To those that live in IL but bought in another state..

[IcePrincess27]

Hello,
I am curious how this works. In IL, It used to be that you only got taxed on the difference between your new vehicle and the trade in.

However since Jan 2020 there is a silly double tax rule....
Example: Buying a car for $35,000 with a $20'000 trade in. The $20,000 trade-in will not be taxed on the first $10,000 in value, but the remaining $10,000 gets taxed along with the $15,000 difference between the new and used car values. So sales taxes will be applied to $25,000 of the transaction, which will cost $2,185.

My dealer is in IN and telling me that I will only get taxed on the difference because IN doesn't double tax.

However I thought IL tax rules would apply since the car will be registered in IL.

How did this work when you purchased out of state? Did you only get taxed on the difference?

Thanks in advance.

 

[prettyh8machine]

Hello,
I am curious how this works. In IL, It used to be that you only got taxed on the difference between your new vehicle and the trade in.

However since Jan 2020 there is a silly double tax rule....
Example: Buying a car for $35,000 with a $20'000 trade in. The $20,000 trade-in will not be taxed on the first $10,000 in value, but the remaining $10,000 gets taxed along with the $15,000 difference between the new and used car values. So sales taxes will be applied to $25,000 of the transaction, which will cost $2,185.

My dealer is in IN and telling me that I will only get taxed on the difference because IN doesn't double tax.

However I thought IL tax rules would apply since the car will be registered in IL.

How did this work when you purchased out of state? Did you only get taxed on the difference?

Thanks in advance.

I haven’t purchased mine yet, but I’ve ordered one from a dealership in Missouri and live in IL. My understanding, is that they calculate taxes usually based on the state the vehicle will be registered in. I could be mistaken, but I believe that’s what I had been told.

 

[IntruderM]

First, the double taxation law expires 12/31/21.

Second, Illinois allows only 6.25% tax to pass through from IN. So that is what my dealer collected. But, where I live the tax is 7.25%. So when I go in to register the vehicle I have to pay the 1% tax difference and registration fees. So the DMV will in fact collect the tax difference from you based on the double taxation policy right now.

 

[IcePrincess27]

First, the double taxation law expires 12/31/21.

Second, Illinois allows only 6.25% tax to pass through from IN. So that is what my dealer collected. But, where I live the tax is 7.25%. So when I go in to register the vehicle I have to pay the 1% tax difference and registration fees. So the DMV will in fact collect the tax difference from you based on the double taxation policy right now.

First, the double taxation law expires 12/31/21.

Second, Illinois allows only 6.25% tax to pass through from IN. So that is what my dealer collected. But, where I live the tax is 7.25%. So when I go in to register the vehicle I have to pay the 1% tax difference and registration fees. So the DMV will in fact collect the tax difference from you based on the double taxation policy right now.

Thanks! I can't find any info that this will expire at the end of the year, can you please point me to some info? I wish I could wait that long, but my car's ETA is this month.
My dealership has already quoted me the Sales Tax, and it looks to be just over 7%. They sell cars to people from IL all of the time and he advised this is how they normally do it.

My question is more so on the amount I will be taxed ON.

Say vehicle is $50k
My trade in is $25k

Do I have to pay Sales tax on $40,000? ($25k difference, plus the $15k that is left over after the IL $10k credit)
Or do I only have to pay it on the $25,000 difference?
The IN dealer is telling me I only have to pay it on the $25k difference, but if going by IL rules, I would need to pay it on the $40k.

This is why I am asking, as it is a huge difference

______________________________

 

[IntruderM]

Thanks! I can't find any info that this will expire at the end of the year, can you please point me to some info? I wish I could wait that long, but my car's ETA is this month.
My dealership has already quoted me the Sales Tax, and it looks to be just over 7%. They sell cars to people from IL all of the time and he advised this is how they normally do it.

My question is more so on the amount I will be taxed ON.

Say vehicle is $50k
My trade in is $25k

Do I have to pay Sales tax on $40,000? ($25k difference, plus the $15k that is left over after the IL $10k credit)
Or do I only have to pay it on the $25,000 difference?
The IN dealer is telling me I only have to pay it on the $25k difference, but if going by IL rules, I would need to pay it on the $40k.

This is why I am asking, as it is a huge difference

Illinois Removes Trade In Value from Selling Price Definition | Sales Tax Institute

As of 2022, the full value of trade-ins will be excluded from the definition of sales price.

www.salestaxinstitute.com

https://www.ilga.gov/legislation/BillStatus.asp?DocNum=58&GAID=16&DocTypeID=SB&SessionID=110&GA=102

As per my understanding if you purchase this year, even though the dealer in IN collects the tax only on $25k, when you go the DMV to register the vehicle they will collect the tax on the remaining $15K.

 

[IcePrincess27]

Illinois Removes Trade In Value from Selling Price Definition | Sales Tax Institute

As of 2022, the full value of trade-ins will be excluded from the definition of sales price.

www.salestaxinstitute.com

https://www.ilga.gov/legislation/BillStatus.asp?DocNum=58&GAID=16&DocTypeID=SB&SessionID=110&GA=102

As per my understanding if you purchase this year, even though the dealer in IN collects the tax only on $25k, when you go the DMV to register the vehicle they will collect the tax on the remaining $15K.

thank you so much!!