Sales Price – Motor Vehicles – Dealers

You must collect sales tax on the sales price of the motor vehicle at the time of the sale unless an exemption applies. The final amount you charge your customer can include both taxable and nontaxable items. Items that are nontaxable are not part of the sales price.

What sales price includes

Sales price includes the following, even if they aren’t separately stated on the invoice:

  • Freight or shipping charges to transport the motor vehicle to the seller
  • U.S. federal excise tax imposed on the manufacturer, wholesaler or importer before the sale
  • All options and accessories
    • Examples
      • Information, entertainment, GPS systems
      • Upgraded features
      • Running boards
  • Services, including charges for labor, provided by the dealer as part of the sale agreement
    • Examples
      • Painting, coating, rust-proofing
      • Washing, waxing, cleaning
      • Lettering
      • Installing
      • Fabricating
      • Making repairs required by the buyer
  • Mandatory service and warranty agreements
  • Document fees
  • Credit card service fees
  • Theft-deterrent systems
  • Flooring cost interest
  • Auction fees
    • Examples
      • Gate fees
      • Buyer’s fees

You must calculate tax on the sales price before applying:

  • Insurance settlements
  • Down payments

What sales price doesn’t include

Sales price doesn’t include the following if they are separately stated on the invoice:
  • Federal excise taxes imposed at the retail level
    • Examples
      • Heavy trucks
      • Trailers
  • Title and registration fees imposed by a government
  • Optional service and warranty agreements
  • Finance charges
    • Examples
      • Loan origination fees
      • Interest
  • Optional Insurance
You can reduce the amount of the taxable sales price when applying:
  • Trade-in allowances, when items received will be placed into a resale inventory
  • Manufacturers’ rebates that aren’t paid directly to the customer for motor vehicles only
  • Dealer’s discounts or rebates

Note: A customer down payment doesn’t reduce the taxable sales price.

Trade-in allowances

You can accept merchandise as full or partial payment of a motor vehicle you sell. The amount allowed on the traded-in merchandise reduces the sales price, which is the amount you charge tax on.
  • You must put the merchandise you take in trade into your inventory for resale.
  • The trade-in and all documentation must take place at the time of the sale, or the allowance doesn’t reduce the sales price.
  • You can’t accept manufactured homes and modified park model recreational vehicles as trade-ins.
Note: The merchandise you accept on a trade doesn’t have to be a motor vehicle, although that’s most common. For example, you can accept a horse for a car, but you have to put that horse in your selling inventory for it to count as a trade-in and reduce the taxable price. Otherwise, the value of the horse only counts as payment. A leased vehicle you accept as a trade-in for a new purchase or lease reduces the sales price only if both these criteria are met:
  • The customer has paid the lease in full.
  • The customer paid sales tax on the buyout of the lease.

Manufacturer’s rebates

A manufacturer’s rebate reduces the sales price if it’s:
  • Paid directly to the dealer, and
  • Subtracted from the price of the motor vehicle
Don’t subtract the rebate from the sales price if the customer takes the money instead of applying it to the price of the motor vehicle.