SALES AND USE TAX—Consideration received under federal Cash for Clunkers program.

The Division of Taxation has issued a release concerning the sales tax treatment of consideration received under the federal Consumer Assistance to Recycle and Save Act of 2009. The Act establishes a program, known as the “Cash for Clunkers” 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. The release states that since the federal funds provided to the dealer under this program are directed toward the purchase or lease of a new vehicle, those funds are deemed to be third-party consideration. Similar to 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.

(Sales and Use Tax—Consumer Assistance to Recycle and Save Act of 2009, 07/09/2009)