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Figure tax due on sale amount, before employee discount price

November 22, 2010

Amid the current blitz of the domestic manufacturers’ vehicle employee pricing promotions, state revenue department auditors, it appears, could be the real winners. 

Dealers who fail to correctly calculate the tax due in special pricing promotions could owe the difference, plus more, when an audit uncovers the error. Important, any money a dealer receives from the manufacturer should be treated as a rebate, and the tax should be determined on the total amount—"gross receipts," in Illinois Revenue Department parlance—that the dealer would receive in the transaction.

 

For example, if a dealer collects $20,000 in the sale, it does not matter whether the customer paid $20,000 or whether the customer paid $18,000 and the manufacturer paid $2,000 to the dealer as part of some type of program. In either case, the dealer’s gross receipts from the vehicle sale are $20,000, and that is the amount subject to tax. 

According to the revenue department: "A rebate for which a dealer will be reimbursed must be included in the total price and is subject to tax. A rebate offered by a dealer that will not be reimbursed should not be included in the total price and will not be subject to tax."

 

Auditors regularly rule that dealers who underreport sales tax would face additional tax, penalty and interest on the amount of the rebate—for each transaction uncovered.

 

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