EAP & Pesky Tax

EAP & Pesky Tax

Here in TX we pay 6.25% tax on purchase price of the car. It would help to extent of $500 if Tesla can provide a grace period (say 30 days) to purchase EAP & FSD after registering the vehicle. That way we can save 6.25% on $8k which is a nice save in a state that doesn't go out of it's way to help EV owners. Do you think Tesla would consider it?

socaldave | 18 agosto 2017

Haha no. Why should they? What other company on earth would do so? Just be glad you're not in LA paying 9.25%.

Darkon | 18 agosto 2017

I was wishing the same thing as OP for a couple of reasons:

1) According to another forum member, in CA they are not supposed to charge sales tax on OTA-delivered software purchases, so this could save quite a bit on a $5K (or $8K with FSP) purchase (about $620 for me on the $8K purchase). That said, other CA Tesla owners have said that Tesla DID charge them sales tax when they purchased OTA-delivered upgrade, so you likely won't see this sales tax savings in reality, regardless of the CA tax law.

2) If the car costs $8K more when you first buy it, the annual DMV license fees in CA will be roughly $60 more. Over 10 years, that's an extra ~$600 right there.

Given that these are both OTA updates, I really would like to see Tesla offer a window (30 days seems reasonable) where you can get the EAP and FSP options w/o paying the $1K penalty on each.

Frank99 | 18 agosto 2017

I think it would be a marvelous marketing tool to enable EAP (and FSD once it's available) for 30 days on all new cars, and give the new owners the opportunity to purchase afterwards as if it were pre-ordered (kinda like XM radio on a new car). I'd guess they'll have a remarkable conversion rate on that...

johnmann | 18 agosto 2017

Sales tax is 10% and climbing n Seattle. It sure would be nice to be spared paying it on the $8,000 for EAP and FSD!

Tesla2018 | 18 agosto 2017

What if you go to a service center in Delaware or New Hampshire or other state with no sales tax and have it activated there instead?

rxlawdude | 18 agosto 2017

@Darkon, I suspect those who were assessed sales tax on OTA delivered software have a good remedy to correct this error. Haven't heard from any affected owner that went back to Tesla or Dept of Equalization to clarify, but the law is crystal clear.

LA-Fohlen | 18 agosto 2017

@sdsatish I'm with you on that. A state that does not support people willing to go into EV technology should not deserve the sales tax.

weluvm3 | 18 agosto 2017

Yes, according to my understanding of CA state law, EAP and FSD activation should not be subject to sales tax. It is either custom software or a license to use software, and it is excluded: gov/pdf/pub61.pdf

But, if Tesla requires us to purchase it bundled with the car, rather than as an after purchase add-on, in order to get the $1,000 "discount", then it is effectively increasing the price of the car, hence it is taxable. And increase the license fees as well.

Tesla, please allow us to activate the software aftermarket without the additional $1,000 charge. It won't cost you anything, and your customers will thank you for it.

johnmann | 18 agosto 2017

Or at least allow us to pay for it at the same time as the car, but put it on a separate invoice.

eleestein | 18 agosto 2017

Since you're asking for big favors, how about Tesla turning on EAP for the first month at no charge and allowing the new owner to make the EAP buying decision after a trial period?

When I bought my Model S without EAP, sure enough Tesla soon provided me a free one month trial with an OTA update to see if they could entice me to buy EAP as an add-on. Of course, it was $1,000 more than buying it with the car. They probably wouldn't do a trial period for the Model 3 EAP without some sort of upcharge. It would disincent people to buy it before trying it.

weluvm3 | 19 agosto 2017

I'm sorry, but I don't understand why Tesla would want people to buy EAP before trying it? If EAP is so great, then Tesla should want to give everyone a taste when they buy the car. After experiencing it for a month, anyone who wouldn't be happy to pay $5,000 to activate it shouldn't have been "tricked" into buying it bundled with the car (for the prospect of "saving" $1,000.).

