Which makes me question why VW can't do the same thing here in the USA. It's a state-by-state tax law matter, so it wouldn't apply nationally, but most states do let you use the trade-in value to reduce your sales tax liability on the new car.
{NB: Obviously,
nothing in the following post is intended to apply to anything existing in the Canadian settlement, since I am responding to a U.S. contributor. And I don't care to address whether or not anything that happens in Canada's settlement ought or ought not to be in the U.S. settlement. We've got our settlement, and it ain't gonna change.}
You give -parts of- the answer to why it can't / didn't happen in your post. I might add:
1. The CAS settlement was a federal matter, nothing to do with the states, except insofar as if a state participates in the settlement, they must register existing Dieselgatemobiles (45 have done so).
2. Sales tax is a state matter, and varies from state to state. Therefore, no state has any possible incentive to waive the sales tax.
3.
The buyback is not a trade-in. (and this has been reiterated numerous times elsewhere in this forum).
4. Solution: be living in a state with no sales tax, or be living in VT, which has some provision in the state sales tax code that allows the tax to be refunded (or waived, or something). Otherwise, you're going to pay sales tax, as I am here in IL, and I've concentrated on things that can profit me, like hanging onto this Passat until the end of next year, which is of significant value.