Tax on $7500 Federal Credit ??

[ku4ever2]

Quick question. I am in the process of negotiating deal on new Leaf lease and I have heard conflicting stories from dealers on the $7500 rebate. One is insisting I pay taxes on the rebate in the up front cost and another has not even mentioned it (it might be buried in their deal but their overall deal is better). The one dealer that wants to charge it says somehow it is in the cost...and that likely I will be surprised by it in the end even if the dealer says I dont need to pay it?

What is the story on paying taxes on the rebate..is it dependant on the dealer and some handle it differently than others?

 

[cwerdna]

Can you update your location info via User Control Panel (near top) > Profile (left side)? That way, we don't need to ask in future posts/threads or do sleuthing to deduce it.

As for "rebate", I'm confused. There is a $7500 Federal tax credit. This is not a rebate. If you lease, Nissan or rather, NMAC AFAIK passes the savings along to you.

As for rebates in general, when purchasing a car, whether or not a rebate/incentives saves on sales tax depends on the state. See http://www.edmunds.com/car-buying/what-fees-should-you-pay.html" onclick="window.open(this.href);return false;.

 

[ebill3]

Quick question. I am in the process of negotiating deal on new Leaf lease and I have heard conflicting stories from dealers on the $7500 rebate. One is insisting I pay taxes on the rebate in the up front cost and another has not even mentioned it (it might be buried in their deal but their overall deal is better). The one dealer that wants to charge it says somehow it is in the cost...and that likely I will be surprised by it in the end even if the dealer says I dont need to pay it?

What is the story on paying taxes on the rebate..is it dependant on the dealer and some handle it differently than others?

Well, I don't know much about leasing, but something doesn't sound right.

If by rebate you mean the $7,500 federal tax credit, the way Nissan has handled it in the past, is that they, Nissan, get the tax credit and they then pass the savings on to the lessor. That tax credit is not income to you or to Nissan, therefore there are no taxes due.

Perhaps someone with more knowledge of leasing will jump in, but I think I would walk away from the dealer that wants to collect the tax.

 

[ku4ever2]

Can you update your location info via User Control Panel (near top) > Profile (left side)? That way, we don't need to ask in future posts/threads or do sleuthing to deduce it.

As for "rebate", I'm confused. There is a $7500 Federal tax credit. This is not a rebate. If you lease, Nissan or rather, NMAC AFAIK passes the savings along to you.

As for rebates in general, when purchasing a car, whether or not a rebate/incentives saves on sales tax depends on the state. See http://www.edmunds.com/car-buying/what-fees-should-you-pay.html" onclick="window.open(this.href);return false;.

Ok I updated my profile info..I live in Northern Colorado.

Yes I am speaking about the $7500 Federal Tax Credit. And yes I am working on a lease deal thru NMAC. I know most threads talk about how in the lease this is taken out of the Net Capitalized Cost and just goes to NMAC. Again the question is one dealer is telling me I am responsible for sales tax on that rebate..which comes to about $400+ (5.9% * 7500). I think it might just be another way for him to suck in more money on the deal because another dealer didnt even mention it?

 

[ebill3]

Walk.

 

[derkraut]

Walk.

+1 That dealer is just trying to rip you off.

 

[DaveinOlyWA]

the dealer could handle it anyway they want to really. there is no sales tax for EV purchases in WA but the fed tax credit should be treated as a $7500 down payment. so if you put down $2,000 then the paperwork should read that you put down $9500 and it goes from there. the part of the cost covered by the $7500 is treated just like any part of the price of the lease tax wise and should be part of the financed portion of the lease that would be covered by the monthly payments.


ooops. opened thread before dinner when there was only the OP...

Again the question is one dealer is telling me I am responsible for sales tax on that rebate..which comes to about $400+ (5.9% * 7500). I think it might just be another way for him to suck in more money on the deal because another dealer didnt even mention it?

the dealer is correct. you are responsible for the sales tax on that because it is part of the capitalized cost of vehicle in which taxes apply. now tax laws vary and not familiar with your state but you should be responsible for taxes on the entire cost of the vehicle minus the residual in most cases.

 

[ku4ever2]

Walk.

+1 That dealer is just trying to rip you off.

