Monday, 03 August 2009 10:20

Dealers Still Pay Tax on CARS Rebates

The CARS act exempts consumers from paying taxes on the rebate. But it does not exempt car dealers.

Dealers will have to pay taxes on the rebates they receive under the federal CARS program, according to an IRS advisory bulletin issued today.

"Gross income generally means all income from whatever source derived unless specifically excluded by law," wrote Terri Harris, who heads an IRS division specializing in automotive issues. "Gross income derived from a business means the total sales, less the cost of goods sold." It likely will be treated like a cash downpayment from the consumer.

A NHTSA official incorrectly assured car dealers listening in on a National Automobile Dealers Association webinar that they would not be taxed on the rebates.

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