Posted tagged ‘cars’

That Cash You Got For Your Clunker Is Taxable

August 25, 2009

This just in… there ain’t no such thing as a free lunch!

clunker

Keloland Television: But many of those cashing in on the clunkers program are surprised when they get to the treasurer’s office windows. That’s because the government’s rebate of up to $4500 dollars for every clunker is taxable.

“They didn’t realize that would be taxable. A lot of people don’t realize that. So they’re not happy and kind of surprised when they find that out,” Nelson said.

Karl Denninger explains further at The Market Ticker:

The amusement here is how most (if not all) states compute sales tax (charged when you register the vehicle.)

When you buy a new car you pay tax on the difference between the new car’s purchase price and the trade-in you present to the dealer. This is an intentional distortion in the law that is intended to favor dealers over private-party used car sales; if you sell your used car privately the new buyer pays sales tax but you do not get the offset on the purchase of your replacement vehicle – the only way to get that is to trade the car.

Dealers use this, of course, in negotiations, effectively pocketing the sales tax – and why not? It’s a real difference to you!

But the “cash for clunkers” is not a trade-in. That’s a $4,500 check from the government, basically.

So you get nailed at least once and possibly twice. Specifically, you pay sales tax on the full vehicle price (effectively paying sales tax on the $4,500!) and what’s worse those states that tax income (that would be most of them!) might wind up counting this as income for state income tax purposes too, effectively taxing you twice.

Car Dealers Survey: Cash for Clunkers a Failure

August 20, 2009

Car Dealers Survey: Cash for Clunkers a Failure

In a survey of nearly 800 dealers,

  • 97% of dealers who responded, say the government is not reimbursing fast enough
  • 13% of dealers have dropped out the program because the government is not reimbursing fast enough
  • 87% percent of dealers are concerned the money will be exhausted
  • 3% of CARS program deals have been reimbursed
  • 66% of dealers have not received one payment from the government
  • 25% of dealers are experiencing severe cash flow problems that require short-term loans to alleviate
  • 11% of submitted applications have been approved (though dealers still are waiting for the money)
  • 16% of submitted applications have been rejected
  • 55% of dealers are not confident they will get reimbursed for every deal
  • 40% do not want the program to continue, even if changes are made to the CARS program

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Yep, Government Motors It Is

March 30, 2009

car_salesman_sleezyPresident Barack Obama says the federal government is preparing to offer several incentives to get Americans to buy more U.S.-made cars.

In a White House speech, Obama said the IRS will start notifying consumers who purchased cars after Feb. 16 that they can deduct the cost of any sales and excise taxes. The program would remain in effect till year’s end.

Obama says he wants to work with Congress to use parts of the economic stimulus package to fund a program that would allow consumers to get a “generous credit” when they replace an older, less fuel-efficient car and buy a new, cleaner car.

The president says he wants to make the program retroactive starting Monday. It’s meant to boost car sales in the U.S., which have seen their worst decline in 27 years.

Obama also said the government will guarantee warranties on any GM or Chrysler vehicles.

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