That is what I thought too. Again, I have been shopping with a few different dealers and only one brought it up. I just thought maybe the others had it buried somewhere else in their lease.

I am ready to pull the trigger tomorrow on a VPP lease. Best deal I found was an SV with Premium pkg (34400 MSRP): VPP pricing, 24 months, 12k lease $232 (incl sales tax) and not a single penny out the door (first payment already included in lease). So total Lease cost of $232 x 23 payments = $5336 seems like a good deal based on few compares I have done on this forum?

Again, I just don't want to be surprised by hidden fees when I go into sign the papers. The dealer that couldn't match the deal was the one that stated that I would be surprised when they ask me to pay for the sales tax on the $7500 rebate so hope that doesn't happen. Sounds like others have not seen it so hopefully I should be good.

 

[ku4ever2]

the dealer could handle it anyway they want to really. there is no sales tax for EV purchases in WA but the fed tax credit should be treated as a $7500 down payment. so if you put down $2,000 then the paperwork should read that you put down $9500 and it goes from there. the part of the cost covered by the $7500 is treated just like any part of the price of the lease tax wise and should be part of the financed portion of the lease that would be covered by the monthly payments.


ooops. opened thread before dinner when there was only the OP...

Again the question is one dealer is telling me I am responsible for sales tax on that rebate..which comes to about $400+ (5.9% * 7500). I think it might just be another way for him to suck in more money on the deal because another dealer didnt even mention it?

the dealer is correct. you are responsible for the sales tax on that because it is part of the capitalized cost of vehicle in which taxes apply. now tax laws vary and not familiar with your state but you should be responsible for taxes on the entire cost of the vehicle minus the residual in most cases.

Ok..Im confused by the last statement. So at the end are you saying that YES somewhere in the lease I must pay for tax on the $7500 tax credit?

 

[SanDust]

Should be taxable. If you bought the car you'd pay sales tax on the purchase price, not the purchase price minus the $7500 tax credit. For a lease the leasing company is paying the dealer the purchase price so it would be liable for the sales tax on the purchase price, not on the purchase price minus the tax credit that it later receives, and it would expect the lessee to pick this up.

Rather than being a misleading SOB this sales guy may be giving you the straight scope.

Different states have different laws. Though it sounds right, you'd have to look at Colorado specifically.

FYI collecting sales tax and not remitting it to the state isn't legal and I doubt the dealer would do this.

 

[DaveinOlyWA]

the dealer could handle it anyway they want to really. there is no sales tax for EV purchases in WA but the fed tax credit should be treated as a $7500 down payment. so if you put down $2,000 then the paperwork should read that you put down $9500 and it goes from there. the part of the cost covered by the $7500 is treated just like any part of the price of the lease tax wise and should be part of the financed portion of the lease that would be covered by the monthly payments.


ooops. opened thread before dinner when there was only the OP...

Again the question is one dealer is telling me I am responsible for sales tax on that rebate..which comes to about $400+ (5.9% * 7500). I think it might just be another way for him to suck in more money on the deal because another dealer didnt even mention it?

the dealer is correct. you are responsible for the sales tax on that because it is part of the capitalized cost of vehicle in which taxes apply. now tax laws vary and not familiar with your state but you should be responsible for taxes on the entire cost of the vehicle minus the residual in most cases.

Ok..Im confused by the last statement. So at the end are you saying that YES somewhere in the lease I must pay for tax on the $7500 tax credit?

that $7500 is the same as you putting that money down. it is no different. So whatever the tax laws in your state cover, then yes you are responsible for taxes.

say you lease a car. the sale price is $34,000. you lease for 2 years, the residual is 20,000. some states as I understand it will tax you on the 34,000. most states only tax you on the difference between "sale" price and residual or 14,000 in this case.

so you put down $2000 but its actually listed as $9500 because its your $2000 plus the fed's $7500. now you owe the balance which is $4500 plus various fees, AND tax on the full $14,000.

 

[LEAFfan]

First of all, it isn't a cash incentive nor is it a rebate. So Edmund's chart about tax on rebates/incentives doesn't apply to FTCs. I can't speak for CO, but every Nissan dealer here in the PHX area charges tax on the $7500 FTC with a lease.

