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Board: Porsche - 911 - 997
Language: English
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Jul 1, 2006 1:06:57 AM
- mastiffdog
- Newbie
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- Loc: Ventura County, CA
- Posts: 36, Gallery
- Registered on: Jun 20, 2006
- Reply to: U Boat Commander
Re: can't sell 997s to dealers
Quote:
U Boat Commander said:Quote:
PS CA said:
Not in California. They write up the deal on the new car adding the sales tax to the purchase price of the car. They then treat the trade-in like a down payment. In other words they subtract the value of the trade-in from the total that included tax. Even if you sell your car to a private party, they have to pay sales tax on the price you charged them. California can collect a lot of tax from one car over its lifetime......from the original purchaser and all subsequent purchasers.
Phil
Hence the reason why when in CA you are negotiating to buy a new car with a trade in you tell the dealer to give you two prices for your trade in: (i) the best price they can offer you for your trade in car and (ii) the lowest possible price they can offer you for your trade in car without getting in trouble with the tax authorities. Then you agree to the low price and subtract the difference from the price of your new car. The final result is that you screw the Franchise Tax Board out of a lot of tax. I happened on this little trick when trading in my 993 for my 996. Pretty neat, huh?
Can you explain this further? I guess I am confused. From what little I know, in California you pay the State Board of Equalization the state sales tax the rate for the county the car will be registered. You pay that sales tax rate on 100% of the new car's value. The value of the trade in is irrelevant. And, what does the franchise tax board have to do with it? Unless you are establishing a loss on the trade in vehicle, then I suppose the Franchise Tax Board would be involved for state income tax purposes. And if that is what you are referring to, and you are using one value for one purpose, and another value for another purpose, the "trick" you are claiming sounds more along the lines of tax fraud. But what do I know...
Jul 1, 2006 5:53:01 PM
- U Boat Commander
- Veteran
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- Loc: Los Angeles, CA
- Posts: 1250, Gallery
- Registered on: May 8, 2004
- Reply to: mastiffdog
Re: can't sell 997s to dealers
Quote:
mastiffdog said:
Can you explain this further? I guess I am confused. From what little I know, in California you pay the State Board of Equalization the state sales tax the rate for the county the car will be registered. You pay that sales tax rate on 100% of the new car's value. The value of the trade in is irrelevant. And, what does the franchise tax board have to do with it? Unless you are establishing a loss on the trade in vehicle, then I suppose the Franchise Tax Board would be involved for state income tax purposes. And if that is what you are referring to, and you are using one value for one purpose, and another value for another purpose, the "trick" you are claiming sounds more along the lines of tax fraud. But what do I know...
You pay sales tax on the PRICE of your new car, not the value. The lower the price, the lower the tax. If the dealer can buy your used car for below it's value then they will give you a better price on your new car. It's not rocket science.
You're right, SBE not FTB. My mistake.
Jul 1, 2006 6:23:03 PM
- mastiffdog
- Newbie
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- Loc: Ventura County, CA
- Posts: 36, Gallery
- Registered on: Jun 20, 2006
- Reply to: U Boat Commander
Re: can't sell 997s to dealers
Quote:
U Boat Commander said:Quote:
mastiffdog said:
Can you explain this further? I guess I am confused. From what little I know, in California you pay the State Board of Equalization the state sales tax the rate for the county the car will be registered. You pay that sales tax rate on 100% of the new car's value. The value of the trade in is irrelevant. And, what does the franchise tax board have to do with it? Unless you are establishing a loss on the trade in vehicle, then I suppose the Franchise Tax Board would be involved for state income tax purposes. And if that is what you are referring to, and you are using one value for one purpose, and another value for another purpose, the "trick" you are claiming sounds more along the lines of tax fraud. But what do I know...
You pay sales tax on the PRICE of your new car, not the value. The lower the price, the lower the tax. If the dealer can buy your used car for below it's value then they will give you a better price on your new car. It's not rocket science.
You're right, SBE not FTB. My mistake.
That makes alot more sense...
Jul 1, 2006 7:46:24 PM
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nberry
- Rennteam VIP
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- Loc: La Jolla, USA , United States
- Posts: 13472, Gallery
- Registered on: Apr 11, 2002
- Reply to: mastiffdog
Re: can't sell 997s to dealers
Actually it is also impacting the FTB because the net profit of the car to the dealer will be lower. Of course, if they turn around and sell the trade in for a higher value then in theory it should even out. However, dealers have a way of charging fix up cost onto used vehicles.
Bottom line is the State of CA get screwed out of sales tax and income tax. Not that there is anything wrong with it.
Bottom line is the State of CA get screwed out of sales tax and income tax. Not that there is anything wrong with it.
Re: can't sell 997s to dealers
Quote:The dealers profit is not affected.
nberry said:
Actually it is also impacting the FTB because the net profit of the car to the dealer will be lower. Of course, if they turn around and sell the trade in for a higher value then in theory it should even out. However, dealers have a way of charging fix up cost onto used vehicles.
Bottom line is the State of CA get screwed out of sales tax and income tax. Not that there is anything wrong with it.
What they are referring to is the over allowance (OA) the dealer applies to most trades to satisfy the customers desire to get a good trade in value. They are just backing out the OA and putting the actual cash value (ACV) of the car in the deal and then lowering the selling price of the new car by the same amount. Money wise it's a wash to the dealer but the State collects less in sales tax because of a lower selling price of the new car. Dealers do the OA most times without the customer even knowing it.
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