This way, everyone who has EAP is happy with it, and nobody feels resentful that they bought an upsell they didn't need, or paid $1,000 more for it later on. And we all save on tax and licensing.

People keep justifying this $1,000 bundling discount, or $1,000 late purchase fee (however you want to look at it) on the basis that "everybody does it". Well, excuse me, but are we buying Teslas because Tesla does business like "everybody else"? Is THAT what appeals to you about the company? I kind of thought that Tesla's goal was to do things BETTER than the crappy legacy automakers, and offer a BETTER buying experience for their customers. Isn't that what you guys want? A different, more rational, less stressful and more consumer friendly buying experience where ever and whenever possible?

Chargedmr2 | 19 agosto 2017

OP, as far as I know, software (downloaded or purchased on a some form of media) is taxable in TX. This means you will potentially pay MORE tax (standard sales tax rate) if you don't buy EAP as part of the car purchase. Maybe Model S owners can clarify based on their experience.

rxlawdude | 19 agosto 2017

@Fiddle, Tesla did provide a "trial" of AP1 to MS owners last year. Activated OTA, and after the 30 days, deactivated OTA.

eleestein | 19 agosto 2017

@Fiddlesticks - I agree with you. Tesla should allow an EAP Trial Period without there being a financial penalty if you decide to buy it a month later rather than with the initial purchase of the car. However, maybe Tesla isn't willing to take the risk that they would sell less of the EAP upgrade (maybe they would sell more?). I agree that Tesla should not be like other car makers and should offer a better buying experience, yet I think they need to recoup some of the R&D costs and the extra hardware investment (8 cameras, sensors, etc.). Selling the high margin EAP upgrade with as many Model 3's out the door is a big help towards future profitability and will help alleviate this financial burden. I think it's a no-brainer that as soon as FSD gets to level 4 (or sooner), and can be legally used on highways and roads, Model 3 Owners who haven't already bought EAP will be buying it in droves along with FSD. For now however, Tesla needs to sell as much of the EAP upgrade as they can.

weluvm3 | 19 agosto 2017

@eleestein If Tesla won't offer a free trial without penalty because they are afraid they would sell fewer upgrades, then all the more reason WHY we, as consumers should demand one.

Because, who would know better than Tesla how desirable EAP would be for their customers once they have tried it? If EAP is truly great, and worth every penny of it's $5,000 cost, then Tesla should have nothing to fear from letting people try before they buy. And they should have nothing to gain from rushing people into making a snap decision at the time of purchase, rather than 30 days later.

So, the real question is: does Tesla have enough confidence in the value and desirability of their own product, such that they feel no need to resort to the marketing and sales tactics of their competition? And, if they don't, then why should any of us? Why should we have more confidence in Tesla's products than they do?

carlk | 20 agosto 2017

I don't know why people are so unhappy when Tesla actually gave everyone a chance to upgrade by adding the hardware suit in every car whether you have chosen the option or not. Try that for a Merc or whatever to see if you can add the capability three months or three years after you have purchased the car. As for the sales tax loophole it might be legal but it's not all that ethical especially if Tesla is to change the policy so people could take advantage of it. I'm sure there will be people attacking it if that is to happen.

weluvm3 | 20 agosto 2017

@carlk It would not be "ethical" for Tesla to help their customers legally save money on sales tax? Interesting: how do you feel about Tesla potentially timing deliveries of cars in the USA to maximize the number of people eligible for the Federal tax rebate? Would it also be "unethical" if Tesla did that?

And, carlk, it's not clear to me why you think anyone finds the opportunity to upgrade "upsetting." It seems to me that everyone here, myself included, is absolutely trilled by the opportunity. But, like all other opportunities in life, we'd prefer the chance to individually carefully and thoughtfully evaluate its benefit versus cost before making an informed decision whether to commit to it. Why does THAT seem to upset YOU so much? Is it wrong for anyone to want to do that? It seems too me that it's a perfectly normal thing for anyone to want to do, and anyone who doesn't is frankly a bit stupid.

