came across the following memo from the Virginia Automobile Dealers Association:

http://www.vada.com/Portals/0/Docume...ker_Update.pdf

I'm copying the relevant portion of the memo here:

Taxes: For purposes of showing this amount on a Retail Installment Sale Contract, you should
clear this with the lender as to whether this should be shown as trade value or cash
downpayment. However, you should know the following information from DMV and the Tax
Department.
Sales and Use Tax should be calculated on the selling price of the new vehicle without any
deduction for the Cash for Clunkers payment.
Business License (Gross Receipts) Tax should be calculated on the selling price of the new
vehicle without any deduction for the Cash for Clunkers payment. If you list this payment on the
trade-in line on your Buyers Order and RISC you may need to reprogram your computer to
correctly calculate the Business License Tax.
DMV and the Tax Department do not expect any change to this interpretation but they will
review it based upon the final NHTSA rules.

So according to VADA, taxes are levied on the full price of the vehicle, not the price after the $3500/$4500 deduction/credit.

Can anyone in Virginia confirm this?

[jorbock]

Here is the answer for Colorado buyers which I received from my county clerk via email. Looks like I will have to pay sales tax on the rebate, but at least it's deductible on federal income tax this year.

Question:
I will be buying a new car in next week using a clunker trade-in under the CARS.gov program which will credit the dealer $4500 for my trade-in and will subsequently reduce the price of the car. Normally, I would pay sales tax on the new car price minus the trade-in allowance. My question is, will I be responsible for paying sales tax on the $4500 that the dealer gets reimbursed from the U.S. government for my trade-in under the CARS program.

Answer:
Eligibility for the credit and the amount of credit are determined at the dealer under the federal guidelines. The credit allowed is applied toward the purchase or lease as partial payment, similar to manufacturer rebate. The dealer will apply this credit in addition to other rebates or credits. The dealer is reimbursed by the federal government for this credit. This federal credit does not lower the purchase price or the amount subject to state or local sales tax.

If the dealer as part of the sales negotiations allows a scrap value for the vehicle being traded in, that scrap value can be considered a trade in and is allowed as a deduction from the amount subject to state and local sales tax.

[jdnow09]

Does anybody have the link for california?


My dealer charge me tax first then subract the rebate.

Its on line #6-A as "Agreed Trade-in value"

and #6-F "Other - Cash for clunker program"


I found the link for california.

http://www.boe.ca.gov/news/pdf/l230.pdf

John

[jdnow09]

I just stopped by the dealer and the finance guy said he would show the letter that I brought him regarding the tax exemption to the owner. He hope to call all of us back to rewrite the contract.

I wonder how it would work if they submit the stuff to the bank for financing?


John

[DianneWhitmire]

Each state's going to make a different ruling, but cars sold in CA are not taxed on the rebate. The rebate shouldn't appear on the contract. We wrote some deals wrong too, because the State Board of Equalization didn't make their decision public to us till 10am Friday, and we'd already rolled 10 cars by then. Anyone who bought their Prius from me that morning will be re-written correctly, and their selling price will drop $4500 as per the BOE's memo to dealers as to how this is shown on contracts.

Dianne

[jdnow09]

Originally Posted by DianneWhitmire

Each state's going to make a different ruling, but cars sold in CA are not taxed on the rebate. The rebate shouldn't appear on the contract. We wrote some deals wrong too, because the State Board of Equalization didn't make their decision public to us till 10am Friday, and we'd already rolled 10 cars by then. Anyone who bought their Prius from me that morning will be re-written correctly, and their selling price will drop $4500 as per the BOE's memo to dealers as to how this is shown on contracts.

Dianne

Dianne,

Since I am financing the whole amount from the dealer's choice of bank, how would it work if they submitted the loan stuff to the bank. It has been just one day though (I am not sure if they submitted yet). The finance guy is going to show the letter I brought today to the owner. He told me they likely to call all the participants back to rewrite the contract.

John

[kettledrum]

I received a reply from the Indiana Department of Revenue yesterday with a link to the answer for Indiana residents.

http://www.in.gov/dor/reference/files/dn31.pdf

The sales tax is to be calculated AFTER the CARS rebate is applied to the price of the vehicle. Unfortunately, my previous research, while not official, indicated that this would not be the case and so I was not surprised when my dealer charged me sales tax on the full amount. Now I have to go back and get $315 out of them.

[goldfishu]

Originally Posted by jdnow09

Hello,

I am in socal and heard mixed comments. Is the sales tax being done before the rebate or after subtracting the rebate?

It makes a difference here in socal since the tax is so high .

John

I'm in Ca and the rebate was applied BEFORE state tax. The dealer initially applied the rebate after tax but they called me back in a day later and corrected it. I ended up saving another $500(approx.).

[Jim Clark]

We were charged sales/title tax on the MSRP (plus a dealer processing fee). Apparently that is law in VA.