I make my living as a Tax Coordinator for two very large Worldwide
Corporations (Both of which everyone should know by name) and, appropriately
enough, I do most of the Car Lease/Sales for the company.
In the 2002 Federal RIA Tax Handbook, the code states:
Retail Excise Taxes: Passenger ("luxury") vehicles (weighing 6,000lbs or
less). For 2001, 4% of excess of sale price over $38,000; for 2002, 3% of
excess sale price over $40,000 (amount as calculated by RIA bosed on CPI
figures); tax expires after 2002. Special rules apply to electric and clean
burning fuel vehicles. (|P| 1118 Pg. 40)
Rick is correct in his reference stating that Luxury Taxes should be paid by
the dealer, in the case of a "New" car purchase. Different rules apply to
used vehicles, wherein, the buyer of a person to person transaction of a
used vehicle would likely have to account for reasonable compensation should
the car exceed such values. But, most likely, the luxury taxes would have
already been paid upon the original purchase of the vehicle from the dealer
as a "New" vehicle, unless it was never issued an MSO.
Good luck. It is the principles that matter most.
84 Z51 4+3
90 Red/Black ZR-1 #712
>From: Rick Schultz <[log in to unmask]>
>Reply-To: Rick Schultz <[log in to unmask]>
>To: [log in to unmask]
>Subject: Re: [ZR1] NONTECH: Luxury TAX
>Date: Thu, 2 Jan 2003 15:34:16 -0500
>The seller of the vehicle is liable for the luxury tax NOT THE BUYER
>Taken right from the tax code:
>The book states that the Seller of the vehicle is liable for the luxury
>tax(page 26). The book is Publication 510 Excise Taxes for 2002, and the
>website on the front of the book is www.irs.gov.
>Effective January 1, 1991 the federal government began assessing a tax
>on luxury vehicles. The tax for 2002 is based on 3% of the amount of
>the negotiated selling price in excess of $40,000. The tax is triggered
>by the first retail sale or lease of a vehicle and is paid by the retail
>dealer. The tax is based upon the negotiated price not the MSRP. The
>tax is computed by adding all of the consideration the CUSTOMER gives
>for the new vehicle. Rebates are not considered as consideration the
>customer gives because they are paid by the manufacturer as a means of
>reducing the cost of the vehicle directly.
>>Another way to compute the taxable amount is to take the MSRP and
>>subtract all dealer discounts, price reductions and rebates.
> The sale price includes the following "consideration": cash, down
>payment, amount financed and the actual cash value of any trade-in. The
>sale price also includes charges incidental to readying a vehicle for
>delivery and dealer parts and accessories. The sale price does not
>include extended warranty contracts, optional insurance, title,
>registration, and license fees, or state and local sales tax.
>Bruce L. Wolfe wrote:
>>>I tried to explain to them that I would pay State Sales Tax on the
>>>44,421.68, but that
>>Federal Luxury Tax was figured in after all rebates and incentives were
>>So, you were charged lux tax on $4,421.68 x .03 = $132.65. According to my
>>understanding, rebates or allowances applied to one's payment, instead of
>>purchase price, do not reduce tax liability.
>>IRS excise tax info follows.
>>For 2002, the tax is 3% of the amount the sales price exceeds the base
>>amount of $40,000. The
>>luxury tax is scheduled to expire after 2002.
>>Passenger vehicles. Generally, the tax applies if the passenger vehicle
>>has an unloaded weight
>>of 6,000 pounds or less. However, the tax applies to a truck or van only
>>if it has a maximum
>>loaded weight of 6,000 pounds or less. The tax applies to limousines
>>regardless of their weight.
>>Leases. Generally, a lease is considered a sale of the vehicle. The sales
>>price is the lowest
>>price for which the vehicle is sold by retailers in the ordinary course of
>>business. For rules
>>on paying the tax on a lease, see section 4217(e)(2) of the Internal
>>Use treated as sale. If any person uses a passenger vehicle before its
>>first retail sale, the
>>person is taxed on such use as if that person sold the vehicle at retail.
>>Exceptions. The luxury tax does not apply to the following uses of a
>>Use of the vehicle as material in the manufacture or production of, or as
>>a component part of,
>>another taxable vehicle manufactured or produced by the user.
>>Use of the vehicle as a demonstrator.
>>Use of a vehicle after importation if the user or importer establishes
>>that the first use of the
>>vehicle occurred before January 1, 1991.
>>Parts and accessories. Certain parts or accessories installed within six
>>months of the date on
>>which a passenger vehicle is placed in service may be subject to the tax.
>>The same rate of tax
>>applies to parts and accessories that applies to vehicles.
>>The owner, lessee, or operator of the vehicle is liable for the tax. If
>>the part is installed by
>>someone else, the installer is secondarily liable for the tax.
