Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions
 

Talks continue over state’s intent to tax dealer cash

November 17, 2010

Officials of the CATA continue negotiations with the Illinois Department of Revenue over the department’s intention to subject dealer cash to sales tax. 

The two entities, along with the Illinois Automobile Dealers Association, met Oct. 17 for a second time on matter, but a resolution was not reached on extracting tax from certain rebates and dealer incentives.

 

The Illinois Appellate Court ruled in 2004 that the state can pursue taxes on all the money a dealer receives tied to a vehicle sale—from the purchaser and the manufacturer. Holdback would not be taxed. 

The CATA and the IADA concede that proceeds tied to a single unit could be taxable but that a distinction should exclude the money a dealer receives for meeting the retail objectives of a manufacturer’s program—for instance, earning several thousand dollars for selling a certain number of vehicles in a certain timeframe.

 

But a major obstacle to meet the revenue department proposal involves determining tax related to stair-step programs. 

In the latest discussion, revenue department attorneys proposed the following examples of tax liability:

 

1. A dealer is to receive $500 for each specific model vehicle he sells in a specific time. Each $500 payment assigned to a specific vehicle, when paid separately or as part of any lump sum payment by the manufacturer, would be part of the taxable gross receipts from the sale of that vehicle.

 

2. A dealer is to receive $500 for each specific model vehicle he sells in a specific time, but only if he sells 10 or more vehicles in that time period. Also, the dealer would receive $100 for each vehicle if he sells 20 or more of those vehicles within the specified time. If the dealer sells 25 qualifying vehicles, the tax would be:

 

  • The $500 payments for vehicles 1-9 are attributable to the sale of each individual vehicle but are conditioned at the time of the sale upon subsequent sales. Those monies, therefore are not subject to tax. 
  • The $500 payments for vehicles 10-25 are subject to tax because they are attributable to the sale of each individual vehicle and are not conditioned at the time of sale on any subsequent sales.
  • The $100 payments for vehicles 1-19 are attributable to the sale of each individual vehicle but are conditioned at the time of the sale upon subsequent sales. Those monies, therefore, are not subject to tax. But the $100 payments for vehicles 20-25 are subject to tax because they are attributable to the sale of each individual vehicle and are not conditioned at the time of the sale on any additional sales. 

3. A dealer is to receive $5,000 if he sells 25 or more units of a specific model in a specified time. The $5,000 is not subject to tax because it is not attributable to any specific sales transaction.

 

A new meeting date among the CATA, the IADA and the Revenue Department has not been set.

 

Back