Help: California Sales Tax - Dealer Scamming?

I have a dealer in So Cal saying that sales tax is required on the purchase price before incentives on the lease.

I’ve always seen the sales tax added on to the monthly payment calculated after incentives (as is the case in the lease calculator). I understand certain states require it (TX, GA, etc), but CA is not one of them.

I tried to look up guidance from the Franchise Tax Board or the Board of Equalization, and it seems as if CA does give the lessor the option to charge sales tax on the purchase price.

What am I missing here? Are they scamming to come up with an explanation for the extra $1500?

I haven’t had the chance to look into the regulation but I do not think the lessor has the option to charge sales tax based on the purchase price. The lessor pays taxes as it collects the lease payment from its customers. If they indeed have that option, then you are better off speaking to other dealers…

It’s pretty customary that sales tax is charged on incentives (lease cash, manufacturer rebates, bonus cash, even GM card money, etc…)

That said, it does not mean you have to pay full sales tax on MSRP. The dealer discount prior to incentives should not be taxed.

2 Likes

Yup. Think of rebates as free money from the manufacturer, which you can put towards your lease, rather than a reduction in the selling price. The amount of sales tax paid is based on the pre-rebate cost.

1 Like

Interestingly, my Volvo’s $6,650 lease cash/allowance/conquest wasn’t taxed. I paid tax on the sale price after all Volvo rebates and dealer discounts.