PSA: Charged full sales tax on EV in NJ (October 2024)

Background: At the end of August 2024, I purchased a 2024 Tesla Model X Plaid (pre-owned, but under 3000 miles). I used a lease-like balloon loan to finance it (with the return option after 35 months). The car was purchased out-of-state and shipped to New Jersey (delivery took place before the end of August).

Issue: there were some delays, and it took a while before I could go to the DMV and register it, which happened today (10/28/2024). Upon getting to the DMV clerk, I was asked: “You know you have to pay taxes and this, right?”. I said “You mean fees: title, plates, registration, EV annual fee”. They said: “No, sales tax”.

That’s where the issue started. Their system said ai had to pay sales tax. I pushed back, asked to speak to a couple of supervisors and the manager of the branch, showing the law that states the following: “
Sales, Leases, and Rentals Prior to October 1, 2024

The New Jersey Sales and Use Tax Act provides a sales and use tax exemption for zero emission vehicles, which are vehicles certified pursuant to the California Air Resources Board zero emission standards for the model year.

The exemption is NOT applicable to partial zero emission vehicles which includes hybrids. The exemption is also NOT applicable to labor or parts for qualified vehicles.

The Sales and Use Tax Act defines “sale” to include rentals and leases. N.J.S.A. 54:32B-2(f). Thus, the exemption is applicable to the sale, rental, or lease of a new or used zero emission motor vehicle delivered prior October 1, 2024. In order to document the exemption for the sale, rental, or lease of a qualified zero emission vehicle prior to October 1, 2024, the customer should fully complete an Exempt Use Certificate (Form ST-4) with “N.J.S.A. 54:32B-8.55” as the statutory reference.”

Long story short, I was unable to get this “overruled” at the DMV (or MVC, rather, as it’s called in NJ), as the system did not allow me to register and get my plates without paying, and conceded to pay the sales tax, and request a refund afterwards.

Then came the kicker, it was not the half sales tax that was applied (3.3125%), but the full sales tax (6.625%), on the full purchase price (since this was financed, not leased).

I’m not sure if it was just my bad luck, with a bunch of folks that didn’t know what they were doing, or a systemic issue in how the system was set up after October 1st, but hoping someone here might know more. If not, let this act as a PSA for anyone else in a similar situation.

@z0lt3c I think you recently did a balloon loan on a Mercedes, and I think you’re in NJ. Did you buy from out of state? Any weirdness at the MVC in your case, with the sales tax?

Dealer should be responsible for this. I would speak with them

Yes, out of state dealer with my balloon loan deal from mid-September. I purchased from a franchised dealer who is using a service to submit the NJ MVC paperwork. It’s been about 40 days and I’m still waiting although I’ve seen these services takes 100 days or longer. I’m also trying to transfer an existing registration to avoid the EV fee.

It sounds like perhaps you purchased from a private party? You’ve got me a little worried.

Also purchased from a dealer who used a third party service to submit the NJ MVC paperwork. Something got declined (still unclear what) and the MVC sent me an email to come there in person to complete the registration (after about 2 months) That’s where this issue arose. Their system showed the full sales tax amount and they could not go around it (per their explanation). They gave me a form to complete and submit to the NJ Division of taxation for refund. Which I suspect will be a big headache. It’s unclear if someone dropped the ball and if so, where it happened.

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I would suggest running a carfax on your VIN. You should see two things-

#1 A post-dated title event added when you purchased the vehicle-

#2 A current-dated title event when the MVC processed the paperwork

This is an example of a vehicle I leased before the EV registration fee took effect but was processed 60+ days after (actual events will look different with a balloon loan).

Good idea, I’ll take a look.

What puzzles me is why their system listed full sales tax (6.625%). I get there being a misunderstanding somewhere about the purchase/delivery versus registration after October 1st 2024 triggering a sales tax “event”, but that should have shown the 3.3125% tax rate.

Anyway, I sort of regret not pushing back more and refusing to pay, as I’m not sure if the refund will be straightforward.

Either way, I will update here once I get a resolution.

You could try your state representative’s office - they may be able to make the right calls to at least get you a clear answer.

Update: the situation was resolved by going through the NJ Division of Taxation, Sales Tax Refunds team. I had to fill out form A-3730, and sent it to them, along with all documentation to show my car was exempt from sales tax, and that I was incorrectly charged. Once they had the paperwork it took about 3 weeks to get the check with the full refund.

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