Not our concern, but will VW pay taxes?

[GetMore]

I was thinking about the tax questions that some people have, and it occurred to me that in NY you pay sales tax on a car when you register it, even if it is used, or has changed hands multiple times. (So, every time someone registers a new-to-them car they pay tax on the purchase price, which is possibly an endless cycle of revenue for the state.)
I know that VW won't register the cars, but some states have different laws, and I was wondering if VW would have to pay sales tax on some of the vehicles they are buying.
Most states will give a credit on trade-ins, but this is not a trade-in, so I could see (and for the sake of the appropriate states want to see) VW paying sales tax on their "purchase" of buy-back vehicles.

 

[Airpizz6]

I was thinking about the tax questions that some people have, and it occurred to me that in NY you pay sales tax on a car when you register it, even if it is used, or has changed hands multiple times. (So, every time someone registers a new-to-them car they pay tax on the purchase price, which is possibly an endless cycle of revenue for the state.)
I know that VW won't register the cars, but some states have different laws, and I was wondering if VW would have to pay sales tax on some of the vehicles they are buying.
Most states will give a credit on trade-ins, but this is not a trade-in, so I could see (and for the sake of the appropriate states want to see) VW paying sales tax on their "purchase" of buy-back vehicles.

Don't think that will happen, but I'm sure the lawyers who will be raking in hundreds of millions already have a plan to minimize what they will have to pay.

 

[autdi]

It's not in the CAS, so no.

It is one of the objections I registered with the court on the settlement undercutting the true cost to exchange equal value cars can't happen with the current settlement. Being made whole would mean driving on the lot in a car valued at X, and driving off in a car worth approximately X. As it stands, I can drive off in something worth at least 6% less just due to the sales tax, other states are much worse.

 

[k1xv]

I believe that taxing authorities would view this as a manufacturer giving a refund, (albeit partial for most customers) for merchandise returned by customers.

Sales tax is normally only assessed for items sold to the end user or consumer.

 

[autdi]

I believe that taxing authorities would view this as a manufacturer giving a refund, (albeit partial for most customers) for merchandise returned by customers.

Sales tax is normally only assessed for items sold to the end user or consumer.

Question wasn't about the turn in car, but the replacement. You don't get into the replacement car without paying sales tax again. Unless your state doesn't charge sales tax.

 

[GetMore]

No, actually my post was about VW buying the cheating cars.
The no-trade tax effects to the consumers has been beat to death already.

 

[Airpizz6]

No, actually my post was about VW buying the cheating cars.
The no-trade tax effects to the consumers has been beat to death already.

Thought your original post was pretty clear...and quite original. But comprehensive reading doesn't seem to be a strong suit of many TDI drivers.

 

[Rico567]

No, actually my post was about VW buying the cheating cars.
The no-trade tax effects to the consumers has been beat to death already.

The dealer buys new cars from VW and pays no sales tax; the reason, given in post above, is that the buyer in this case is not the end user. Same thing if the dealer bought a regular used car from you. They're a reseller, so they pay no sales tax. I think this makes the answer to the original question quite clear, since the buyback is being done by VW -not an end user- no sales tax involved in this case.

And, as you pointed out, the issue of all of us doing the buyback and then buying another car has been covered— with the exception of states that have a sales tax loophole (I think I remember NH)- we're all paying sales tax on the new vehicle. As I understand the sales tax law here in IL, we would have to pay the 6.25%, and the state certainly has no reason to grant us a variance. Relief on this issue would have to come in a modification of the settlement before it's finalized, and I don't believe that's going to happen.

 

[chadbag]

with the exception of states that have a sales tax loophole (I think I remember NH)-

NH has no loophole --- because they have no sales tax in the first place.

I think it was Vermont that allowed 3 months or something to buy the replacement and do an offset.

 

[Mark SF]

The point of having a dealer license is that you dont pay tax on the vehicles you buy. Instead, your dealings are treated as a business and you pay tax on your profits. So if VW bought the car from you and then sold it, they would pay tax on the profit, or get to deduct the loss.

 

[Scratchy101]

Regarding tax, but different scenario:

You bought a 2014 VW TDI for $25K and paid taxes on $25K.
You decide to keep the car and VW gives you $5K back for being total losers, cheats and liars.
In theory you should get back 1/5th of the tax you paid on the $25K since you really only paid $20K for the car after all is said and done.

 

[Rico567]

Regarding tax, but different scenario:

You bought a 2014 VW TDI for $25K and paid taxes on $25K.
You decide to keep the car and VW gives you $5K back for being total losers, cheats and liars.
In theory you should get back 1/5th of the tax you paid on the $25K since you really only paid $20K for the car after all is said and done.

This is an interesting theory, and was brought up in another thread. To my knowledge, though, no one has pursued it in a question to their state department of revenue: is the buyback classified in the same category as returning a defective product, and, if so, would the owner not be entitled to a proportional payback of the sales tax. For example, we paid about $2K more for our Passat than we would get in the buyback, so VW is "refunding" us $27,XXX. Would we then be entitled for a refund of our sales tax, in IL 6.25% of that amount, just as if we returned any other product we had purchased?
I personally believe that the IL Dept. of Revenue would say "nope," but it's an interesting question.....

 

[Michael A]

NY state has an IRS form AU11 "Application for Credit or Refund of Sales or Use Tax" which someone from another thread here suggested could be applied and possibly a refund issued. I dont know much else about it though?

 

[TravelDave]

Assuming they plan on fixing the cars and reselling them, VW shouldn't have to pay sales tax on the buyback amount since it would be a "sale for resale."

As for the taxes we all paid on our purchases, I'm skeptical that one could get a partial refund of sales tax paid (though it doesn't hurt to try and that will be state-specific). The buyback is structured as a purchase of your vehicle, not a refund. The "substantial compensation" component is also not a refund. It's payment for your troubles. I wouldn't be surprised if you receive a 1099 for that piece.

 

[BuyMeBackSoon]

Lots of phony ss#s will be submitted. Probably a crime to do so. If they don't ask for your number, no 1099.

 

[k1xv]

"payment for your troubless" could also be characterized as undefined liquidated damages. Its a gray area.

 

[GetMore]

One of the things you sign when you sell the car back gives VW permission to recover the sales tax on the vehicle.