I can use 5 percent of all charges I make on my GM credit card, up to a maximum of $500 per year, toward the purchase of most new GM vehicles. On July 17, I used my "earnings" to purchase a new vehicle. The dealer said I had to pay the 6 percent sales tax on those "earnings," the same as I had to pay on the rebate GM gave on the vehicle. I objected to the taxes on my "earnings" but paid.
I called the rebate center and was told that the money definitely does not fall in the category of a rebate. I then called the Florida Department of Revenue and was told that the "earnings" were taxable and that I could not offset the sales tax on one item with the tax paid on another.
I don't understand this reasoning. I believe I am being taxed twice on the "earnings" because they were taxed at the time of my other purchases. Unlike rebates, my GM card "earnings" cannot be paid to me. When the dealer and I have reached agreement on the purchase price, the dealer calls GM, and GM discounts that agreed price to me by the amount of my "earnings." After all, if we buy a $100 item that is discounted to $50, we don't pay tax on $100.
Your help will be appreciated. Robert Fritsch
Response: Dave Bruns, the Florida Department of Revenue's public information officer, steered us to Florida laws and the department's rules, which are essentially the department's interpretations of the relevant laws, for the answer.
For some dry reading, you can check out Florida Statute 212, "Tax on Sales, Use, and other Transactions," at your library or on the Internet at www.flsenate.gov click on Statutes. Rule 12A-1.018, F.A.C., however, provides an answer to your question in plain English. Basically, a manufacturer's coupon does not reduce the dealer's selling price. A dealer's discount that is given to you on the spot, however, does. Here are two examples illustrating this point:
In the first instance, an automobile is sold for $5,000 with a $500 "factory rebate." The customer pays $5,000 for the automobile and then receives the $500 rebate from the manufacturer. The dealer receives $5,000. Tax is due on $5,000.
In the other case, an automobile is sold for $5,000 with a $500 "dealer's discount." The customer pays $5,000, less the $500 discount. The dealer receives $4,500. Tax is due on $4,500.
In your case, the manufacturer discounted the price of the vehicle you purchased according to the amount of "earnings" that had accumulated on your credit card and offered an additional $4,000 rebate. The selling dealer, however, was reimbursed by the manufacturer for the rebate and credit card "earnings." The dealer received the full selling price of the vehicle. Tax was thus due on the full selling price.
In short, tax is due on what the seller receives, not what the customer pays.
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Reaction: I know you have been trying to trace an order I placed in May with J.D. Marvel Products. I just wanted you to know my merchandise came today in the mail. Thank you for your help. Lillian Scheide
Response: We have not heard from J.D. Marvel Products in Beaconsfield, Quebec, so thanks for letting us know you finally received your merchandise. Action has had a long relationship with J.D. Marvel Products in Beaconsfield, Quebec, but over the past year the company has either taken a long time to respond to complaints we forward to it, or not responded at all.
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