IADA - The Idaho Automobile Dealers Association, Inc.

(CARS) Idaho Sales Tax

REMINDER: The National Highway Traffic Safety Administration (NHTSA) has finalize detailed rules and create an online system to implement this program.
CLICK HERE TO READ AND DOWNLOAD RULES

IDAHO SALES TAX INFORMATION AVAILABLE TO AUTO DEALERS

One of the questions asked regarding the new federal rebates available under the CARS / “Cash for Clunkers” program is how state sales tax rates should be applied. The Idaho State Tax Commission's interpretation of the sales tax law with respect to the government’s subsidy (up to $4,500) for a consumer’s purchase of an automobile is neither a manufacturer’s rebate nor a trade-in value.

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If I buy a new vehicle under the Car Allowance Rebate System, also called CARS or “Cash for Clunkers,” is the federal government credit towards my purchase taxable?

Yes. Unlike a trade-in allowance or an automobile manufacturer’s rebate, a credit paid under the CARS program won’t reduce the price subject to Idaho sales tax. The buyer must pay tax on the amount of the credit.

To receive a federal credit under CARS, the law requires your old vehicle to be destroyed. A dealer may also give you a credit for the scrap value of the vehicle you turn in. If so, the price of the new vehicle subject to sales tax will be reduced by the scrap value minus $50 that the federal law allows dealers to keep for covering program costs.

Contact TAX COMMISSION if you need more information.

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I’m a new car dealer. How should I invoice a sale under the Car Allowance Rebate System, also called CARS or “Cash for Clunkers” program?
Government payments to you under the CARS program won’t reduce the price subject to Idaho sales tax, so you can put the government payment amount on the “cash down” line of the sales invoice. If you allow a credit for the vehicle turned in, the price subject to sales tax will be reduced by that amount, so you can put the trade-in credit on the “trade-in” line of the invoice. However, this allowance is limited to the estimated scrap value of the vehicle minus $50 that the federal law allows dealers to keep for covering program costs.

Contact TAX COMMISSION if you need more information.

Because key aspects of this program are now final, IADA does not recommend that dealers review all details possible of the parameters defined by the laws governing the program.

Disclaimer: IADA is not authorized to dispense legal or tax advice. Dealers and consumers are always advised to seek professional tax or legal counsel.