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Is the CARS rebate being taxed

Discussion in 'Gen 3 Prius Main Forum' started by jdnow09, Jul 26, 2009.

  1. jdnow09

    jdnow09 New Member

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    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
     
  2. rachaelseven

    rachaelseven New Member

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    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.
     
  3. jdnow09

    jdnow09 New Member

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

    John
     
  4. vapor8

    vapor8 New Member

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    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

    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 ;-)
     
  5. Bica2go

    Bica2go New Member

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    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!
     
  6. Fussion101

    Fussion101 Junior Member

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    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: [FONT=Arial, Helvetica]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?[/FONT]
    [​IMG]

    Answer: [FONT=Arial, Helvetica]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.

    [/FONT]
    Question : [FONT=Arial, Helvetica]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?[/FONT]
    [​IMG]

    Answer : [FONT=Arial, Helvetica]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).[/FONT]
     
  7. Fussion101

    Fussion101 Junior Member

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    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.
     
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  8. Bica2go

    Bica2go New Member

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    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.
     
  9. qlanus

    qlanus Junior Member

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    1 person likes this.
  10. vapor8

    vapor8 New Member

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

    DrJon New Member

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    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!
     
  12. vapor8

    vapor8 New Member

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    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/Documents/CONFIDENTIAL/July-23-2009_Clunker_Update.pdf

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

    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?
     
  13. jorbock

    jorbock New Member

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    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.
     
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  14. jdnow09

    jdnow09 New Member

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    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
     
  15. jdnow09

    jdnow09 New Member

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    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
     
  16. DianneWhitmire

    DianneWhitmire High PRIUStess

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    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
     
  17. jdnow09

    jdnow09 New Member

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    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
     
  18. kettledrum

    kettledrum Member

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    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.
     
  19. goldfishu

    goldfishu New Member

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    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.).
     
  20. Jim Clark

    Jim Clark Member

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