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IMPORTANT NOTICE

 

TO:  ALL RHODE ISLAND MOTOR VEHICLE DEALERS

 

The 2009 Recovery Act (Federal Stimulus Package) that is expected to be signed by President Obama on Tuesday,  February 17, 2009, contains a provision for a Sales Tax Deduction against 2009 Federal Income Tax.  This Deduction is for Sales Tax paid on the purchase of a qualified motor vehicle.  The purchase must be made on or after the date of enactment and before January 1, 2010.

A qualified motor vehicle is: 

  • a passenger automobile or light truck (as defined in title II of the Clean Air Act), or motorcycle (within the meaning of 49 CFR 571.3) the gross vehicle weight rating of which is not more than 8,500 pounds and the original use of which begins with the taxpayer, and
  • a motor home (within the meaning of 49 CFR 571.3) the original use of which begins with the taxpayer. (Code Sec. 164(b)(6)(D))

Sales tax must continue to be paid by the consumer when purchasing and registering the qualified motor vehicle.  The consumer would then take a deduction on their 2009 Federal Income Tax Return as part of their standard deduction or as an itemized deduction, provided certain income requirements are met.


CAR ALLOWANCE REBATE SYSTEM PROGRAM

The CAR Allowance Rebate System (CARS) is a $1 billion federal government program that helps consumers buy or lease a more environmentally-friendly vehicle from a participating dealer. Consumers may participate in the CARS Program between July 1, 2009 and November 1, 2009 or until authorized funds are no longer available.

Purchasers will receive a credit at the time they purchase or lease their new qualifying vehicle. Consumers may also be eligible for any other advertised rebates or discounts offered by the seller in combination with the credit they receive through the CARS Program. A voucher or other documentation issued under the program shall have a stated value which will be used to offset a portion of the purchase price or lease price of a qualifying new fuel efficient vehicle.

Rhode Island General Law 44-18-12(v)(C) states that “sales price” shall include consideration received by the seller from third parties if the seller receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale. The credit received by the purchaser at the time of purchase or lease of new qualifying motor vehicle therefore shall be included in the sale price subject to tax.

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Should you have any questions, please contact the Excise Tax Section at (401) 574-8955.

 

David Sullivan
Tax Administrator                      

 

February, 2009