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Sales Taxes On Cash Back?

beeser

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beeser Enthusiast

beeser

Posted
Posted

According to at least two GMC dealers here in SoCal, taxes are computed on the sale of a new vehicle based on the sales price before the cash rebates are applied. That can amount to an additional tax of over $500. I don't understand. Isn't the actual price of a vehicle based on what you are paying for it? In other words, actual price = sale price - rebate.

VMax2007 Senior Enthusiast

VMax2007

Posted
Posted

When you purchase stuff (i.e. motor oil) that has a rebate offer, you always pay tax on the sale amount, prior to any rebates. That is why the gov't loves rebates vs "sales".

LawmanSS Senior Enthusiast

LawmanSS

Posted
Posted

Unfortunately, that's true. The cash back incentives are applied as though they were a cash down payment. First, they figure the sale price of the vehicle, plus tax. Then they deduct the cash incentives. It really sucks because, as you said, it doesn't help to lower the sales tax. When I bought my Sierra back in September, the "Employee Price" was used, but the "Bonus Cash" came off at the end. Now, in PA, if you trade a vehicle in, that amount comes off of the sale price before taxes are calculated...I guess they figure the trade-in was already taxed? :D

cc1999 Enthusiast

cc1999

Posted
Posted

Up untill about 5 or 6 years ago Oklahoma charged sales tax on the window sticker no matter what you actually paid or traded in. Its been changed now to where you pay tax on what you actually paid for the vehicle. It does not suprise me that some states charge tax without the rebates.

bubba33 Enthusiast

bubba33

Posted
Posted

That is not how it works in Missouri. What you end up paying for the truck is what your taxed on.If you use a trade in you pay tax on the differance.

Silver Wraith Enthusiast

Silver Wraith

Posted
Posted

I've always presumed that they do it this way because when they offer a 'rebate' or sales incentive, they write this off against their profits. Since it's the company taking the tax break on this write off, you get to pay the taxes.

Zembonez Senior Enthusiast

Zembonez

Posted
Posted

A rebate is exactly that... a rebate. It doesn't affect the sales price (although most people do spend it on their purchase) You will pay tax on that money in most every state. (maybe all) Tax is figured on sales price - less any trade in allowances. No taxing authority is going to allow tax allowances on rebates if they have a say.

 

It a whole other argument whether rebates affect how much discount dealers allow on a sale. If the dealer pays a part of it, you can bet they aren't "giving" anything away for free.

 

Nope. No way.

beeser Enthusiast

beeser

Posted
  • Author
Posted
Unfortunately, that's true. The cash back incentives are applied as though they were a cash down payment....

Careful, if the manufacturer is giving this rebate to the buyer as an inducement to purchase their vehicle the IRS could just as easily consider it income and therefore taxable. Hogwash maybe but I wouldn't put it past them. Either way it sort of gets to me that I might have to pay California an extra $500 for a sale that never took place. Another way of looking at it is the effective tax rate in my situation is approx. 11% instead of the usual 7.5%. Grrrr... And if California gets their way that may increase another couple of percentage points next year.

Zembonez Senior Enthusiast

Zembonez

Posted
Posted
Well I do know what i paid taxes on . It was not the rebate . My price for the truck was 23,200

Yeah but you get to pay State Income Tax... and we don't! :thumbs:

 

Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have not totally succumbed to the Socialization of the USA... YET.

bubba33 Enthusiast

bubba33

Posted
Posted
Well I do know what i paid taxes on . It was not the rebate . My price for the truck was 23,200

Yeah but you get to pay State Income Tax... and we don't! :thumbs:

 

Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have not totally succumbed to the Socialization of the USA... YET.

 

You said most states (maybe all ) pay taxes on the rebates. What does the fact that i pay state income tax have to do with me not having to pay sales tax on rebates. :lol:

Zembonez Senior Enthusiast

Zembonez

Posted
Posted
Well I do know what i paid taxes on . It was not the rebate . My price for the truck was 23,200

Yeah but you get to pay State Income Tax... and we don't! :thumbs:

 

Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have not totally succumbed to the Socialization of the USA... YET.

 

You said most states (maybe all ) pay taxes on the rebates. What does the fact that i pay state income tax have to do with me not having to pay sales tax on rebates. :lol:

 

Not much actually.

 

Lighten up Bubba! It was just a joke.

 

I said most because I do not know the tax laws in every state. :lol:

fbachman Senior Enthusiast

fbachman

Posted
Posted

in Ohio:

 

You pay sales tax on the purchase price. The "cash back" has thus been taxed at the state/local rate.

 

On trade: you pay sales tax on the purchase price minus the trade-in value given (i.e. the difference).

 

A LOT of folks hop the river to KY to buy cars. Not sure if it's the lower sales tax rate, or if there is yet an additional benefit there regarding how they tally the sales tax.

Z45 Senior Enthusiast

Z45

Posted
Posted

In Michigan if you go out of state to buy a motor vehicle you are liable for the taxes in Michigan unless you reside in the state you made the purchase and have the vehicle titled and licensed in that state. Unless you do that, they dealer has to notify the state of the purchase and when you come to buy your license plates and get the new car titled, you are charged all taxes relative to Michigan.

 

Any purchase is like that. For instance I buy something on line from an out of state company and pay no taxes. When I file my state income I must pay Michigan sales tax on all those purchases made out of state. They give you 2 options to pay, a percentage of your gross or actual itemized purchases. Failure to pay constitutes tax evasion. Its assumed everyone has tax liability like this and if you don't file, you risk audit. In other words, they try to scare you into admitting you bought out-of-state and own taxes.

 

The states have figured out how to collect the most taxes on every sale.

 

In Michigan any rebates or GM card points are considered your money, they do not reduce the taxable price of the motor vehicle. You pay sales tax on what they term the taxable price which is the MSRP less any discount you haggled with the dealer, if the MSRP was 35,500 and the dealer said they will sell it for 33,00 then that's your taxable price. Then your trade-in, any rebates etc and GM card points come off that price.

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