• Aug 1, 2009
As you're aware by now, yesterday's big news was H.R. 3435, the emergency legislation passed by the House of Representatives authorizing an additional $2B for the CARS scrappage scheme. As had been widely reported on Thursday, the clunkers program appeared to have run out of money a lot sooner than anyone had expected, sending legislators in favor of it into a panic. After a period of impassioned floor debate (the Michigan delegation appeared on the verge of a collective nervous breakdown, treating the possible suspension of C4C as the apocalypse), the resolution passed and will head on to the Senate next week for additional debate and a final vote. In the meantime, Cash for Clunkers stays online. For dealers, however, the action in the House wasn't the only important news to come out yesterday.

According to Automotive News, NHTSA -- the government bureaucracy responsible for administering the CARS program -- conducted a webinar for automobile dealers last Monday. During that session, retailers were reportedly told that the federal rebate cash they'd be receiving would be non-taxable. Now, for the buyers trading in so-called clunkers, this is indeed the case. Unfortunately for car dealers, however, it appears that NHTSA got the explanation wrong. In fact, AN reports that the IRS issued an advisory bulletin yesterday confirming that yes, the federal rebates dealerships receive for CARS trades count as taxable gross income.

Apparently, some retailers believed that since their customers weren't getting taxed, neither were they. And if the Automotive News account of events is accurate, it's fairly obvious that NHTSA didn't fully understand the tax implications either when they conducted their webinar. As a result, some dealer smiles around the country are likely turning into frowns this weekend. The money line in the AN piece comes from Dick Heider, a dealer accountant who points out that the CARS cash simply counts as a normal payment to the retailer, and thus is taxable. "What you are dealing with are people who don't understand accounting," he says. Apparently, on all sides of the equation.

[Source: Automotive News | Photo: Steve Lyon (CC by SA 2.0)]


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  • 96 Comments
      • 5 Years Ago
      @ audi_arena
      Mmm, the way i see it, normally when dealers get a trade in worth 4500, they can sell it for $4500,and usually more than that. In this case, they're given a "trade in" worth 4500, that they immediately crush and sent off to the scrap. So why on earth should they be taxed on a portion of a deal they're making no money on.

      @Nozferat
      I would say that is the definition of americans, but that is not true. In the history of america, we've done a lot of sacrificing for the greater good. But i would say in post WWII america so many people are concerned about "me me me" and the continual social free ride, that they think everything in society is literally owed to them. And the though of making a sacrifice...well clearly, that isn't american anymore. Hate those whiners.
      • 5 Years Ago
      It's mindblowing to see this many people think that destroying a perfectly good car is a good idea. Using illegally created money that the government never had, taxing that money that they never had, and then making us pay for it no less. You guys amaze me. If you'd quit insulting each other long enough to read how the Federal Reserve works in conjunction with the Treasury and quit pitting the political parties against each other, you guys would realize this is all going to land on our heads in a few years. No matter who did what and when, this is a continuation of events that have happened since FDR. And we gone further and further in debt. I don't care what the money is created for, we are not better off in any way continuing all of this. Someday the piper has to be paid, we can't continue to rob Peter to pay Paul. It hasn't worked in any country, in any government, at any time in history. Study what the colleges and the media DON'T tell you.
        • 5 Years Ago
        Not to mention, Polo, that Article 1, Section 9, Clause 7 of the US Constitution states:

        "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time. "

        Which is exactly what HR 1207, and it's companion bill in the Senate S 604, is trying to accomplish by forcing an audit on the Federal Reserve to find out just how much money they are creating and where it is going. There are over 281 cosponsors on the bill in the House of Representatives and 20 in the Senate.

        Wants more facts, or would you rather insult me? Because if that's "empty talking points and hate-fill rhetoric" I must be an evil person. I'd like to ask you what exactly I've said that's an empty talking point or any statement that was hate filled. Can you elaborate?
        • 5 Years Ago
        Ray, if you're an evil, hate filled person, I like evil, hate-filled people.
        • 5 Years Ago
        "Using illegally created money that the government never had, taxing that money that they never had, and then making us pay for it no less."

        How is the money "illegally created", and explain it in a manner that can be held up in court since you are claiming it is "illegal".

        You can't, because you're so bloated with empty talking point and hate-fill rhetoric you couldn't make a coherent sentence with out blurting out some meaningless nonsense that no sane person could understand.

      • 5 Years Ago
      Income is Income and we all get taxed on Income on the business side of things....How anybody would assume different is ignorant....
        • 5 Years Ago
        "The government never had this money, and they never will. So taxing us (businesses) on money they didn't have is ludicrous at best."

        Make sure you tell that to the military industrial complex which right now takes around $500Billion of that non-existent money each year. And I hope you were screaming that loud and clear when Bush was adding $5TRILLION to the national debt.

