I own a Volkswagen vehicle affected by the federal settlement. What are the sales and use tax consequences?

Volkswagen (VW) has recently reached settlement with federal regulators under which it has agreed to buy back all affected vehicles, allow a trade-in for another vehicle, or pay cash settlements and provide new emission software to those who choose to keep their vehicles.  If you have a vehicle covered by the settlement, you may face sales and use tax consequences, depending on which option you choose.

Sell Vehicle Back to VW

If you choose to sell your vehicle back to VW, you will not be required to pay or collect sales tax on the sale.  Additionally, you will not be entitled to a refund of the sales tax paid on the original purchase of the vehicle.  If you use the money received from the buyback to purchase a new vehicle, you will need to pay sales tax on the entire sales price of the new vehicle.  The sale to VW and the purchase of a new vehicle are two separate transactions.  Under these circumstances, no trade-in occurs, so no trade-in deduction is allowed.

Trade-in Vehicle for New Vehicle

If you choose to trade-in your vehicle to a dealer for a new vehicle, you will owe sales tax on the difference between the sales price of the new vehicle and the trade-in allowance given by the dealer for your current vehicle.

Keep Vehicle and Receive Cash and New Emission Software

If you choose to keep your vehicle and receive the cash settlement and the new emission software modification, there will be no sales or use tax consequences. 

 

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