GNYADA April 2019 Newlsetter

Sales Tax Reminders

3

A. ExTENDED WARRANTIES

Retail Purchase The fair market value of the trade-in is the amount applied to reduce the selling price, which reduces the amount used to calculate sales tax due. Lease Transaction Regardless of the value of the trade-in, the sales tax credit will be based on the amount of the equity the customer has less the trade-in vehicle value. Trade-In Remember, the buyer or the lessee of a new vehicle does not have to own the vehicle or personal property being used as a traded-in in order to receive the sales tax credit. Eligible Property In addition, any property, not just a vehicle, being traded in (a boat, motorcycle, diamond ring, painting, livestock), can be eligible for the trade-in credit as long as the dealer accepts the property for the purpose of resale and applies the credit to the purchase of the new or used vehicle the dealer is selling or leasing to the buyer. GNYADA publications, A Guide to Sales Tax for Automobile Dealers (Pub. 838) and A Dealer's Guide to Sales and Use Taxes on Long-Term Motor Vehicle Leases in New York State (Pub. 839), are a great resource for dealerships. Contact GNYADA today if you need a copy.

This is a reminder on how sales tax applies to service contracts and extended warranties, which can be confusing. Here are a few items to keep in mind: Sales Sales of extended warranties or service contracts are subject to sales tax. Repair work To keep things as simple as possible, any deductible or other payments made by the CUSTOMER for repairs under an extended warranty ARE SUBJECT to sales tax.

B. SALES TAx DEDuCTIoNS oN TRADE-INS

Calculating the correct sales tax on a deal involving a trade-in is important because this is often an area subject to audit. Below is a summary of the difference between a retail purchase and lease transaction with a trade-in.

Avoid Violations – Follow License Plate Laws

4

Customers may ask you for reim- bursement if they receive a ticket or fine, which can range from $25 to $200.

Here are the best practices, and top three concerns, when it comes to installing license plates. Glass or Plastic Coverings Dealers should not offer to coat or cover license plates with any glass, plastic, or synthetic material. Providing such covers is considered a violation for concealing or obscuring part of the plate. The Vehicle and Traffic Law says that license plates must be kept clean, be easily readable, and cannot be cov- ered by material that distorts recorded or photographic images of the plates.

Front Plates New York law requires a set of dis- tinctive number plates"conspicuously displayed, one on the front and one on the rear of such vehicle." Dealers should attach both a front and rear license plate. License Plate Frames It is illegal to cover license plates in a manner that obscures the letters, num- bers, or other markings. Dealers should examine their plate frames to ensure that any words, numbers, or letters on the license plate are not blocked or obstructed by the frame. Check with your supplier to make sure you receive compliant plate frames.

3

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • April 2019