Consumers certainly shouldn't be in any way pressured or penalized by ANY company, Tesla included, for wanting to make informed, thoughtful decisions. Just because some other consumer unfriendly company do that doesn't mean that enlightened companies should. Tesla is supposed to be an enlightened company, so why should we defend them for acting otherwise?

carlk | 20 agosto 2017

Just look at how Amazon was attacked because some say it's business model relies on helping customers to "legally" to save state sales tax.

carlk | 20 agosto 2017

And then you get what you pay for that should not be anything new to you too. Tesla spent a lot money to develop the system and to add the hardware it got to find some way to recover the cost. Pressured of not, every purchase decision we make is pressured into unless if money is no object to you, if there are not enough people there to pay for it no one will get anything anymore. When you try to get something out of nothing from a company you're actually getting it from everyone who has paid for it. That's just the way it is someone has to pay for it. Tesla is a business not a charity. Its business relies on revenues not donations.

weluvm3 | 20 agosto 2017

@carlk and Amazon probably wouldn't have been as successful without those initial "subsidies." Yes, they exploited a loophole, as did all other Internet based companies at that time, that helped them kickstart a whole new industry. Just like Musk is trying to do now with Electric cars and all the other novel technologies he is promoting.

And, yes, Musk is also getting "attacked" for the taxpayer subsidies that some claim is fueling his companies' success. Should he stop doing that? Maybe pay back the money? Encourage customers not to apply for any Federal or State tax rebates they may be eligible for? Or to apply for any utility company E-car rebates (SCE is offering one at the moment.) Or tax credits for installing chargers? And isn't the decision of what is and isn't subject to sales tax also a government subsidy, which anyone is free (even encouraged) to benefit from whenever they legally can? Is it "unethical" for the government to use tax policies to promote certain consumer behaviour, and for consumers to take them up on it?

And, for your reading pleasure:

http://www.latimes. com/business/la-fi-hy-musk-subsidies-20150531-story.html

"Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies. ..."

http://www.businessinsider. com/tesla-stock-price-california-state-government-bailing-out-2017-7

"The California state Assembly passed a $3-billion subsidy program for electric vehicles, dwarfing the existing program. The bill is now in the state Senate. If passed, it will head to Governor Jerry Brown, who has not yet indicated if he’d sign what is ostensibly an effort to put EV sales into high gear, but below the surface appears to be a Tesla bailout. ..."

Carl Thompson | 20 agosto 2017

I think that it's simply a matter that Tesla knows that when people buy the car they've probably already had to arrange financing. So it's easy for most people to simply add $5,000 to the loan or credit they've already arranged. If people can wait until after they purchase the car to purchase EAP than some people who would have bought it will be in a situation where they feel like they can't afford to pull $5k more out of their bank account or put it on a credit card that month. Their inner monologue might be something like:

"I _wanted_ EAP but I just put $10k down on the car, just spent $2k putting an EVSE put in, just spent $7k getting the car modified and wrapped, just found out my insurance will be a lot higher than I thought and my checking account is starting to look real low. And I've been driving the car for a few weeks and realize it drives better and is more fun than anything I've ever owned even without EAP. I guess I'll just skip it."

Nothing sinister going on here. Tesla just knows it will be a lot harder for people to buy EAP after the fact.


weluvm3 | 20 agosto 2017

@carlk Tesla is 100% free to charge for whatever they like to recover whatever costs they need to. But a decision made without enough information and time to honestly evaluate it is not a decision freely made. Trying to claim that you have given someone a free choice when you made it harder for them to make a free choice is disingenuous. Tesla's products and services are valuable enough and desirable enough such that they should feel no need to engage in such tactics with their customers.

