Trade-in sales tax exemption not in danger

The in basket: Once again, my wife, TheJudyBaker, is the source of a question. She was in a new car dealership the other day, making a preliminary inquiry about buying a new car, and she believes the salesman told her a change was coming in sales tax on car purchases after the first of the year. 

She got the impression that the practice of deducting the value of a trade-in from the price of a new car and applying the sales tax rate to the difference was about to end. It used to be that way, that the sales tax rate was applied to the total purchase price of the new car, but it was changed by voter initiative in 1984.

That’s a big deal, if true, I told her. 

The out basket: Fortunately for car buyers and sellers, it’s not true. 

Mike Gowrylow, spokesman for the state Department of Revenue tells me, “No legislation was passed to eliminate the trade-in deduction, and none has been proposed.  

“If anything, legislators have been sympathetic to the fiscal plight of car dealers and bills were introduced during the 2009 session to give them tax breaks such as a lower B&O tax rate, though none passed. Eliminating the sales tax deduction on the value of trade-ins would be a tax hike and increase the total cost to buyers and discourage sales.

Mike added, “I can only assume the salesperson was misinformed, or auto dealers may be fearful that the trade-in law might be repealed.  Or it was just a way to encourage someone to buy now.”

One thought on “Trade-in sales tax exemption not in danger

  1. Hi:
    I wonder if the reader/salesman were confused.
    What *is* going away at the end of the year is an income tax deduction for sales taxes paid on vehicles up to $48,000 (I think – could be higher).
    That may have been what the salesman was trying to say.
    Love the column.

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