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Save sales tax?

Save sales tax?

This is probably a really dumb question but here goes: If I buy without autopilot, I would save hundreds on sales tax when I register the car. If I add autopilot later, would I have to pay sales tax on $6k at that time? Is here tax on a software download? (And yes, I know the sales tax on the $5k option upfront is less than the extra $1k to add autopilot later).

rxlawdude | 21 août 2018

This issue has been vexing for California residents, because there have been reports of most being charged sales tax on the OTA enabling of EAP.

Technically, any delivery of software not involving a tangible item (disk, manuals, even a registration card) is not taxable, but there are exceptions. The big one is whether the software for EAP is already installed but dormant, and the OTA activation simply flips a bit (Taxable!), or if the EAP software is actually loaded OTA (probably non-taxable).

Some have not been charged for the OTA activation. It's one of those mysteries of the world. ;-)

TranzNDance | 21 août 2018

The answer probably depends on the state. In California, there is a sales tax of 9%. I'm not sure if that is based on my county.

stevenmaifert | 21 août 2018

So if the sales tax on the $5k option upfront is less than the extra $1k to add autopilot later even if it weren't subject to sales tax, why would you wait?

jvcesare | 21 août 2018

@stevenmaifert One other CA consideration is that the biggest part of the registration cost is the value of the vehicle. They will use the sale price to determine that. Buying OTA will not affect this.

GaryTheBadger | 21 août 2018

stevenmaifert - Because I don't have the spare $5k now, but will later, assuming I even chose to add autopilot.

jvcesare - That is the point of my question...will the $6k to add autopilot later be taxed? If so, as regular sales tax or as vehicle registration tax (in my State it's 9.5 vs. 6.5). Has someone added autopilot later and were they taxed? By Tesla or the DMV?

jamespompi | 21 août 2018

Not to mention the price of AP is going to go down in the future. It has already for people with AP1 hardware that didnt upgrade. As the hardware becomes obsolete to the newest tech and/or they offer AP as a standard feature, Tesla will have to charge less for people that opted out to upgrade. Tesla did the same strategy for the 40 to 60 battery upgrade. The price dropped significantly over time.

TranzNDance | 21 août 2018

The price of AP could also go up once it has more features. Supply and demand, the latter being suppressed by the lack of the features to justify a higher price. There weren't that many people who bought the 40 battery compared to people who would like AP.

jamespompi | 21 août 2018

Doubtful, its more likely there would be fewer features on older hardware. Tesla has already shown several signs of trying to capture additional revenue on software upgrades to existing hardware at a discount. Theres a balance between not discouraging customers from opting out of software upgrades from the beginning and Tesla actually trying to recoup on hardware they already gave you.

David N | 21 août 2018

@GaryTheBadger
That’s a great question. Sounds like a question for Tesla. Let us know what you find out.

stevenmaifert | 21 août 2018

@jvcesare - Yup, but is that alone a good enough reason to delay the purchase of EAP? The VLF is based on 1.15% of the purchase price and reduces each year for the first 11 years at which time it becomes a fixed amount for the remaining life of the car. The California DMV provides a VLF rate table: https://www.dmv.ca.gov/portal/wcm/connect/ffb82f61-5a98-4cd0-853a-b446fb...

Running the numbers - Based on a purchase price of $50K versus $55K, it would take 86 years to accumulate enough VLF savings to offset the additional $1K you would pay for a post delivery purchase of EAP. Pick any price with a $5K differential and you'll see it would take a ridiculous amount of time. It would only make sense if you didn't have to pay sales tax on that $6K post delivery EAP purchase.

GaryTheBadger | 21 août 2018

David N - Do you have a magic phone number for Tesla? Every time I call, the recording says due to call volume they can't take calls. I've also placed some typed messages via their website ...no replies.

David N | 21 août 2018

Sorry, I do not

ro.soares | 21 août 2018

@stevenmaifert - But you can pay for OTA EAP with a credit card. Say you have a 5% cash back credit card, you'll get $330 cash back. You transfer that to a separate credit card that offers 25% more for travel redemptions. That becomes $410. How many years now to offset the $590 difference? :)

I did not get EAP as I didn't have the extra 5k to spend, but uncle Elon did give me 9 days of free EAP just enough for me to get hooked to that drug. Now I'm rearranging my finances to gift me EAP for Christmas...

