LAWS GOVERNING AUTO INDUSTRY

Two of the main chapters of the Nevada Revised Statutes and Nevada Administrative Code discussed today are:

• Chapter 372: Sales and Use Taxes

• Chapter 482: Motor Vehicles and Trailers:

Licensing, Registration, Sales and Leases

Also referenced will be chapter 374, Local School Support Tax

AUTOMOBILE INDUSTRY

The Department of Taxation administers the

sales/use tax laws and regulations while the

Department of Motor Vehicles (DMV)

AUTOMOBILE INDUSTRY

The Department of Taxation looks to some of

the definitions contained in NRS Chapter 482

for guidance in making determinations of

Automobile Industry

Some useful sources of information can be found at:

DMV Registration/Title Guide:

http://www.dmvnv.com/pdfforms/regtitle.pdf

Department of Taxation: http://www.tax.nv.gov Statutes and Nevada Administrative Code at

•

Statutes

a/k/a

NRS

•

Regulations

a/k/a

NAC

•

Publications

Tax Notes

Technical Bulletins

•

Other

FAQs

For sales and use tax, references are to Chapters

372, 374, 360 and 360b; reference is also made to

NRS chapter 482

SALES TAX

Sales tax is due on the sale for retail of Tangible

Personal Property which may be:



_Seen



_Weighed



_Measured



_Felt



_{Touched or is}



_{In any other manner perceptible to the senses.}

The sales of all tangible personal property is taxable unless specifically exempted by statute

SALES

•

NRS 360B.480 and NRS 372.025 are the

primary statutes describing what is

included in gross receipts and what is not.

Included

All receipts, cash, property

Manufacturer’s discounts, or rebates Mandatory warranties

Services that are part of the sale or

SALES

•

NRS 360B.480 and NRS 372.025 are the

primary statutes describing what is

included in gross receipts and what is not.

Excluded

Discounts offered by the seller Unwinds

Labor charges when separately stated Trade-in of used vehicle / vessel*

TAXABLE SALES

•

Sales to students are generally taxable

•

Sales to Native Americans are taxable unless the vehicle is

delivered to the reservation.

•

Sales to persons in the military and who are stationed in

Nevada are considered residents and subject to Nevada

tax. If the military person has papers verifying immediate

deployment, a drive away affidavit can be issued.

•

Maintenance Contracts: If the contract is negotiated at the

time of the sale, it is considered part of the taxable sale.

Optional warranty contracts are not subject to tax at the

time of the sale and sales or use tax is due on any parts

included in the warranty at the time of repair.

TAXABLE SALES - MILITARY

Sales to Military

personnel are generally

subject to sales tax.

Occasionally a dealer may get this Active Duty Military Governmental Services Tax Exemption Affidavit.

NOTE THAT THIS FORM DOES NOT EXEMPT THE TRANSACTION FROM SALES TAX…..it only

exempts the Governmental Services tax.

NOTE: This exemption

TAXABLE SALES

Snowbirds is a term often associated with people who move from colder climates and migrate southward in winter months to warmer locales such as Nevada, Arizona, etc. Sales to this group are generally taxable if they have a residence here

TAXABLE SALES

Theft Deterrent Systems: Car alarms are subject to the sales tax. Examples include DataDot, Karr Alarm.

TAXABLE SALES

Vehicle Give-aways:

When a dealership enters into an agreement with a

casino to display their vehicles in a contest program

developed by the casino, the Department considers the

transaction to be between the dealership and the

casino.

TAXABLE SALES

Vehicle Give-aways(

)

For example, if a California resident wins a vehicle that

they get from a Nevada dealership, the sale is

considered taxable since the Casino ‘purchased’ the

vehicle. The sales tax is either paid by the casino, or the

contest winner (if rules were posted). No drive-away

exemption is allowed for this type of transaction.

TAXABLE SALES

•

Tire Sales

•

Smog fees

•

Doc(ument) fees

•

Parts Sales

•

Shop Supplies

UNWINDS vs REPOS

• When a customer returns a vehicle and cancels the sale, the transaction is referred to as an Unwind. In this transaction, to cancel the sale, the dealership must make the customer “whole”. In other words, restore the customer to his/her position prior to the unwind. A reasonable restocking fee may be charged. If the trade-in vehicle is no longer in the dealership’s inventory, then the value of the trade-in given before the unwind is the value needed to make the customer ‘whole’.

• If the vehicle was repossessed, there is no refund of the sales tax charged on the original deal. However, the provisions of NRS 372.368, Deduction of certain bad debts

This form should be in the deal file whenever a repossession occurs. Note this form also includes a

COURTESY DELIVERIES

The sale price of any vehicle delivered in this state by a registered retailer who is providing a courtesy delivery on behalf of an unregistered out-of-state seller should be included in the gross receipts of the delivering retailer.

Exceptions include:

• The customer is a retailer and informs the delivering retailer. In this instance, a resale certificate should be issued by the customer.

