Whoops – BMW i3 REx Not Sales Tax Exempt In New Jersey

MAY 28 2014 BY ERIC LOVEDAY 35

Nearly 4 months ago, Jacob Harb, Head of EV Operation and Strategy BMW North America had told BMW client advisors (a fancy name for salespersons) at BMW dealerships in New Jersey that the i3 REx was sales tax exempt.

Here’s our coverage from 4 months back when news of the i3’s sales tax exemption broke:

New Jersey Takes the Lead

 Meanwhile, over in New Jersey, the decision has been finalized.  The BMW i3 REx is exempt from sales tax.  The i3 REx joins all of the pure electric vehicles as being sales tax exempt in New Jersey, location of BMW’s North American headquarters.

 For i3 REx buyers in New Jersey, the sales tax exemption is certainly welcome, but again there’s bound to be complaints from non i3 REx buyers.

New Jersey Department of Treasury Taxation Division Sets The Record Straight

Recently, we got wind of an issue in New Jersey in which this exemption was being questioned.  InsideEVs immediately contacted the tax division of the New Jersey Department Of Treasury.  After repeated emails, the conclusion was/is that the BMW i3 REx is not exempt from sales tax.

When asked if it was possible that perhaps the NJ tax division overlooked the i3 REx due to its unique powertrain, the response was the same:

“…if the vehicle does not appear on the DEP’s list of qualified zero emission vehicles; the car is not exempt pursuant to N.J.S.A. 54:32B-8.55”

That list, which does not include the BMW i3 REx, is partially reproduced below:

Notice BMW i3 BEV Is Listed Bit i3 REx Is Not

Notice BMW i3 BEV Is Listed Bit i3 REx Is Not

*Entire listing here (PDF)

InsideEVs contacted BMW for comment.  We received an initial reply, which stated that BMW would further investigate and contact us shortly.  We are still waiting for that follow-up response.  Follow-up response received:

“The BMW i3 battery electric model does qualify for the NJ ZEV sales tax exemption. As no car equipped with an internal combustion engine qualifies for the exemption, the i3 with range-extender also does not qualify.”

i3 REx Now $8,000 More Than i3 BEV in New Jersey

In essence, not getting the sales tax exemption means that BMW i3 REx buyers will pay $3,000 to $4,000 more than they had expected to pay.  Add in the $3,850 REx option and those in New Jersey are looking at a i3 REx that actually costs them close to $8,000 more out-of-pocket.

BMW i3 REx Sold – Sales Tax Not Charged

The even bigger issue is this: Perhaps a dozen i3 REx vehicles were already sold in New Jersey.  Those vehicles were sales tax exempt per what Harb had told BMW client advisors.  Now, what’s to be done with $3,000 to $4,000 in sales tax that’s to be owed to the state since the i3 REx is not sales tax exempt?

What Now?

Will i3 REx owners be asked to pay the difference?  Will BMW NA foot the bill?  Or are dealers expected to pay?

 

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35 Comments on "Whoops – BMW i3 REx Not Sales Tax Exempt In New Jersey"

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David Murray

Interesting turn of events. You know I had questioned at one point why BMW would even produce the BEV version of the i3. It seemed to me the $3,800 add-on was cheap enough (considering the full price of the car) that it should be on every car sold. But in this perspective, $8,000 is a lot extra to pay for that Rex.

Phatcat73

Maybe BMW can reduce the size of the gas tank further? 🙂

Dave R

Hah, funny. Still, the car would be a lot more appealing with even a 3 gallon gas tank over the 2 gallon gas tank.

I wonder how many people will simply carry a standard 2.5 gallon gas tank for those longer trips to avoid stopping for gas every 50 miles and worrying about whether or not you’ll make it to the next gas station on longer stretches of highway.

Nix

… And make the tires narrower? 😉

Jack

I pulled up the full list..

Why is the Nissan Leaf not included???

Erik
David

Its bigger news that the LEAF isn’t on the list ,http://www.state.nj.us/treasury/taxation/pdf/Treasury2014ModelYearZEVlisting.pdf

I wonder why. Maybe the 2014 Leaf wasn’t available when the list was created? Its certainly a ZEV.

QCO

I suppose there is some logic in the NJ position since the Volt is also excluded….

But it’s yet another i3 REx regulatory anomaly that will have a negative impact for all the wrong reasons.

evnow

So, in WA we have tax exemption, but not in NJ ? What a mess.

Anon

Adding a REx seems more costly to BMW’s i-brand than initially expected…

Nix

New Jersey wrote a law that selects the i3 and pure EV’s for preferential treatment, and excludes the REx the same way it excludes the Volt, PHEV Prius, PHEV Ford’s, and future PHEV’s from VW, Audi, Mitsubishi, etc. Do you think being excluded from this tax credit is somehow harmful to all of these brands too?

Aside from a momentary glitch in their messaging about tax credits in one state, I fail to see where this is somehow BMW’s problem for daring to build a PHEV like all those other companies. This short-sighted law seems to negatively impact New Jersey’s lawmakers image for making smart choices, more than it impacts all the PHEV car maker’s branding.

Anon

Going PHEV instead of BEV, was the primary mistake: less space for batteries in both versions, gimped US REx programming for CARB credits, classification issues for California’s HOV stickers, and NJ’s taxation fiasco. Oh, and delayed EPA Data for the window stickers.

Seems like it’s caused more negative issues in multiple states since its US Introduction, than you remember…

Jack

I wonder if you could buy the BEV and after the sale then have the dealer install the REX.

