Cash for Clunkers Vouchers Taxable to Auto Dealers

The IRS has clarified that the vouchers provided to new car purchasers under the "Cash for Clunkers" program are income to the auto dealer. The vouchers represent part of the cost of the vehicle and must be included in the dealership’s gross income.

In a typical dealership transaction, a customer may pay for the vehicle in cash, finance the full vehicle price, or finance something less than the full selling price after the application of a cash down payment or a trade-in vehicle allowance. A dealership’s gross receipts include the full selling price of the vehicle, regardless of the form of the customer’s payment. In addition, to the extent the dealership receives any scrap value for the customer’s trade-in, that scrap amount is includible in the dealership’s income.

The credit and ultimate payment by the National Highway Traffic Safety Administration (NHTSA) to the dealership under the CARS program is includible in the dealership’s gross receipts from the sale of the vehicle. The dealership must include this income in the year the vehicle is sold.

Cash for Clunkers Fallout

Seems as though everyone is wanting on the band wagon. But in a blink of the eye all the money ran out. And now Congress had to quickly appropriate new money.

So, if you want your $3500 or $4500 rebate - get it fast!

It seems that the salvage yards are concerned because all the traded-in cars are being crushed instead of going to salvage. That means the loss of valuable replacement parts for older cars still in service.

Obama Gives "Cash for Clunkers"

On June 24, President Obama signed HR 2346, the 2009 Supplemental Appropriations Bill for Iraq, Afghanistan, Pakistan, and Pandemic Flu. Contained within this bill is a provision under Title XIII, Consumer Assistance to Recycle and Save Act of 2009 that provides $1 billion for vouchers of $3,500 or $4,500 to be applied toward the purchase or lease of a new fuel efficient automobile or truck. This provision is more commonly known as “Cash for Clunkers.”

The vehicles must be purchased or leased between July 1 and November 1, 2009. To qualify for a voucher, the vehicle traded in must be scrapped, and the purchased vehicle must achieve greater fuel efficiency than the vehicle to be turned in.

The amount of the voucher the purchaser is entitled to receive will depend on the type of vehicle purchased and the amount of the increased fuel efficiency. Full details of the program and definitions of eligible vehicles is available at Tax Act Summary for "Cash for Clunkers"