DIFFERENT COUNTY SALES

•

Sales to residents of another county

Any sale in one county is subject to that county’s

sales tax rate regardless of the fact that the

purchaser is a resident of another county. Where

the sale takes place determines the rate of

taxation. For instance,



A customer lives in Nye County, but purchases a

ABSORPTION OF TAX

•

Taxpayers CANNOT advertise they will pay the

sales tax

•

Taxpayers CAN state that “sales tax is

included….”

•

If there is no such statement on the invoice or a

sign that states that sales tax is included, then

the sale is subject to taxation on the entire

amount or portion that is separated out

TRADE-IN ISSUES

•

Trade in of a vessel towards the purchase of a

vehicle

You can take a trade-in of a vessel towards the purchase of a vehicle; HOWEVER, the tax trade-in credit is the county tax rate MINUS 2%.

TRADE-IN ISSUES

•

Trade in of a vehicle towards the purchase of a

boat (vessel)

You can take a trade-in of a vehicle towards the purchase of a boat. The trade-in tax credit is the full county tax rate.

• Trade-ins are to be reported as an exempt sale in Column B

TRADE-IN ISSUES

•

Trade-in tax credit on vehicle not purchased in

Nevada:

 Attorney General’s Opinion #92-15 clarifies that the

trade-in tax credit is available for any vehicle being traded in, regardless of where the trade-in vehicle was purchased.

 “A trade-in allowance’ would be available to reduce the

sales price of an out-of-state purchase of a vehicle by the corresponding value of the trade-in, in order to reduce the applicable tax liability.”

 There are no restrictions in NRS 372.025, NRS 372.065

TRADE-IN ISSUES

•

Trade-downs: When a customer trades in a

vehicle/vessel that is given a trade-in credit which is

higher than the selling price of the new vehicle/vessel, the

trade-in tax credit cannot exceed the tax of the selling

price of the new vehicle/vessel.

TRADE-IN ISSUES

•

Negative equity: When debt on a trade-in is higher than

the value given to the customer for the trade-in

vehicle/vessel, a negative equity is created. Negative

equity cannot affect the tax on the selling price of the

new vehicle/vessel, but should be shown as an increase in

the new debt the customer will owe.

LEASE DEFINITIONS

•

Residual Value

•

Capitalized Cost

•

Capitalized Cost Reduction

LONG TERM VEHICLE LEASES

•

A long term lease is for a period over 31

days (

)

•

Information on the lease:

–

Value of leased vehicle

–

How payment at inception is disbursed

–

Estimated value at end of lease

TAXABLE ITEMS IN A LEASE

•

Monthly payments

•

First payment paid to dealership

•

Doc fees showing on lease

•

“Smog Fees” showing on lease

Example of completed vehicle lease

Please note that this is only a partial example of a completed lease

AMOUNT DUE AT LEASE SIGNING OR DELIVERY $10,000.00 MONTHLY PAYMENTS

A. Your first Monthly Payment of $647.01 is due on the Lease Date, followed by 62 payments of

$647.01 due on the 1st of each month.

B. The total of your Monthly Payments

is $40,761.63.

OTHER CHARGES

(not part of your Monthly Payment)

A. Termination Fee $395.00 (If you do not

Purchase the Vehicle)

TOTAL OF PAYMENTS (The amount you will have

paid by the end of the lease). $50,509.62

ITEMIZATION OF AMOUNT DUE AT LEASE SIGNING OR DELIVERY

A. Amount Due at Lease Signing or Delivery:

(1) Capitalized Cost Reduction $ 8304.79 (2) Sales/Use Tax on Capitalized Cost Reduction $ 602.10 (3) First Monthly Payment $ 647.01 (4) Refundable Security Deposit N/A (5) Initial Title, Registration and License Fees $ 20.00 (6) Upfront Sales/Use Tax on Vehicle $ N/A (7) Doc Fee $ 426.10 Total $10000.00

B. How the Amount Due at Lease Signing Or Delivery will be Paid:

(1) Net Trade-in Allowance $ ____________ (2) Rebates and noncash credits $ ____________ (3) Amount to be paid in Cash $ 10000.00_____

Total $10000.00

YOUR MONTHLY PAYMENT IS DETERMINED AS SHOWN BELOW

A. Gross Capitalized Cost. The agreed upon value of the Vehicle ($50,999.26) and any items you pay over the Lease Term (such

as service contracts, insurance, and any outstanding prior credit or lease balance………..$ 51,494.26

B. Capitalized Cost Reduction. The amount of any Net Trade-in Allowance, rebate, noncash credit, or cash

You pay that reduces the Gross Capitalized Cost……….$ 8,304.79

C. Adjusted Capitalized Cost. The amount used in calculating your Base Monthly Payment………$43,189.47 D. Residual Value. The value of the Vehicle at the end of the Lease used in calculating your Base

EXEMPT SALES

•

NRS 360B.480 and NRS 372.025, - what is

not included:

Dealer issued discounts

Drive-away permit costs

Title fees, Registration fees

Optional Warranties, service only warranties

Out of state sales

EXEMPT SALES

•

Sales to exempt entities

Government (U.S. or Nevada)

Religious*

Charitable*

Educational*

Nevada National Guard*

•

Sales to residents of other states **

•

Sales for resale

* Must have department-issued exemption letter on file

DRIVE-AWAY SALES

If purchaser provides the documentation to prove

they will use the vehicle out of state, they have 15

days to remove the vehicle to their home state. Such

documentation may include, but not limited to:



_{out of state driver’s license}



_{out of state insurance document}



_{Note: if the purchaser has a residence in both}

Nevada AND another state, the sale is subject to

tax.