Save the sales tax…

scottf200

Yes, a after market “kit”

Spec9

Well, I would definitely go for the non REx version then. And complain even louder about the lack of an option for a larger battery.

Nix

Or not go for a BMW, and go for a longer range Tesla (either pony up for the Model S, or wait for the GEN III).

Spec9

“i3 REx that actually costs them close to $8,000 more out-of-pocket”

Think of how many car rentals, ZIP cars, plane tickets, flat-bed tows, etc. that could buy you. I just don’t see how the REx is worth it with such a premium.

Aaron

We’ll know when Tom Moloughney trades in his i3 REx for an i3 BEV. 😉

I think BMW should eat this. They didn’t give the dealers the correct information. It’s in writing that they were wrong.

Dan

I don’t think they have a choice. It’s on the dealer to collect the sales tax at the point of sale; I know of no mechanism for them to go back and charge more, and if they did, the customer could simply opt-out and give them the car back.

Nix

After a successful class-action lawsuit in 2001 due to NJ dealerships over-collecting too much sales tax (and pocketing the difference), typical NJ sales contracts contain a clause similar to this:

“The motor vehicle fees shown on the Vehicle Buyer Order or Lease Contract for your vehicle are an approximation of the actual fees that will be charged by the New Jersey Division of Motor Vehicles to process the title and registration for your vehicle. When your title work has been completed, we will refund any excess fees that have been collected. If we have underestimated your motor vehicle fees, we will seek payment of such amount from you. ”

That is how they would have the legal right to collect the underpaid taxes.

Jesse Gurr

It could be argued that it only applies to title and registration and NOT to sales tax since it didn’t specifically say “sales tax” anywhere in there.

Nix
That is suggested sample language. The exact language in each contract will likely differ, so don’t read too much into that exact language trying to look for loopholes. The intent of the language would be clear to a judge anyways (even as it is written above). The duty of the buyer to pay taxes on taxable purchases under NJ law is also clear, even if there was a good faith mistake on how the taxes were calculated. Yes, the retailer has the sole responsibility to collect the tax, but the flip-side is that the consumer is responsible pay that tax to the retailer on every taxable purchase. It is a two-sided transaction, with the retailer responsible for one side of the transaction, and the consumer responsible for the other side. For example, if a consumer told a retailer that they were going to take delivery of a product out of state, and therefore were tax exempt, the retailer wouldn’t be responsible for collecting taxes at the time of purchase. But if the delivery turned out to be a straw delivery, and the item was brought back into the state, the consumer would be 100% responsible for paying all the taxes… Read more »
Dan

If we are to discuss intent and good faith, then as I said, any buyer should be able to say, “Oh, after you sold me this car telling me that there would be no tax, now you’re coming after me for tax? No thanks, take the car back.”

Big Solar

Does Maryland still offer the sales tax refund like they did back in 2012?

Mike

Yes Maryland still has a EV and PHEV tax break. It was just increased and extended to 2017.

Chris

Given the tiny handful of Rexes already sold in NJ, I vote BMW eat the tax as a goodwill gesture…probably “cost” them less than the bad publicity, returned (and thus used) cars, etc.

Nix

It is unlikely that a buyer could force a dealer to accept a return due to this mistake.

pjwood

I never would take what a dealer says about taxes, as gospel. This falls under NJ’s “ZEV” sales tax exemption. A ZEV is a ZEV, is not a vehicle with an engine.

http://www.state.nj.us/treasury/taxation/zevnotice.shtml

taser54

Ultimately, the tax is the responsibility of the purchaser of the vehicle and will be captured when the vehicle is titled.

If the State titles the car without collecting the tax, it still will not absolve the car owner of the tax. As we know, the State will not leave money on the table.

Nix

Typical New Jersey car contracts contain something like this:

“The motor vehicle fees shown on the Vehicle Buyer Order or Lease Contract for your vehicle are an approximation of the actual fees that will be charged by the New Jersey Division of Motor Vehicles to process the title and registration for your vehicle. When your title work has been completed, we will refund any excess fees that have been collected. If we have underestimated your motor vehicle fees, we will seek payment of such amount from you. ”

If similar verbiage is in those i3 REx purchase agreements, any underpayment of taxes is the responsibility of the buyer, even if there is a mistake.

Tax mistakes are fairly common, due to the complications of different tax districts, and the fact that the taxes are based upon your home address. You owe your taxes, and car salesmen are not tax advisers, and cannot be held liable for any tax advise they may offer.

With that said, if I were in a deal like this, I’d ask the dealership to throw in an extended warranty on the car as a act of good-will for their role in the misunderstanding.

Dan

This is neither a title fee nor a registration fee. And unless something works differently in NJ, it is the dealer who is responsible for reporting sales and paying the taxes on those sales.

Nix

The “Sales and Use” taxes are part of what the New Jersey Division of Motor Vehicles collects when they process the title and registration. You cannot get title and registration without proof of the sales tax payment.

Jesse Gurr

Sales tax and use tax are slightly different. I ran into this a number of years back. This is how it works in California anyway. Sales tax is tax on something you bought in the state.
Use tax is something you bought outside the state and bring into the state to ‘use’. My wife and I were traveling out of state and got into a wreck, we totaled the car and bought a used car. When we went back to California we had to pay a use tax when we registered the car, didn’t matter that we paid sales tax in the other state.

Nix

Yes, that is correct. They are different taxes, and both can come into play when registering a vehicle. Which is why I included both of them when I named what taxes needed to be paid before successfully registering a car in New Jersey.

Phr3d

Read through to find what Tom’s actual result was and nothing .