Sales Tax Question

Just when you think, what can "they" tax next, I came across a situation yesterday that made me think twice...

So, here the deal...
I bought a new car, and included in the MSRP, on the window sticker, is a charge for the Federal Gas Guzzler Tax of $1,000. Note that this charge was added and included by the manufacturer, and not the dealer...

This dealer is telling me that the $1,000 tax is included in the (sales)taxable total, as viewed by the State. It seems to me that I'm paying tax on a tax...?? The dealer's explanation is that the gas guzzler tax is taxable since it is included as a line item by the manufacturer on the window sticker.

Anyone else ever run into this scenario?

Regards,
David

David, Checked my Maranello purchase records: sales tax was assessed on something called "Manufacturer's Suggested Port of Entry Retail Price," which is MSRP BEFORE factory installed options and destination charges. Very strange, can't believe I didn't notice this before.

Will

Will,
Am I understanding you correctly that you too paid sales tax on the guzzler tax?

I ran this by my accountant this morning..and got a non definitive answer as to the legality of this. His feelings, which were the same as the dealer are....If the fed tax is included "above" the total for the MSRP, then the States feel its taxable.

It would seem in your situation that the options weren't taxed??

Regards,
David

David, sorry, my post wasn't clear at all.

In my case ('03 575), the gas guzzler tax was assessed on the pre-options, pre-destination charges price, which on my car's sticker was called the "Manufacturer's Suggested Port of Entry Retail Price." The sticker then added options and destination charges to get to the "Total Suggested Retail Price."

My state's sales tax (Maryland) was assessed on the MSRP, which as in your case included the gas guzzler tax, the options and the destination charges - and of course without regard to the trade-in. So, yes, it appears we're paying a tax on a tax.

From my dealership's form, it appears that the old luxury tax may have been assessed in the same manner ....

Hope I explained things better this time. Good catch.

Will

Will,
Makes perfect sense...Seems both Ferrari and in my case now, BMW, include the gas guzzler tax the same way. It's bad enough in NY that they tax us to death, to begin with..but tax on tax, oh please!

At least lux tax is no more...

Regards,
David