That fact that they seem to feel the need to do this is causing cognitive dissonance in many people who honestly believed in Tesla, Musk, and their mission to transform the industry...including all of the awful sales tactics that the rest of the industry has historically engaged in. Again, I 100% accept the need for Tesla to charge anyone for any product or service that would benefit that person. Including EAP if they feel they need to charge for that. But, if you will give people a choice, allow them to make that choice freely, without any pressure, and with all the information they need to make the best choice for them. Don't mislead them, over promise to them, frighten them, or set them up for regret later. Just give them the facts, calmly and fairly, and let them chose for themselves. If Tesla cannot survive doing business like that, then maybe they don't "deserve" to survive? I personally won't feel too bad if traditional car dealerships don't survive in their current form...

weluvm3 | 20 agosto 2017

@Carl Thompson Sure, and what's stopping Tesla from allowing people to immediately pay to activate EAP at time of purchase? If someone is absolutely sure they want it, and it would be easier for them to bundle it into their financing, Tesla could accommodate that as well. All they'd have to do is call it another "package" (the immediate activation package) that someone could order. Problem solved.

carlk | 20 agosto 2017

Carl Thompson
"Nothing sinister going on here. Tesla just knows it will be a lot harder for people to buy EAP after the fact.

Yes pure business decision and it's a pretty good and fair one too.

weluvm3 | 20 agosto 2017

Well, I, for one, knew that I was going to buy an M3 after I reserved one 1.5 years ago, so I've had ample opportunity to save enough money to pay $5,000 cash for EAP, assuming I actually wanted to save money on financing and sales tax, of course.

And, even if I hadn't, my Federal Tax rebate would cover the upgrade.

And, assuming that I wasn't eligible for a Federal tax upgrade, what's stopping Tesla from partnering with a bank or offering their own financing for the upgrade at a competitive rate? Isn't financing a pretty common thing for auto companies to offer?

Tesla may or may not want to help their customers save money and make better, more informed choices. Depending on what "kind" of company they see themselves as, and what kind of relationship they aspire to having with their customers. I get it, I'm just as cynical as the next guy when it comes to that (more so, maybe.)

But what I don't get. What really perplexes me. Frustrates and annoys me. Is WHY IN THE WORLD would any honest "so called consumer" go onto a forum like this one, and argue AGAINST the right of other consumers, such as myself, to "try before they buy" and save money on state sales tax???

You know what: speak for yourselves, OK? If you don't want to try EAP out before you commit to buying it, THEN DON'T! If you don't want to save money on sales tax, THEN DON'T! But don't tell me that I shouldn't want to have those rights, or that I'm being somehow unfair or unreasonable! Because, you guys are really starting to p*ss me off, OK? You don't make any sense, you are arguing against something which, at worst, won't hurt you in the slightest, and may even benefit you, and which will hurt me and other people in my situation IF Tesla agrees with you. What right do you have to do that? And just WHO are you people to even wish for such a thing? Used car salesmen or something?

ebiggs | 20 agosto 2017

@Fiddlesticks, you're not alone.

And as a fellow consumer, I for one, support your consumer advocacy, thank you.

I think we all should. If you'd like to see something, don't be afraid to ask for it. If enough people say they'd like a 30 day trial and decision period over EAP in lieu of a high-pressure sales tactic, then Tesla would get useful information on how to please its costumers and gain good will, which is a smart business move.

Honestly, I just don't think it's been a huge concern with Tesla's current consumer base as is evidenced by more than just this forum. For example, the way they inform you about the $1000 post delivery charge is not very smart. It goes something like this:

Add EAP: $5000 now, $6000 after delivery.

That is psychologically brutal and doesn't even try to hide the high pressure sales tactic. Instead it should be like this.

Add EAP: $6000 (buy now and save) <-- not even tell you how much you save but when you check it it shows this:

Subtotal: 80,000
EAP discount ($1000)
Total: $79,000

And never mention that it's more after delivery.. Let the consumer logically conclude on their own that it would be more.

This is just basic common sense pricing structure design that they'd do if they ever thought their customers were having a hard time swallowing the current design. But they don't change it because they presumably have received very little negative feedback over the way it works now.