>>The tax does not apply to any of the following items.
>>Replacement parts or accessories.
>>Parts or accessories installed to help a person with a disability operate,
>>enter, or exit the
>>Parts or accessories that permit the vehicle to be propelled with a
>>Parts and accessories if the total cost (including installation) of all
>>parts and accessories
>>does not exceed $1,000.
>>Exemptions. The luxury tax does not apply to the sale of a passenger
>>vehicle for the following
>>For use exclusively in public safety, law enforcement, or public works
>>activities by the
>>federal, state, or local government. Treat an Indian tribal government as
>>a state only if the
>>use is an essential tribal government function.
>>For use exclusively in providing emergency medical services by any person.
>>For use by the purchaser exclusively in the business of transporting
>>persons or property for
>>hire or compensation.
>>For export. The requirements for making a sale of an article for export
>>exempt from the
>>manufacturers tax also applies to these sales.
>>Resale or substantial non-exempt use. The tax applies to vehicles that
>>were originally exempt
>>from the luxury tax if the purchaser resells the vehicle or makes a
>>substantial non-exempt use
>>of the vehicle within 2 years after the date of purchase.
>>Credit or refund. A credit or refund (without interest) may be allowable
>>if the price of the
>>vehicle is readjusted by reason of return or repossession of the vehicle
>>or a bona fide
>>discount, rebate, or allowance applied against the price of the vehicle.
>>For information on
>>conditions to allowance that apply to credits and refunds, see
>>Manufacturers Taxes, earlier.
>>Luxury Tax Computation
>>1. Enter the retail price of the vehicle
>>2. Enter additions to the retail price
>>3. Add lines 1 and 2
>>4. Enter subtractions from the retail price
>>5. Adjusted sales price. Subtract line 4 from line 3
>>6. Base amount for 2002 $40,000*
>>7. Taxable adjusted sales price. Subtract line 6 from line 5. If line 6 is
>>greater than line 5,
>>stop here--the luxury tax does not apply to the vehicle
>>8. Tax rate for 2002 .03(3%)
>>9. Luxury tax. Multiply line 7 by the tax rate on line 8
>>Line 1. The retail price is the total consideration paid in cash, cash
>>services, and the wholesale fair market value of any trade-in minus any
>>payoff made by the
>>seller and any cash given back to the customer. For leases, enter the
>>lowest price for which the
>>vehicle is sold by retailers in the ordinary course of business.
>>Line 2. Additions include the following items if stated separately on the
>>invoice and not
>>included in the retail price.
>>Parts or accessories sold on or in connection with the vehicle.
>>Taxes (except the luxury tax and state sales tax).
>>Any other charges not listed above.
>>Line 4. Subtractions include the following if they are separately stated
>>on the invoice and are
>>included in line 3.
>>State and local sales taxes.
>>Title and registration charges.
>>Optional warranty charges.
>>Rebates and price adjustments paid.
>>The value of used components supplied by the purchaser.
>>* The base amount for an electric vehicle is $60,000. The base amount for
>>a clean-fuel vehicle
>>is $40,000 plus the amount the price of the vehicle increases due to the
>>retrofit parts and components that permit the vehicle to be propelled by a
>>----- Original Message -----
>>From: "Rick Schultz" <[log in to unmask]>
>>To: <[log in to unmask]>
>>Sent: Thursday, January 02, 2003 11:12 AM
>>Subject: [ZR1] ZR1 NONTECH: Luxury TAX
>>I purchased a new corvette for 44,421.68 tuesday evening (12/31/02)
>>about 6 hours
>>before the Federal Luxury Tax ended. I wanted to wait till Thursday to
>>close the deal
>>so there would not be any controversy over the Luxury Tax, but they said
>>today or no
>>deal, because they wanted to close out the car on the 2002 books. Maybe
>>not. With my GM card and GMAC rebates of totaling 4887.50 that brought
>>below the 40,000.00 threshold to 39,534.18. I tried to explain to them
>>that I would pay
>>State Sales Tax on the 44,421.68, but that Federal Luxury Tax was
>>figured in after all
>>rebates and incentives were deducted. I brought some documentation with
>>me but to no
>>avail. So I was faced with paying 132.65 in Federal Luxury Tax or no
>>deal. No, they
>>would not lower the price because it was GMS purchase. Can someone help
>>me get my
>>money back ? It's not that 132.65 is all that much money, but the
>>gets enough of my money and it's more the principal of it. The Dealer
>>said that as long as
>>I owned the car I would have to pay Luxury on any accessories that I
>>when the LAW was in effect that was true for 6 month's not for life and
>>certainly not now
>>that the Luxury Tax has been repealed.
>>Problems? Contact Dave Bright at: [log in to unmask]
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