By Dan Gearino
Auto dealers are ready to oppose Gov. John Kasich’s plan to change the way sales taxes work on vehicle trade-ins, a move they say would make new-car transactions more expensive.
“We have some serious concerns about this proposal as we understand it at this point,” said Tim Doran, president of the Ohio Automobile Dealers Association.
His comments were based on a summary of the plan provided by the governor’s office this week, not on the legislation itself, which has not yet been released.
Under current law, customers can trade in a car or a watercraft and use the value of the item to reduce the sales-tax bill for the new item being purchased. For example, if the new vehicle costs $20,000 and the trade-in is valued at $5,000, the customer pays sales tax on the difference, which is $15,000.
Kasich’s plan would eliminate half the tax benefit of the trade-in. In this example, the customer would pay sales taxes on $17,500. The benefit to the state would be an estimated $216 million in additional sales-tax revenue per year, according to his office.
Based on the current sales tax in Franklin County, 7.5 percent, the proposed change would increase the cost of this transaction by $187.50.
“That would be distressing,” said Keith Dennis, owner of the Dennis Hyundai and Kia dealerships in central Ohio. “It would a significant negative for the consumer.”
The Kasich administration is proposing the tax changes as part of a larger plan that would reduce the state income tax.
“New-car buyers are most likely the same people who are benefiting from the across-the-board income tax cut of 23 percent,” Ohio Tax Commissioner Joe Testa said in an email. “Small-business people are also getting tax cuts they can use to help buy a new car or truck for their business."
Doran said anything that increases the cost of new-car transactions will contribute to a decrease in sales, making customers choose less-expensive vehicles and sending reverberations through the market.
He said he thinks the change would prompt more consumers to sell their used vehicles on their own, as opposed to through a trade-in. If this happens, he predicts the state would lose out on taxes because some private sellers “fail to declare the full amount of the transaction price.”
Dealers also have concerns about the governor’s proposal to increase the state sales tax by a half-cent, which would also add to the cost of buying a vehicle, Doran said.
The half-cent increase would add $87.50 to the transaction cost in the example.
Doran’s group plans to work closely with the legislature and governor’s office as the budget moves forward, he said.
Auto dealers are ready to oppose Gov. John Kasich’s plan to change the way sales taxes work on vehicle trade-ins, a move they say would make new-car transactions more expensive.
“We have some serious concerns about this proposal as we understand it at this point,” said Tim Doran, president of the Ohio Automobile Dealers Association.
His comments were based on a summary of the plan provided by the governor’s office this week, not on the legislation itself, which has not yet been released.
Under current law, customers can trade in a car or a watercraft and use the value of the item to reduce the sales-tax bill for the new item being purchased. For example, if the new vehicle costs $20,000 and the trade-in is valued at $5,000, the customer pays sales tax on the difference, which is $15,000.
Kasich’s plan would eliminate half the tax benefit of the trade-in. In this example, the customer would pay sales taxes on $17,500. The benefit to the state would be an estimated $216 million in additional sales-tax revenue per year, according to his office.
Based on the current sales tax in Franklin County, 7.5 percent, the proposed change would increase the cost of this transaction by $187.50.
“That would be distressing,” said Keith Dennis, owner of the Dennis Hyundai and Kia dealerships in central Ohio. “It would a significant negative for the consumer.”
The Kasich administration is proposing the tax changes as part of a larger plan that would reduce the state income tax.
“New-car buyers are most likely the same people who are benefiting from the across-the-board income tax cut of 23 percent,” Ohio Tax Commissioner Joe Testa said in an email. “Small-business people are also getting tax cuts they can use to help buy a new car or truck for their business."
Doran said anything that increases the cost of new-car transactions will contribute to a decrease in sales, making customers choose less-expensive vehicles and sending reverberations through the market.
He said he thinks the change would prompt more consumers to sell their used vehicles on their own, as opposed to through a trade-in. If this happens, he predicts the state would lose out on taxes because some private sellers “fail to declare the full amount of the transaction price.”
Dealers also have concerns about the governor’s proposal to increase the state sales tax by a half-cent, which would also add to the cost of buying a vehicle, Doran said.
The half-cent increase would add $87.50 to the transaction cost in the example.
Doran’s group plans to work closely with the legislature and governor’s office as the budget moves forward, he said.
Resource:
Auto dealers say Kasich tax plans are bad for business
Auto dealers say Kasich tax plans are bad for business
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