As a business owner in Tennessee, it's important to stay up to date with any changes in state law that could potentially impact your business. One such change is the expansion of the repossession sales and use tax credit, which takes effect on July 1, 2023. This credit is designed to help dealers who sell used automobiles by providing them with relief from the sales and use tax burden. In this blog post, we'll dive deeper into the details of this expansion and what it means for your business.
Under the new law, dealers must meet several criteria to qualify for the expanded credit. First and foremost, the dealer must principally sell used automobiles, meaning at least 50% of its sales come from the sale of used vehicles. Additionally, the dealer must collect a down payment averaging no more than 5% of the automobile's sales price. The down payment requirement is designed to ensure that the vehicle is at a price point where there is an actual need for financing.
Another requirement is that the dealer must assign 100% of its security instruments, or its loans, to an affiliated finance company that is physically located at the same headquarters location in Tennessee. This requirement is intended to make sure that dealers are not manipulating loopholes in the law and eventually gaining an unfair advantage.
The dealer must also advance the sales tax amount from its own funds on each purchase, meaning that there is no waiting around for government processes to fill in and pay the required amount. The affiliated finance company must have the right to repossess or enforce any lien against an automobile it financed – a key factor in the security of transactions.
Lastly, the dealer must reimburse the finance company for the sales tax the finance company is unable to collect from the purchaser. This is done to ensure that the finance company and the State of Tennessee are paid, no matter what.
References Tenn. Code Ann. §§ 67-6-507, 48-103-102, Pub. Ch. 467 (2023)
CONTENT DISCLAIMER: The information provided here is believed to be up-to-date as of the date of publication, ensuring that you receive the most recent and accurate details. It's important to note that changes may occur due to new statutes, regulations, or court decisions, reflecting the dynamic nature of the subject matter. However, we aim to provide a comprehensive overview with this notice.
We understand that unexpected events and situations may arise, which may not have been foreseen in this notice. In such cases, we encourage you to reach out to the department or consult with your trusted tax professional for further guidance. They will be well-equipped to assist you and ensure you have the most relevant and tailored advice for your specific circumstances. Thank you for choosing Frazier.