I bought a vehicle which has manufacturer rebate of $3500 .?

Question

The dealer included this amount in the purchase price and calculated tax and later deducted $3500. Was he right in doing that or he made some money from me by adding the rebate in the purchase price?

Answer 1

he was correct. It's part of the sales price.

Answer 2

dealers is right you are taxed on the sales price before rebate

Answer 3

The dealer did not make a dime for the taxes on that $3500 rebate.  A rebate is an incentive from the vehicle manufacturer to get people to buy their cars.  Basically, the dealer sold you the car for $26,000 (just to use round numbers) BUT the car manufacturer GAVE you $3500 of that to buy the car.  Therefore you only paid $22,500 BUT the entire purchase price is subject to the tax.  The manufacturere will cut a check to the dealer for the $3500 - which is why it is included in the purchase price when figuring tax.  Now, don't tell the government this or they might just do it - they could technically tax you again on the $3500 for income tax, gift tax and whatever else they wanted to dream up...