Recent Sales and Use Tax Developments
Employee Purchase Plans - Purchase Price Negotiable. Under an Employee Purchase Plan in which the
price is negotiable by the dealership and the employee receives a discount,
or the manufacturer pays the dealer a portion of the negotiated purchase
price, the total sales price is subject to sales or use tax.
Occasionally, the employee will buy a vehicle for someone who is not an
exempt qualified member of the employee's immediate family (father-in-law,
neighbor, cousin, friend, etc.). Even though all the fees and tax were paid
by this person through the employee, tax is due again on the retail value of
the vehicle when the title is transferred from the employee to the other
person.
Employee Purchase Plans - Purchase Price Non-Negotiable. Under an employee purchase plan, in which
the price is not negotiable, the employees of the factory are entitled to
purchase a vehicle from the factory at the dealer's cost. In return for the
service of handling this transaction for the manufacturer, the dealer is
compensated an amount equal to a percent of the manufacturer retail price
less destination charge or other charges. The fee paid to the dealers by
the manufacturers under this type of Employee Purchase Program, is not
subject to sales or use tax.