to charge sales tax on repairs or maintenance done under a warranty (or without a warranty), how to treat inspection charges, and whether to include towing charges and environmental or hazardous waste fees in the taxable sales price are all examples of difficult sales tax questions that dealerships and their owners face regularly. In light of these potential problem areas, it is imperative that your accounting and invoicing departments are provided with the correct taxability rules and determinations. There are many other areas where dealerships can potentially enhance and solidify their sales tax processes. State tax audits can come with penalties and interest, which can significantly accrue over time, depending on the look-back period under review by the state (usually three to four years). It is recommended to get your dealership’s CPA or tax advisor involved early in order to avoid a lack of documentation and failure to implement appropriate procedures and controls. Citrin Cooperman’s Automotive Dealerships Industry Practice is comprised of a team of professionals who specialize in helping dealers grow their businesses and work closely with our State and Local Tax (SALT) team to ensure automotive dealerships are up-to-date with their state tax compliance obligations. If you have any questions, please contact Philip Craft at pcraft@citrincooperman.com or Jaime Reichardt at jreichardt@citrincooperman.com. 3. Advertising Costs Subject to Sales Tax A highly targeted area of dealerships is advertising costs. It is important to look at your advertising bills and understand what is and is not taxable. Since advertising is generally a nontaxable service, many vendors do not charge sales tax on their invoices. However, if the advertising involves printed mailers or advertising inserts for periodicals and circulars to be distributed to prospective customers, that form of advertising could very well be taxable. In addition, many digital and online advertising or listing services could be considered to involve the sale of a taxable information service or, in some cases, access to a cloud computing portal, which may be taxable as well. It is imperative that dealers review their invoices to understand the nature of the service and how it is delivered. If there are questions about the services purchased, ask the vendor for clarification. 4. Loaner Vehicles and Repairs or Maintenance Another confounding area in sales tax for a dealership to consider is how to treat loaner vehicles provided to customers. It can be confusing when trying to identify whether there is a charge for the loaner and whether part of a free or additional warranty or maintenance program can impact the taxability. Additionally, there are also states that will not permit a dealership to purchase a loaner vehicle with a tax-free resale certificate since the vehicles may be utilized by the dealership and not sold or leased to customers. Lastly, the treatment of repairs and maintenance is an additional layer of complexity for dealerships to properly account for when it comes to sales and use tax. Whether Natural Gas | Electricity Choose a pricing program that fits your needs Lock-in your energy rates for 12 months or more Local energy expertise & insight mjahangani@spragueenergy.com Mike Jahangani | 732.982.8486 Visit us online at spragueenergy.com/njcar Sprague Works with NJ CAR Members to Manage All Their Energy Needs 21 NEW JERSEY auto retailer
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