DRIVE-AWAY SALES

Vehicles being purchased in Nevada for use in

other states that do not have a sales tax, such as

Montana, Oregon, Alaska, etc. are scrutinized

carefully in the course of an audit and should be

monitored carefully.

Nevada residents are not allowed

Drive-away permits

•

Beware of Drive-away permits to these

USE TAX

What is Use Tax?

• Use Tax is a mirror of the sales tax, same rate. The tax is meant

to ‘even the competitive advantage’ that out of state vendors have when selling a product without tax, when a Nevada

vendor must charge the tax. The tax is due on all tangible personal property brought into this state, for storage, use or other consumption in this state, and where Nevada sales tax has not been charged.

• The use of inventory for resale may be subject to the use tax

depending on the circumstances. (see “Loaner-Demonstration vehicle usage”).

• Giving away an item meant for resale is subject to use tax at the

USE TAX

• Any tangible personal property purchased for use in the

business is subject to sales/use tax. If the vendor did not charge the tax on the sale, then use tax must be accrued and reported to the Department on the cost of the property.

• Sales tax should be paid to your vendor or use tax accrued on

supplies used in the repair of vehicles on purchases of tangible personal property that are not incorporated into the vehicle. Such supplies include cleaning rags, masking tape, gloves, glass cleaner, paint and any other items of a similar nature. If purchased from a Nevada vendor, sales tax must be paid. Otherwise, use tax must be accrued and paid on the purchase.

• Any parts that are incorporated into the vehicle such as

USE TAX

An example of when use tax is due

•

Giveaway items

•

Self-use items purchased without tax

•

Internet purchases for self use where

Nevada tax has not been charged

•

Vehicles placed in service for use by

dealership



Sales

and Use Taxes do not apply to

the purchase of replacement parts if

the repairs are pursuant to the

provisions of a warranty or guaranty

if the warranty or guaranty was

originally taxed as part of a sale

NAC 372.460(1)

USE TAX

Loaner –demonstration vehicle usage prior to 10/24/2014:

NRS 372.185 defines “…use or other consumption …” as

subject to use tax. Under this statute, vehicles taken out of

the inventory of a vehicle dealer under the provisions of

NRS 482.320 and NRS 482.330 were subject to use tax on

the cost of the vehicle when used for self-use.

•

For instance, if a vehicle is used with loaner plates for a

customer to drive while their vehicle is being repaired,

the cost of the vehicle so used was subject to use tax.

USE TAX

Loaner –demonstration vehicle usage:

Effective 10/24/2014, a new regulation (R129-13) was

approved by the Nevada Tax Commission governing the use

of loaner/demonstration vehicles.

•

If the cumulative period of all the loans of the motor

vehicle by the dealer is more than 180 days, the usage

will be subject to tax at the cost of the vehicle to the

dealer.

•

A written record must be maintained by the dealer and

TIRE TAX

• Tire tax is $1 per tire. (NRS 444A.090 )

(

• When a dealership purchases tires for its vehicles in inventory, a resale certificate should be provided to the tire retailer.

• If the dealership is purchasing new tires for their vehicles placed in service for use in the business, or for personal vehicles, the tire tax should be paid.

RECIPROCITY

Electronic Filing Requirements

All payments of money for taxes, interest,

penalties or other obligations in the

aggregate amount to $10,000 or more MUST

be made by electronic transfer….*

For more information and to register and pay your taxes, go to:

https://www.nevadatax.nv.gov/web

RECORDS TO BE KEPT

•

Purchase invoices

•

Sales journals

•

General ledgers

•

Deal files

•

Affidavits and Drive–away permits

WRITTEN RESPONSE

Most tax issues can be addressed by the

Department of Taxation. Please be advised

that any responses to inquires made to the

Department are only binding if put in writing,

such as Nevada Revised Statutes,

DEPARTMENT OF TAXATION

Contact Information

Our offices are open Monday-Friday 8:00 AM – 5:00 PM

Southern Nevada:

Grant Sawyer Office Building 555 E. Washington Avenue Suite 1300

Las Vegas, NV 89101 OR

2550 Paseo Verde Parkway Suite 180 Henderson, NV 89074 Carson City: 1550 College Parkway Suite 115 Carson City, NV 89706-7937 Reno: 4600 Kietzke Lane Building L, Suite 235 Reno, NV 89502