... of 2019

jvorndran | 21 août 2018

I think a few years from now the price for EAP should be coming down. So sales tax would also be less. Possibly saving money in the long run.

stevenmaifert | 21 août 2018

@ro.soares - That is some creative financing. So, to offset the $590 difference you are down to only 41 years :) The problem, if you can call it that, is that once you reach the 11 year point, the VLF savings between the $5K difference in the price you pay for the car is a fixed $9 per year. That's why it takes so long to break even.

billlake2000 | 22 août 2018

rxlaw, didn't I see somewhere that there some way to dispute/correct/claim/recover the sales tax charged for OTA software? Something to do with tax filing or something else?

mdennick | 29 Janvier 2019

These days autopilot is $5,500, post deliver, if purchased with the 30 day free trial. It goes back up to $7k, a week after the trial. I'm in California...the online "Checkout" shows +$426.25 tax, "calculated from your Registration address".

I'm still not certain why they are charging sales tax for OTA s/w. I asked a Tesla service manager about it today and he said Tesla considers the price going towards the hardware cost as well as the software, so it would be taxable.

Still not sure why they would consider it that way, or if they have to. Looking at the tax regs (https://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1502.html) it seems to still fit in the non-taxable bucket since "the purchaser does not obtain possession of any tangible personal property, such as storage media, in the transaction". We already had the tangible personal property long before the transaction. Do any CA tax experts out there know how this should work and why?

If there isn't sales tax then this would be the way to go (even with the $500 extra), as long as the 30 day trial and promotional price stick around.

mdennick | 29 Janvier 2019

Here's an older thread on it for reference. https://forums.tesla.com/forum/forums/post-delivery-autopilot-andor-fsd-.... Conclusion? We don't know why they are charging tax in CA.
Also, here's the current autopilot trial link. https://www.tesla.com/support/enhanced-autopilot-trial

williamsb | 16 août 2019

The thing I don’t understand is… I was taxed on the Enhanced Auto Pilot I purchased before the demo expired on Jan 29th 2019. $5500.00 + $426.25. I just purchased the Full Self Driving for the sale price of $3000 and wasn’t charged taxes. I live at the same California Residence haven’t moved. Not complaining, the FSD price is awesome just find it strange.

Joshan | 16 août 2019

Well I will post a fact instead of all this conjecture... Straight from my invoice.

Subtotal $3,000.00
Shipping (T) $0.00
Sales Tax $210.00
Total Amount Including Tax (USD) $3,210.00
Amount Paid $3,210.00
Balance Due $0.00

bjrosen | 16 août 2019

If you are in a state with a sales tax you will pay the tax on the FSD purchase, if you live in a state with no sales tax but does have a registration fee based ot the purchase price of the car then you would save money. I live in MA which has a sales tax which you pay when you register the car, buying FSD after the car is registered still triggers the sales tax however the annual excise tax, which is based on the price of the car, will be lower. I bought a black AWD without FSD and then immediately bought FSD after the car was registered. The color was important because the MA rebate, which will be gone after Sept 30, cuts off at $50,000. The AWD in black ($750 color) came in at $49,960 including the destination charge so I'm getting the rebate. If I had picked a different color, aside from white, it would have been $250 more which would have put me over the $50K limit, so no rebate. Buying FSD before registration would have put me way over, but after registration it had no effect.

Joshan | 16 août 2019

There is a state without Sales Tax?!?!?!

Magic 8 Ball | 16 août 2019

Oregon and four others.

Joshan | 16 août 2019

My state puts a tax on the tax...

Magic 8 Ball | 16 août 2019

Only things that are certain in life is death and taxes.

TabascoGuy | 16 août 2019

You don't pay the sales tax on software in our state if you buy it at a grocery store and ring it up between the lettuce and bologna.

jwat14 | 16 août 2019

My state of residence, New Jersey has a sales tax exemption for initial EV purchases, but since the FSD updrade was post-delivery it was taxable. I used a cash-back card, so I'll get back something at least.

aasandsas | 16 août 2019

Actually this is true in State of Delaware where you pay 4.25% DMV fee(not tax but fee lol) on the price of car. Now if you get FSD added as part of purchase, you’d pay 4.25% fee on $6,000 during your car registration.

Whereas if you purchase FSD later after delivery, you don’t pay any DMV fee + get 1% to 2% cash back on your credit card.

bjrosen | 16 août 2019

New Hampshire has no sales tax and no income tax. MA resident's do a lot of their shopping in NH, I do all of my shopping in Nashua. The one thing that a MA resident can't avoid sales tax on is cars because you pay the sales tax when you register your car not at the point of purchase. I bought my Volt in Nashua but I still paid the MA sales tax on it, and I was also able to get the MA rebate on it which back then was $2500, today it's only $1500 and only applies to BEVs under $50K, next month it's gone altogether because it's gotten too expensive for the state.