Their current customers feel like they're a part of tesla and its mission to accelerate the world's adoption of sustainable transport, and so they let them get away with things other companies would have a much harder time doing. And teslas market research probably validates their anti-consumer pricing pressure. But I don't think it's going to last. Even the 500,000th reservation of the model 3 is enthusiastic since they're willing to wait a year to get their car still... But this isn't going to last. Things will change probably by 2019, and we'll see something that's more consumer friendly.

rxlawdude | 20 agosto 2017

@carlk "Just look at how Amazon was attacked because some say it's business model relies on helping customers to "legally" to save state sales tax."

Apples to oranges, as usual. Amazon was not charging sales tax on TANGIBLE ITEMS shipped into a state from a site outside that state.

Non-tangible software isn't comparable. Where nothing tangible is delivered, sales tax is not collected, at least in the great state of California.

rxlawdude | 20 agosto 2017

Oh, yeah. You do know if you did get nontaxed items from Amazon that your state is owed the taxes (called "use tax") it would have received as sales tax on your next state tax return, right?

ebiggs | 20 agosto 2017

Yeah, tesla's OTA updates is not going to be a major driver for CA taxing digital goods.. Just look at how much is sold through iTunes and app store, and the equivalent on android. Or for that matter, netflix and hulu subscriptions... Tesla OTA updates are going to pale in comparison to that level of commerce.

Oh digital goods will be taxed in CA, it's just a matter of time. Tesla should help a buyer out while the legislators are still catching up.

Carl Thompson | 20 agosto 2017

"WHY IN THE WORLD would any honest "so called consumer" go onto a forum like this one, and argue AGAINST the right of other consumers, such as myself, to 'try before they buy' and save money on state sales tax???"

Sorry if you're talking about me. I didn't mean to suggest that people shouldn't be able to 'try before they buy.' I was just suggesting that Tesla may have analyzed things and decided that they're more likely to sell it by doing it this way. Sometimes what the consumer would legitimately like doesn't agree with things that a company does to maximize their profit. There's nothing wrong with a company doing certain things in their own best interest. It's give and take.


weluvm3 | 20 agosto 2017

Exactly, Tesla sincerely believes that they would sell fewer upgrades if they gave people the chance to evaluate that option prior to purchasing, without any pressure to make an uninformed decision. I agree with Tesla's assessment. I'd probably end up upgrading, but I'd still appreciate the chance to try it first, myself.

It's not a "give and take" at all. An enlightened company with pro consumer intentions provides good value options, well executed and free from misleading hype and stressful sales tactics. Even if this leads to fewer sales, at least the sales they make were achieved honestly and their customers don't regret or resent their purchases.

Maybe it seems idealist and naive, but I sincerely believed that this WAS the kind of sales experience Tesla set out to achieve when they made the decision to forgo the usual dealership sales network and sell directly to their customers. But, having made this decision, now they "own" it: they no longer have dealers and car salesmen to hide behind. Whatever sales tactics they chose to employ, there's only Tesla to blame. And Musk.

carlk | 20 agosto 2017

Read your reservation agreement Tesla did not promise you anything. It even says Tesla is under no obligation to sell you anything. Tesla did cancel someone's X reservation because he was making harsh verbal attack of the company when he did not get his unreasonable demand from Tesla. Just to let you know.

Mr.Tesla | 20 agosto 2017


I know you love drama, but there isn't any trickery or pressure here. Tesla is very upfront about the options and costs during configuration. No one, absolutely no one has to click the purchase button until they are comfortable to do so. They can also test drive a Model S or X (or 3 eventually) to get a feel for the EAP features. There are endless AP demo and review videos on YouTube.

You either decide to pay for it at the time of purchase, or you pay more for it later. It's all very simple. Victims don't go 'round here, drama dog.

weluvm3 | 20 agosto 2017

Ok, so now my reservation is going to be canceled? Well, I guess you would know...

weluvm3 | 20 agosto 2017

Well, ok then, "carik" "mr.tesla" and whomever else is monitoring these boards and steering the content. I'm happy to stay away, so no need to cancel my reservation. Good luck to the rest of you guys! Hopefully, it'll all work out in the end.

