Rebates provided to car purchasers by the federal government through its "Cash for Clunkers" program are not subject to sales tax, the State Board of Equalization announced July 29.
In a position that has engendered controversy over the years, the board generally holds that rebates are part of gross receipts, and are subject to the sales tax. Taxpayers' advocates have argued that the sales tax should be imposed on what a buyer actually pays, after the rebate is deducted.
In this case, however, the board has taken the position that the "Cash for Clunkers" rebate is considered a non-taxable sale to the United States government. Under this new program, car buyers who meet specified criteria can get up to $4,500 toward the purchase of a new vehicle. The rebates are paid by the U.S. Department of Transportation's National Highway Traffic Safety Administration. The BOE explained that the federal "Cash for Clunkers" law expressly provides that the credit is not income for the consumer.
Cal-TaxReports, August 10, 2009
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