Relates to the taxable price for the sale of a motor vehicle

Title of bill

An act to amend the tax law, in relation to the taxable price for the sale of a motor vehicle

Purpose

To provide for the calculation of sales tax for the purchase of a motor vehicle after a manufacturer's rebate is applied to the purchase price.

Summary of provisions

Section 1 amends § 1105 of the Tax Law by adding a new subdivision providing that any rebate offered by a retail dealer of a motor vehicle to a consumer at the time of sale shall be excluded for the purposes of calculating the taxable price of such motor vehicle sale. The rebate must also be excluded for the purposes of calculating any local sales and compensating use tax that may be applicable.

Section 2 provides the effective date.

Existing law

Section 1105 of the Tax Law provides for the imposition of sales tax of four percent upon the receipts from every retail sale of tangible personal property, except as otherwise provided in this article.

Section 1210 of the Tax Law relates to the taxes of cities and counties administered by the state tax commission and provides, notwithstanding any other provision of law to the contrary, but subject to the limitations and exemptions as set forth part II of this article, any city or county in this state, acting though its local legislative body, is authorized and empowered to adopt and amend local laws, ordinances or resolutions imposing in any such city or county sales and compensating use taxes.

This bill provides that the state sales tax and local sales and compensating use tax shall be imposed after the rebate is deducted from the price of the vehicle.

Justification

New York State requires that sales tax be paid on the purchase of a motor vehicle prior to the deduction of a manufacturer's rebate. However, claiming that rebates are a form of payment from the manufacturer and therefore do not affect the purchase price of the car fails to acknowledge the fact that the purchaser, on whom the sales tax is imposed, is paying a sales price after the rebate is applied. The "manufacturer's payment" is not subject to any tax. Thus the purchaser bears the cost for the tax on a payment not actually paid by them. For example, a consumer who purchases a vehicle and receives a $2500 manufacturer's rebate that is applied toward the purchase price will pay an additional sales tax of $200 or more, depending on their county of residence. This is unwarranted and unfair to the purchaser.

To remedy this unfairness, this legislation provides that all state and local sales taxes imposed on the purchase of a motor vehicle shall reflect the post rebate price of the vehicle. This measure ensures that the purchaser pays sales tax only on what he or she actually pays as the purchase price.

Legislative history

New bill.

Fiscal implications

To be determined.

Effective date

This act shall take effect 30 days after enactment.