Ocean County, NJ - BREAKING NEWS - CASH FOR CLUNKERS EXTENDED! VOUCHERS— Tax Free, right? NO! Ask your People...

CASH FOR CLUNKERS VOUCHERS— Tax Free, right? NO! Ask your People...
CONTACT

H&R Block, Lakewood Office
1700 Madison Avenue
Lakewood, NJ 08701
732-364-3000

On June 24, 2009 President Obama signed the Consumer Assistance to Recycle and Save Act of 2009 into law. (8 U.S.C. 1301) The Act establishes a new program under which the government will provide $3,500 or $4,500 to help consumers purchase or lease a new, more fuel efficient vehicle from a participating dealer when they trade in an old, less fuel efficient vehicle. This program is also known as the “Cash for Clunkers” program.

Vouchers may be issued for purchases that occur beginning July 1, 2009 and ending the earlier of November 1, 2009 or the date the overall budget limit of $1 billion that was allocated to the clunker program has been reached.

(BREAKING NEWS: President Barack Obama signed a bill Friday morning that breathes new life into the popular Cash for Clunkers program.

"Now, more American consumers will have the chance to purchase newer, more fuel efficient cars and the American economy will continue to get a much-needed boost," President Obama said in a statement.

The move extends the Cash for Clunkers program that had burned through its initial $1 billion in funding in its first week.)

Several states have issued guidance addressing how the Cash for Clunker vouchers issued by the federal government will be treated for state sales tax purposes. Some states issuing guidance will deduct the voucher amount from the sales price in order to determine the amount subject to sales tax. Example: A vehicle is priced at $20,000 and the trade-in is eligible for a $3,500 federal voucher. The state taxes the sale based upon the net out-of-pocket cost of $16,500.

In New Jersey, you'll be paying state sales tax on the entire amount, including the Cash For Clunkers rebate.

"As the Federal funds provided to the dealer under this program are directed towards the purchase or lease of a new vehicle, those funds are deemed to be third-party consideration. Like in a manufacturer’s rebate situation, the amount of third-party consideration must be included in the sales tax base when calculating the applicable sales tax due on the transaction. The funds are not deemed to be an augmentation of the trade-in value that a dealer offers a buyer."