REPORT: Dealers may have to pay taxes on Cash for Clunkers rebates
Nothing is ever as simple as it seems. One prime example is the government's newly minted "Cash for Clunkers" program, or CARS (Car Allowance Rebate System) that launched yesterday.
As the rebate program kicks into gear, dealers that are hoping to cash in are facing a new worry. But according to Automotive News, they may end up having to pay federal and/or state taxes on the rebate money they receive from the federal government. It seems that the lobbyists and congressional aides who actually wrote the bill neglected to address the issue of whether the rebates count as income for dealers.
In the end, the bill passed by Congress explicitly states that the rebates don't count as income for consumers. As for the dealers, oops! Nothing in the rules published by the National Traffic Safety Administration or the law says anything one way or the other, which means that the Internal Revenue Service and individual states will have to make the call. Some dealers are already setting aside cash just in case they end up having to pay.
[Source: Automotive News – sub. req'd | Image: Justin Sullivan/Getty]
Reader Comments (Page 1 of 2)
CB 8:38AM (7/28/2009)
That's not possible. Our federal government absolutely never forgets to consider all the consequences of it's actions.
Reply
notYou 9:12AM (7/28/2009)
Correct! Which is why they alone are the ones who will revamp the best medical system in the world to make it ... even better! Unintended side effects and consequences, be d@mned!
HopeNChange - Full Steam Ahead!
Frank 9:57AM (7/28/2009)
And we want these clowns "reforming" our health care system? Seriously?
James 12:34PM (7/28/2009)
"But according to Automotive News, they may end up having to pay federal and/or state taxes on the rebate money they receive from the federal government..."
Here goes another double taxation...whatta scam.
BigWill 1:14PM (7/28/2009)
"And we want these clowns "reforming" our health care system?"
Exactly. I can see ObamaCare covering open heart surgery but not bothering to cover anesthesia.
Gstill 8:43AM (7/28/2009)
In this economy, if it can be taxed, it will be. If the states get to make the call, they'll collect the tax revenue, because unlike the federal government, they don't have the luxury of running a deficit.
Here in Tax-achusetts, the sales tax and liquor tax just shot up. If they can get any more tax revenue, they will.
Reply
notYou 9:13AM (7/28/2009)
Gstill: If the states get to make the call, they'll collect the tax revenue, because unlike the federal government, they don't have the luxury of running a deficit.
If that's true, how is California - what? - 40billion'ish in the red?
Seminole 10:50AM (7/28/2009)
notYou,
That is why California is issuing IOU's. The Fed can just print more money if it runs a deficit.
DarkKnight67 9:02AM (7/28/2009)
My Dad and I were discussing this thought - that the rebate was imputed income. But, we thought that it would wind up being paid by the purchasers (and it may still), not the dealers.
Reply
Jerry Hightower 9:03AM (7/28/2009)
See what happens when you rush things Obomber! These are supposed to be some of the brightest lawyers/politicians and they still can't get it right. You mean to tell me they considered taxing or not taxing the consumer and yet didn't even think of the dealers? There's basically only two parties involved. Can't wait for the screwed up health bill.
Reply
Polly Prissy Pants 1:34PM (7/28/2009)
What makes you think this was a mistake?
Cougs 9:22AM (7/28/2009)
So wait...they are taxing the refunds of tax money? Yea, that's about right - can't wait for them to get healthcare all buttoned up to saves us 3 pennies and a ball of lint.
Reply
Matthew 9:31AM (7/28/2009)
I was surprised to learn that the payment was to be made to the dealer rather than directly to the consumer. I can understand they wanted to save the consumer from being out-of-pocket. But the way it has turned out the consumer might never receive the full saving. I wonder if there is anything in the legislation that allows the consumer to elect to receive payment directly, rather than as a discount from the dealer. I suppose not.
Reply
JohnAngelo 9:37AM (7/28/2009)
Dealers who make a profit pay income taxes on their profit. How many are actually making money?
Probably more than you think. Been in the finance office lately?
Reply
Leclerc 12:35PM (7/28/2009)
Maybe consumers that feel as though the dealer finance department is making "too much money", they should get off their a** and grab their own financing? Lazy Americans.
Frank 9:59AM (7/28/2009)
On second thought, let's not be too hard on them. Maybe they didn't read the bill.
Reply
Protzenegger 12:06PM (7/28/2009)
The real question is, what bill DID they read lately?
Brian 11:21AM (7/28/2009)
Is Autoblog just trying to stir up the mob with another non story?
The issue of dealers paying taxes was not addressed in the law because they OBVIOUSLY would have to pay taxes on it. Why would the rebate be considered any differently than the rest of the purchase price that came out of the buyers pocket or from financing? It's all the same money to the dealer so they would pay on the entire purchase price.
Think people.
Reply
wally 11:46AM (7/28/2009)
Maybe, one day these so called government leaders will actually read & analyze what they are voting on!!!!!!!!!!!!
Watch out health care!!!!!!
Reply
Level 11:50AM (7/28/2009)
Whats the big deal? As a business owner you get taxed on all income you generate, this is no different..Whether the dealers received the 4500 from the customer or the government is irrelevant makes no difference because it's still income..Stop with the whine...
Reply