Luxury tax when buying a car, cannot find the answer!

Submitted by ctthrowaway55 t3_ychhcv in Connecticut

I've been reading the CT laws regarding luxury tax and I cannot figure out a straight answer.

Looking to buy a car but the sales price is $53k. My understanding is that if the sale is over 50k, the entire purchase is taxed at 7.75%. I have a trade worth $4500, then there are dealer fees like doc and then registration fees. If I do the math by taking the vehicle price, minus trade, plus doc/reg etc then I come out to aprox $49.5k. Is that the amount I'd be taxed on, which would circumvent the luxury tax rate, or is the tax based on the actual price of the vehicle before considering the trade.

Dealer says that the tax is based on the first line, which is the original price of the car, so even if the trade gets you below 50k, the price of the car was above 50 so they have to use the higher tax rate. I can't find this anywhere in the tax code. Anyone have insight on this?

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zDEFEKT t1_itm5yol wrote

They tax you on the price of the car. The car is $53k so they will tax you on that. Doesn’t matter about trade in even if it brings you back below the threshold. Found this out myself recently by experience.

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76before84 t1_itm6ilm wrote

Why not ask the dealer and offer 3k less for the trade in but also have 3k less on the price of the car?

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jjma14 t1_itm80po wrote

https://portal.ct.gov/dmv/vehicle-services/sales-tax-registrations?language=en_US

"If your vehicle was purchased from a licensed dealership, the 6.35% (or 7.75% for vehicles over $50,000) sales and use tax is based on the purchase price. We allow full trade-in credit when computing the Connecticut Sales and Use tax if the vehicle was purchased from a licensed dealership."

It sounds like the tax is based on the $49.5k if I'm reading that right.

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Delicious-Plane-3440 t1_itmczqh wrote

Tax is after they take your trade in. I’ve dodged this bullet multiple times.

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Supercaesarsalad t1_itmk35u wrote

If you pull out your old Connecticut-opoly board, that should have the luxury tax on it.

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ctthrowaway55 OP t1_itmo1hi wrote

Replying to jjma14 (#205,040)

That's the source I originally read from, but the sales person said that's not the case because the price of the car is still above 50k. I've had other sales people from other dealers say the same, which is confusing as hell because that's not how it reads. I agree with you, it reads like I should be taxed on 49.5. I'll try and clarify with the sales manager next time I speak to them.

You know what'd be even easier? If they ditched this stupid additional tax...

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ctthrowaway55 OP t1_itmocbo wrote

Replying to zDEFEKT (#204,838)

This is how it was explained to me by sales guys at different dealerships. Still doesn't make sense to me, and the language in the book doesn't read that way. I'm due to take delivery in a couple weeks and need to sort this out...

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jjma14 t1_itmpu8n wrote

Replying to ctthrowaway55 (#206,777)

I wish they had examples or something that made it crystal clear, but it never works that way ha. Either way, I hope you get it cleared up! Good luck with the purchase!

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jaredsparks t1_itnp95b wrote

Replying to ctthrowaway55 (#206,813)

I'm an attorney here in CT. I bought a MYLR for $49,900, plus tax which put it at about $55k. I had to pay the luxury tax. It's based on the total price, including tax. I researched the law. Trade-ins make no difference.

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charcoalcheeseburger t1_itnpbs6 wrote

Mazda dealership in Milford tried to apply tax before subtracting rebates during negotiations years ago when we purchased from them. It’s a trick dealerships play to get you to a final price. They clean up the accounting pocketing they difference at delivery.

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JaKr8 t1_ito76ep wrote

If the sale price of the car is over $50000, you pay the luxury tax. We went through this earlier this year...

If you buy a car that sells for $60000. And your trade is worth $40000. You pay the luxury tax on $20000.

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