Tax Question - Illinois - "marketing allowance" vs rebate/incentive

Illinois requires sales tax to be paid on “any rebates or incentives for which a dealer is reimbursed from any source.” But what about “marketing allowances” - am I taxed on them? Or, to ask another way, is a marketing allowance different from an “incentive” or “rebate” ?

What strikes me as odd is what happens if the deal you make on the car results in a cap cost/sell price that is greater than msrp minus marketing allowance ( I know that would never happen to a hackr but hear me out). Lets say msrp of 65,000, marketing allowance of 15,000, and cap cost/sale price of 52,000 – do I really pay sales tax on 67,000 (52K + 15K)? That can’t be right.

Any insight would help, including analogies to different states. Thanks

No. I’ve written a very detailed description of how Illinois taxes leases. Here it is…

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Thanks – not sure I really follow this. But, putting that aside, can you tell me whether IL will tax a “marketing allowance?”

If what you mean by a marketing allowance is a manufacturer to dealer allowance or incentive, then it should be non-taxable like most, if not all states. However, because this is Illinois, I could be wrong.

Sounds like you’ve answered your own question, but can’t seem to accept the answer.

The sale price is obviously taxable.

The marketing allowance is just another name for a rebate, right? So that would be taxable in IL too.

Whether the two add up to more than MSRP is irrelevant. Dealers can mark up above MSRP or pass less than the full allowance to you.

Does Jesse White admin this (Secretary of State) ?

Ok, max, not sure why the snark. I asked whether I would get taxed for a “marketing allowance” which is a term different from an “incentive” or a “rebate”. delta737h said no in most if not all states, with the caveat that IL might be different.

Max gives the opposite answer – “obviously taxable” because Max assumes marketing allowance is just another name for a rebate.

So, with two different answers, I don’t understand why you say I can’t seem to accept the answer. Which answer do you think I’m not accepting?

More importantly, what is the basis for your assumption that marketing allowance is just another name for a rebate. It might be but why do you think so? Most lawyers and tax people will tell you that different words likely mean different things. So, why make the assumption?

As for senwia’s question – I think its the Dept or Revenue, not Sec of State who administers this tax.

It’s not snark or assumptions. The reality is that words from a forum member mean nothing, you need to prove to the taxman that it’s not a rebate or incentive. How do you propose to do that?

I am in Illinois too, and believe I read somewhere (can try to look it up again) that dealer cash and manufacturer to dealer incentives are not taxable.

Maramoja - thanks for the info.

Given the high level of knowledge of many on this forum, I’m still trying to find out whether anybody has info that addresses the question of whether a “marketing allowance” is treated differently from an incentive or rebate? For example, I suspect, but don’t know, that a manufacturer provides a dealer with an incentive or rebate with no strings attached - dealer can use the money as it sees fit. I’m also aware that, historically, some mfrs (Honda) gave “advertising money” to dealers on a “car sold” basis and required that the money be spent on actual advertising. If a marketing allowance is earmarked/restricted similar to Honda’s advertising money, I think its a strong argument that its not an incentive/rebate.

@ralphsaphony could maybe chime in? He deals mostly in IL…

Tax treatment depends on how “marketing allowance” is defined. If it is defined as a manufacturer to dealer incentive, then the dealer can pass it along to the customer as their discount off the MSRP. In that case, it is not taxable. I’m betting that marketing allowance is very similar to “marketing support” that is provided by the manufacturer to the dealer, which is usually passed along to the customer as a discount. Dealer discounts are not taxable as they are applied to the MSRP. Furthermore, there is no way for the state of Illinois to know if marketing allowances (support) were used to establish dealer discounts whether one purchases or leases.

Can you post a link to the source of the info on this?

I was not able to find anything that proves your point from the official sources

FYI. After reading your post I’ve checked my lease paperwork and I can confirm that my sales tax on the lease was not taxed as described in your post.

Really? And, how were you able to confirm this? Show me exactly what you did that disproves my claim that sales tax is not taxed as I’ve described in my post. Or, post your paperwork and I will show you where you’re paying tax on tax. As far as proof is concerned, look at my post again where I included an image detailing all the calculations as well as source documents. All the details are right there. Below is an Illinois dealer’s lease worksheet as well as the Illinois tax calculator with explanations, also included in the image above, where I show exactly how tax is computed on tax.