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08.05.2009 3:28 pm

Missouri, Illinois charge no sales tax on clunker rebate

St. Louis Post-Dispatch
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The federal government’s “cash for clunkers” program is plenty confusing, especially with the Senate still deciding whether to give it more money. One issue that’s sowing confusion in some parts of the country, though, isn’t a problem in Missouri or Illinois: Neither state will charge sales tax on the $3,500 or $4,500 that you get for junking your clunker.

The Illinois Department of Revenue highlights the issue right on its home page:

The department has determined that:

* The $3,500 or $4,500 payment from the federal government to the dealer is not taxable for sales tax purposes because it is a direct government payment to the dealer.

* The salvage value that the dealer provides for the traded in vehicle will be treated as a trade in and therefore is not taxable for sales tax purposes.

The Missouri Department of Revenue doesn’t make the answer quite as easy to find, but spokesman Ted Farren emailed me with reassuring words for the state’s car buyers:

Rebates are not taxed in Missouri, so the sales tax charged would be on the price of the vehicle after all rebates are applied.

Buyers in some states aren’t so lucky. The Baltimore Sun reports that Maryland, for example, is applying its 6 percent excise tax to the amount of the rebate. For someone who gets the highest clunker credit of $4,500, that’s an extra $270 in taxes.

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2 comments

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This will be the first time that Illinois has not charged as much tax as possible on anything. I am sure some patronage bureaucrat politician will be reprimanded for this disasterous oversight - why he/she might even have to cut their lunchtime down to 90 minutes, or worse have their raises cut in half (from 9% to 4.5%).

— Bottom Line
4:24 pm August 5th, 2009

Screwed again, why do I keep having to subsidize this garbage.

— kd
8:29 am August 6th, 2009