        Oh, and dealers are taxed on regular trade-ins so why would this be any different? You thought Cash4Clunks meant "Cash4Dealers"?
        • 5 Years Ago
        The government never had this money, and they never will. So taxing us (businesses) on money they didn't have is ludicrous at best. We are going to have to pay this back in inflation. How anyone could "assume different is ignorant" shows your ignorance. You need to read things other than your government mandated textbooks and the crap spewed by the media.
        • 5 Years Ago
        Ray, you live in La La Land.....Income is Income regardless of where it's coming from and who's picking up the tab...Where the money is coming from is irrelevant...If it's money you received from a for profit transaction you will get taxed on, can that be any clear to you??? It doesn't matter if they are getting the 4500K from my pockets or the government's pocket, it's money they are receiving for a business transaction for profit....IF they don't want to get taxed on the 4500K they should donated to a non-for profit organization as charity and deduct it from their income...What crap spewed by the media??? you talking about??? this is as simple as black and white common sense...If you don't like the taxing laws in this country you got 2 options, 1 deal with it or 2 get the F out of the US....

        Due to my income bracket I get taxed more then you do, You think I like picking up the slack from everyone else??? having to pay more in taxes due to everyone else short comings?? but you know what it is how it is, Stop whining about life is unfair boo hoo and just deal....



      • 5 Years Ago
      That had better be some stock photo and not in any way related to CARS because if an E30 convertible is being scrapped at sacrificial alter of Democrat vote-buying, I may contemplate resorting to violence.
        • 5 Years Ago
        "at (the) sacrificial" - I hate not being able to edit posts... Autoblog, you have your mission.
      • 5 Years Ago
      Where's the surprise? Whenever money changes hands, somebody gets taxed.

      Car dealers are probably just upset because they think to pass the taxes on to the car buyers as they normally would. They will now, you betcha.
      • 5 Years Ago
      Alright I give up.

      I can't even read the comments on Autoblog anymore because you the handful of people that actually get things are drowned out by all the nutjobs on both the left and the right.

      The only place worse then autoblog right now for comments is youtube.
        • 5 Years Ago
        Still, comparing AutoBlog comments to YouTube comments is like comparing the Mona Lisa to the designs I piss into my toilet.
      • 5 Years Ago
      incoming pissed off Republicans blaming obama for everything. BTW autoblog is about cars not about politics just FYI for all the morons here.
        • 5 Years Ago
        I did notice autoblog seems to have a higher concentration of conservatives (every time there's a political argument they come out of the woodwork), maybe b/c gawker is dominated by liberals and it bleeds over to jalopnik. It's okay once in a while to let them have their day, especially in topics like this one where you can't avoid it.

        As for Cash for Clunkers, it's a mixed bag. It doesn't seem that well managed, but it does seem like a success since it brought a lot of showroom traffic. I bet a lot of people politically against it, actually signed up for the program.
        • 5 Years Ago
        @Hector,

        How in the world would you know if any of us go to news sites?

        I personally go to a lot of news sites. Not to participate, but to have a good laugh at all of the self-righteous know-it-alls like yourself who populate those sites. Yeah, there's a lot of those here too, but the ones on the news sites are so much more ignorant. It is great entertainment!
        • 5 Years Ago
        Cash For Clunkers *is* politics, genius.
      • 5 Years Ago
      Good. I went to the Toyota dealer today and saw about 40 cars in the back marked "CFC".... Many looked like they had a lot of life left in them.. It kind of makes me sick as a car enthusiast to see good cars go to waste..
        • 5 Years Ago
        Just think about the cleaner air you'll be breathing because those cars are off the road.

        Think about the families who get to drive in a newer car with more standard safety features, and better gas mileage, so they can afford to give their family a better life.

        Think about someone other than your own petty interests for a change.
      • 5 Years Ago
      LOL God Bless our Government! they really know how to F stuff up!
        • 5 Years Ago
        @Randy dude you sound sooooo stupid right now.
        • 5 Years Ago
        Well I don't think it was a F up... Think about it... If one of us gets unemployment wages, we get taxed. Why wouldn't the dealer? It's income towards the purchase of something... Right? Or am I missing something?
      • 5 Years Ago
      Not to worry, I'm sure dealers will find a way to inflate the transaction costs to offset the rebate income.

      For example:

      Remove oil from crankcase per EPA guidelines = $1200.00
      Use EPA Certified silica to disable engine = $900.00
      Remove air from tires per EPA specs = $200.00
      Remove and dispose of Christmas tree air freshner = $125.00
      Complete, copy in triplicate and submit CARS paperwork = $2000.00
      • 5 Years Ago
      Wealth redistribution on a small scale.
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