 

[thankyouOB]

when you buy the car, you pay sales tax on the full price and get the federal tax rebate later. for example:
car costs 30k
tax at 8% is 2.4k
total cost is 32.4k
after rebate = 24.9k
the fantasy alternative:
you dont get to deduct the federal tax rebate out front, so you dont pay 1.8k tax on 22.5k and 24.3k is total after rebate. you dont save $600. it is paid in tax.

i would assume it works the same way for the car when it is bought by the dealer/lease front company and leased to you. the sales tax on the tax rebated amount is factored into the sale somewhere.

 

[bobsfreeleaf]

I was told the same thing by a dealer in CA, as the reason the lease payment would be higher than I expected (that was on a 2012). In the end, I went to another dealer who gave me the $199 a month deal on my 2013, net out the door for $219. However, he bumped my term to 39 months, so maybe that is where he made it up. That 24 month deal sounds good. Bob

 

[cgaydos]

Turns out the second dealer was right about the need for the tax - what we don't know is if the first dealer found some way to package the up-front tax payment in with the overall lease.

I have to admit my first reaction was that the dealer was wrong. However, when I leased my red LEAF here in Colorado last year I had a $2k down payment so I wasn't sure that this didn't include sales tax.

Lo and behold, today I looked at the NMAC lease agreement and there it is plain to see under section 4, "Itemization of amount due at lease signing or delivery". This section includes capitalized cost reduction (the 7500 and any other rebates), your first payment, title fees (not registration - you pay that at the DMV here), then item (f) Total Tax on the Capitalized Cost Reduction.

The amount you will pay depends upon the sales tax rate where you reside. I would ask the first dealer about this before going in.

 

[Randy]

I was told the same thing by a dealer in CA, as the reason the lease payment would be higher than I expected (that was on a 2012). In the end, I went to another dealer who gave me the $199 a month deal on my 2013, net out the door for $219. However, he bumped my term to 39 months, so maybe that is where he made it up. That 24 month deal sounds good. Bob

One thing to keep in mind in California is that you need to lease for 36 months to get the CVRP $2500 rebate. A 24 month lease doesn't qualify for that rebate...

 

[ku4ever2]

Thanks for all the great information. It is a bit confusing. I'm assuming both dealers have it buried in the lease somewhere. The good news is I have two dealers with similar offers so if one seems to be screwing me I'll just walk and go to the other.

Hopefully by this afternoon I'll be in my new Leaf!

 

[cwerdna]

I was told the same thing by a dealer in CA, as the reason the lease payment would be higher than I expected (that was on a 2012). In the end, I went to another dealer who gave me the $199 a month deal on my 2013, net out the door for $219. However, he bumped my term to 39 months, so maybe that is where he made it up. That 24 month deal sounds good. Bob

One thing to keep in mind in California is that you need to lease for 36 months to get the CVRP $2500 rebate. A 24 month lease doesn't qualify for that rebate...

CVRP doesn't apply to the OP since the OP's not in California.

 

[SanDust]

Turns out the second dealer was right about the need for the tax - what we don't know is if the first dealer found some way to package the up-front tax payment in with the overall lease.

Putting aside lengthening the lease terms, which introduces an entirely different set of issues, given that the lessor sets most of the terms, the only way the dealer has to cut the monthly payments to cover the tax would be to lower the purchase price or increase the amount down.

I think one reason people get confused on this point is because of how some states treat trade-ins. In most states a trade-in is treated as a sale to the dealer (which it is). The dealer is responsible for the tax so you, as the seller, don't pay it, but you do pay tax on the amount of the purchase price on the new vehicle, not the purchase price minus the trade value. However, some states only tax you on the purchase price minus the trade in value, probably because the car dealers have a good lobby.

 

[ku4ever2]

Wanted to follow up on this thread. I finished up the deal today on my new Leaf. And yes, right there in plain view on the Lease agreement is "Tax on Capitalized Cost Reduction" of $442.50...which is exactly my sales tax rate (5.9%) x the $7500 Federal Tax credit.

The good news is I didn't have to pay it. Since I pushed hard for $0 out the door, the dealer paid that tax along with the D&H and 1st month payment. I think I got lucky with a dealer that was willing to make the deal because a few others I asked couldn't come close to the same deal (although one got close). I guess it shows that it pays to shop around and yes all fees/cost are negotiable