how do they compute the tax on sales price before rebates?

ex.

haggled price - 25k
10 % tax - 2.5k
subtotal - 27.5k
rebate - 2k
to pay - 25.5k

i dont get how they get away with this? whats the reasoning? if i go to grocery store and buy a $6 can of beans at 20% off .. do i pay tax on 6 or 5?

to me .. im buying a product at a reduced price .. so what am i paying the extra tax on? .. is GM's 5k off rebate a pure tax donation to the government?

either im missing something here or we're all getting ripped off

CPA heaven or any other smart soul please respond .. cause i feel trully robbed of this knowledge

 

I live in a state without sales tax so I am not familiar with this at all. The only thing I have experience with is shopping at Victoria's Secret website and catalog and they have promotions that if you spend so much, you get so much off. However, you are charged shipping at what your total was before the money off discounts.

I understand the principle on that one but I am not sure exactly. Kind of like a mail-in rebate. You buy something at the store and pay taxes on that price. You then mail in for whatever amount it is for and get that back. Essentially, they take the rebate after all applicable taxes and fees are calculated on the actual price. The rebate is like a "reward" for having purchased their product. That is why they don't knock if off the price first before calculating your tax.

I don't know if that made any sense when I typed it out but in my head it did.

 

that makes sense more than my can of beans example

i just hate paying taxes .. especially on paper amounts .. why dont they call it a sale instead of a rebate to reward me more?

but seriously my taxes pretty much add up to 10% here .. wouldnt you be ticked off by that?

 

Dupa...sorry to hear about the problems you've been having with your deal. I think bunnygirl has the right idea with the mail-in rebate analogy. I think I've read elsewhere on the forum of people having the same complaints as you, so it probably is standard practice.

Ten percent sales tax is pretty steep! In SC our sales tax is capped at $300, but then you get hit with ~ 2.9% property tax at registration time every year!! That seems to be the only upside to the rapid RX-8 depreciation.

 

Technically, you don't get the rebate until after you pay. In essence, the dealership/manufacturer is fronting you the money from the rebate. Hence, paying the tax on the original amount.

 

I closed my RX8 deal last week in PA. The rebates were taken off as well as the additional discount to get to the sales price. Then sales tax was added. I've never heard of taking the discount off after calculating sales tax. I'd call another dealer in the area to ask if that is the standard practice in your state.

 

I just got done going through this and your paying taxes on what the dealer says your car is worth not for what you paid for. You could have paid 20,000 but your worth may be 27,000 before you take it off the lot. Uncle Sam is the ultimate butt F*cker

 

My previous purchase was the same way .. so I assumed it is .. it was just hard for me to comprehend the logic of this until the mail-in analogy

not complaining just trying to understand

Interesting that PA does it differently though

 

BunnyGirl, we'll have to strike a deal where next time I buy a car I'll register it at your place in beautiful tax-free Oregon, and in exchange, anything in that thar Vicky's wishbook is on me. Deal?

 

Have you ever actually looked at the prices in Vicky's lttle picture book?

 

Hell yeah. There was one laying on my gf's kitchen table 3 weeks ago.

Wouldn't you fork over 2 or 3 hundred for lingerie over 2 grand to the state? I thought so.

 

Anything????

You know at Christmas they always have a multimillion dollar diamond bra and matching panties.

 

Victoria's Secret is my all time favorite store. Last year for my birthday my friend in Italy sent me over $2500 in e-gift certificates. I was so happy!!!!

 

My "best " bud gave me two sticks of gum for my bday. That, and a slap on the ***. You're one lucky chick.

 

I know!!!