Is the CARS rebate being taxed

[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

[rachaelseven]

Edited to remove incorrect information. I stand (sit, really) corrected and apologize for passing on unverified and incorrect information my (unnamed and evidently uninformed) dealer gave me.

[jdnow09]

Thats what I thought too but some here in the forum said its minus the rebate first. I am confused .

John

[vapor8]

It all depends on the state you live in/make the purchase. The FAQ on the cars.gov website even makes that point:

CARS.gov - Car Allowance Rebate System - Helpful Q&As for Consumers

Do I have to pay State or local sales tax on the amount of the CARS program credit?
The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit would depend on the sales tax law of each State or locality. Consumer should review the law of their respective States or consult a tax advisor to answer this question.

Best thing to do is consult a tax advisor or someone you know/trust locally that can answer your question.

That being said, I did see a Toyota dealership from Southern California posting here that the $4500 was taken out of the price of the vehicle 'before' taxes are applied, per California state tax law. As always, consult someone in the know before trusting anything posted on forums when it comes to taxes; that's one thing you don't want to mess with if you can avoid it ;-)

[Bica2go]

Originally Posted by rachaelseven

Sales tax on total price, before rebate, afaik.

My MA dealer told me this afternoon that the sales tax is calc'd after the rebate is applied. He had to redo the paperwork to reflect this change as we'd expected it would be before the rebate. I'm picking up my car in the morning!

[Fussion101]

Here's what I found on the NYS tax website: Will it be treated as a rebate as the name states or is it a trade in value?.....

Question: I am purchasing an automobile for which there is a manufacturer’s rebate. Is New York State and local sales tax computed on the cost of the vehicle before or after the rebate is deducted?


Answer: New York State and local sales tax is computed on the sales price prior to deducting the manufacturer’s rebate. Even though the price paid by the consumer is reduced by the amount of the rebate, the selling price paid to the retailer is not. In effect, the manufacturer is subsidizing the consumer’s purchase.


Question : If I trade-in property towards the purchase of a taxable item or service, do I pay sales tax on the original sale price of the item or service, or the price reduced by the value of the trade in?


Answer : If a vendor of taxable property or services accepts tangible personal property in part payment of the purchase price, and the vendor intends to resell the item accepted in part payment, then you would have to pay sales tax on the net price due (full sale price less value of trade-in).

[Fussion101]

Originally Posted by rachaelseven

Sales tax on total price, before rebate, afaik.

According to Mass. tax website:

Working Draft Directive 09-XX: Motor Vehicles Purchased with a CARS Rebate

Generally, the sales price subject to tax of tangible personal property sold is "the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise." G.L. c. 64H, § 1. An exception to this general rule is provided in G.L. c. 64H, § 26, which provides: "Where a trade-in of a motor vehicle or trailer is received by a dealer in such vehicles holding a valid vendor’s registration, upon the sale of another motor vehicle or trailer to a consumer or user, the tax shall be imposed only on the difference between the sales price of the motor vehicle or trailer purchased and the amount allowed on the motor vehicle or trailer traded in on such purchase."

The Department’s sales tax regulation on motor vehicles, 830 CMR 64H.25.1, defines "trade-in" as "the transfer of complete ownership of a motor vehicle, trailer, or other vehicle from a purchaser to a seller, but only if the transfer occurs at the time of and as consideration for a sale of a similar type of vehicle by the seller to the purchaser." Both the statute and regulation require that the trade-in occur "contemporaneously" with the purchase. See Edward Accomando v. Commissioner of Revenue, ATB Docket No. 173930 (1991).


Therefore, a dealer that has a customer with a CARS qualified vehicle for trade-in and that is purchasing a qualified new vehicle, may treat the amount of the CARS allowance rebate as a “trade-in” for purposes of calculating the sales tax and should report the allowance as a trade-in on the Form RMV-1. Generally, the trade-in rules under the Department’s motor vehicle regulation, 830 CMR 64H.25.1(5)(c) will apply. In addition, dealers must maintain a copy of such certifications as deemed necessary by NSTSA that documents the proper disposal of the trade-in vehicles.

[Bica2go]

Thanks Fussion101 for pulling the MA regulation. I was trusting my dealership to be correct as they're a good size and wouldn't mess with something like this.

I'm really lucky to get my car before Aug 1st when MA sales tax goes up 25%. ouch.

[qlanus]

For the benefit of other Illinoisans, the payment from the feds is NOT taxable for sales tax purposes.

See link below for details.
Federal CARS program, known as “Cash for Clunkers”

[vapor8]

Anyone know what the rule is in Virginia? I'm picking up my Prius under the CFC program tomorrow!