Are Cashback Incentives Applied Before or After Sales Tax is Computed? - Diesel Forum

GWBlack · 08-04-2007, 11:45 PM

My 08 SD is due in 2-3 weeks. I'm trying to figure out what the final numbers should be now that there's a sizeable $3000 cashback incentive. Is the $3000 incentive subtracted off before sales tax is calculated (in which case I won't pay tax on that $3000), or is it subracted off at the very end (after sales tax has been calculated in which case I'll pay tax on it)? Any accountants out there [img]/ubbthreads/images/graemlins/grin.gif[/img]

Thanks!
Gary

bearsfan1 · 08-04-2007, 11:56 PM

I believe that incentives are applied after sales tax is determined. You know that the state is going to get every last penny they can. At least with the rebates, the sales tax will hurt much less!!!

SmokeyWren · 08-05-2007, 12:29 AM

Some states might differ, but both Colorado and Texas charge you sales tax on the rebate.

So you pay sales tax on the total before the rebate.

SteveIn29 · 08-05-2007, 12:31 AM

The rebates are treated as a down payment (not a price reduction) and thus are applied after sales tax is computed on the deal.

GWBlack · 08-05-2007, 03:03 AM

Thank you everybody for the info!

Gary

JimJoe · 08-05-2007, 04:18 AM

[ QUOTE ]
The rebates are treated as a down payment (not a price reduction) and thus are applied after sales tax is computed on the deal.

[/ QUOTE ]

I can't believe that. Rebates are no down payment as they are not paid by the customer and in fact they are a price reduction. What else? Could it be that the government wants some extra bucks on that?

Just imagine the other way round. I get my wages and pay taxes. Afterwards the employer gives me some exra cash and tells me that this is a down payment wehere I do not pay taxes.

So something's wrog here.

Jim

GWBlack · 08-05-2007, 03:00 PM

It seems unfair to charge sales tax on something ($3000) that was never paid by the customer to begin with. However, that's what will happen based on what everybody has said. Is there some government/consumer agency that I can complain to? Don't get me wrong -- I'm very happy with the $3000 incentive, but it doesn't seem right to charge tax on something that was never paid.

Gary

SmokeyWren · 08-05-2007, 04:25 PM

Thoretically, you paid for the full ball of wax, including the TT&L, at time of delivery. Then, after the dust settled, Ford sent you a rebate check.

I know most dealers handle it so you don't actually see the rebate check. At settlement, you sign a piece of paper that assigns the rebate amount to the dealer, and the dealer then subtracts the rebate amount from the total you owe, then Ford sends the rebate to the dealer instead of to you. And you probably don't take the paperwork down to the courthouse to pay the TT&L either. The dealer does that stuff for you.

Think of the rabate amount as sorta like when you buy a gizmo at Home Depot, and that gizmo has a $10 mail-in rebate. You pay for the gizmo, including sales tax, at the checkout counter. Then after you get home, you fill out a rebate form and mail it to the manufacturer. The manufacturer sends you a check for the $10 rebate, but he doesn't also increase the $10 by the amount of the sales tax on the $10 rebate, and the state and local tax folks sure aren't going to refund you the sales tax amount on the $10 rebate. [img]/ubbthreads/images/graemlins/crazy.gif[/img]

So from the revenooers viewpoint, a price reduction and a rebate are two different animals. You pay tax on a rebate, but not on a price reduction.

Imagine the confusion you could cause by demanding that the cashier at Home Depot reduce the taxable amount by the amount of the rebate you might send in for. [img]/ubbthreads/images/graemlins/eek.gif[/img] Ain't gonna happen.

GWBlack · 08-05-2007, 04:57 PM

Thanks SmokeyWren. That makes more sense to me now.

Gary

JimJoe · 08-06-2007, 05:54 AM

Makes sense but just why Ford does that in this way? We are talking about some 3 million vehicles times say USD 2500 rebates. Makes 7.5 billion dollars.

The sales tax of that - assuming 5 % average - is plusminus 375 million. This is about one buck per citizen each year. Could Ford not find a way directly substrating that cashback amount from the price? So they would save 375 million or otherwise give the 375 Million to us?

Jim

Going_Going_Gone · 08-06-2007, 12:35 PM

I checked with the department of Revenue in Arizona. They state that rebates are considered a reduction in the sales price and not taxible. That being said, an "unscrupulous" dealer could write up your deal showing the rebate as a down-payment (taxible) and then treat it as a reduction of the sales price and pocket the sales tax you were charged on the transaction. It isn't a lot of money per transaction, but when you consider the volume of rebates a dealer processes, it can become big money. Since they only report gross sale figures and taxes collected, there is very little likelyhood that it would be uncovered in an audit by the state. My advice to you would be to check with your state revenue department and, if they say it doesn't have to be taxed, make sure the dealer doesn't tax it.

dmags · 08-06-2007, 07:26 PM

In our "tax you to death" state you WILL pay sales tax on a rebate.So my guess is it must vary by state.If you trade a vehicle you will only pay tax on the money difference [img]/ubbthreads/images/graemlins/shrug.gif[/img]

GWBlack · 08-07-2007, 01:12 PM

I just called the Ford 1-800 number. The lady who answered said that rebates are meant to be applied after sales tax is calculated (meaning we must pay tax on the rebate amount). She said they get asked that question alot. Although she said it should not vary by state, it's uncertain whether a state's Dept. of Revenue rules will supercede that or not.

Gary

horses2 · 08-10-2007, 08:57 AM

[ QUOTE ]
Makes sense but just why Ford does that in this way? We are talking about some 3 million vehicles times say USD 2500 rebates. Makes 7.5 billion dollars.

The sales tax of that - assuming 5 % average - is plusminus 375 million. This is about one buck per citizen each year. Could Ford not find a way directly substrating that cashback amount from the price? So they would save 375 million or otherwise give the 375 Million to us?

Jim

[/ QUOTE ]

Behold the power we have given (has been taken) by our government. IT ISNT FORD. Its the Idiot YOU let get elected.
EVERY election has consequences. This is one of them. It all depends on the state. Can you imagine the effort to figure out EVERY State sales tax rules, then figure a pricing strategy that meets the legal requirements (rememeber,cant have different prices for different states) in EVERY state?

Fact is some states let the rebate affect the sales tax, some dont. Until you & your neighbors vote in a state government that respects the citizen you will continue to be screwed.

Sorry for the rant, but we as voters have the power to fix this type of thing, we just dont use it.