Carl Thompson | 20 agosto 2017

"It's not a 'give and take' at all."

It _is_ give and take. It has to be or people wouldn't buy the car. They're giving us a the best value EV you can buy right now (even if it is still a bit expensive) and they're also doing what they need to to maximize the money they make from it.


carlk | 20 agosto 2017

@Fiddlesticks You need to realize that Tesla has treated you real well already. Not only it will sell you a car you could not get anywhere else it also kept the promise to keep the base price at $35K. Any other company would raise the price when it has no competitor with half a million customers waiting and supply will not meet demand for a year or even more. Don't be THAT greedy will you?

Nexxus | 21 agosto 2017

By the way, Tesla charges the owner the sales tax from the state they reside in for any subsequent purchases to the car. I bought the additional mileage option for the $2K back in March and was charged $108 and some change in tax for the state of Virginia. If you purchase the FSD option down the road you will still be liable for the taxes on said product.

stevenroglen | 21 agosto 2017

So if you live in a state where software is not taxed, does the EAP get taxed if purchased initially?

rxlawdude | 21 agosto 2017

@stevenroglen, Yes. Because it is integrated into the tangible item (the car!), it is taxed as part of the total sales price.

Red_Devil_24 | 21 agosto 2017

Count yourself lucky, Here in Quebec we pay 5% federal plus 9.975% provincial on top of it.

Mr.Tesla | 22 agosto 2017


I would never threaten someone who complains that they will get their reservation canceled. I am just a reservation holder like you. Another poster mentioned an extreme circumstance of someone having their reservation for a Model X canceled, but I don't know anything about that. I'm sure, if true, it has very special circumstances connected.

I'm not even saying that it is a bad idea for Tesla to consider allowing the software purchases to be separate, if it will help customers in certain states avoid extra taxes.

I was only addressing the contrived attempt by others to make it sound like Tesla is somehow "pressuring" customers to purchase EAP without giving them any info or ability to test it first.

You are in the privacy of your own home, clicking options on a computer screen. No legacy car dealer salesman is breathing down your neck. Relax and decide what is best for you and your budget. Click "submit" when ready. :-)

carlk | 22 agosto 2017

I was the one who mentioned Tesla has canceled someone's X reservation. Did not mean to threat anyone but just to state the fact that Tesla, or any company, do not need or want everyone to be a customer. They just want enough worthy customers to do business with. Some entitlement customers or just entitlement non-customers somehow got the idea that customer is always right and he/she as an individual is always more important than the company and its business. It was never the case and it never will be.

Haggy | 22 agosto 2017

"Haha no. Why should they? "

Because they want to sell the feature. If it could be added at any time for the same price, it would be best for some people not to buy it, and they might not get around to it. If Tesla turned it on for everybody as a 30 day trial, and then let a person buy it at regular price during the trial since it was already active, the motivation would be there. They might lose some sales to people who are disappointed, but I'd expect it to be the other way around most of the time. But that assumes that the development is done. It wouldn't have worked in the early days of AP1, but would have been a good solution once it was mature. Hopefully by the time the car is released to non-employees, at least EAP will be working smoothly.

In some countries, there are limits with respect to EV incentives, and they go away when cars are too expensive. Getting the software later could help. For others, rolling it into a car loan would help. For others, getting a car loan without it would be possible, and adding it with the tax credit refund would work. Tesla could help people in some of these situations with a trial.

Carl Thompson | 22 agosto 2017

This may sound weird but I'm thinking of not getting EAP at all until FSD is available. Yes, it would be more convenient for my long, brutal commute but I worry it would allow my concentration to lapse too much. When I first got the equivalent of TACC in my current car (non-Tesla) there were times where I caught myself not paying as much attention to traffic as I should. With EAP I imagine it would be worse and I could totally see myself falling asleep when tired because I would not be as mentally engaged with the act of driving.