December 7, 2021

Bipartisan bills would eliminate Michigan sales tax on vehicle rebates

The Michigan Senate will consider legislation to eliminate sales and use taxes from automotive manufacturer rebates, which could save new car buyers in the state an estimated $31 million annually.

House Bills 4939 and 4940 passed the Michigan House earlier this week. The bipartisan bills were sponsored by Reps. John Damoose, R-Harbor Springs, and Joe Tate, D-Detroit.  The bills aim to take new vehicle customers off the hook for paying taxes on automotive manufacturer discounts.

Currently, Michigan car buyers incur a tax obligation for the full price of the vehicle they purchase, and no deductions are allowed for rebates offered by manufacturers. The bills under consideration would exempt rebates from state sales and use taxes.

“When a vehicle is sold at a discount, state taxes should be calculated based on the lower price,” Damoose said. “Our bipartisan plan will make the tax code more fair for Michigan drivers by exempting vehicle manufacturer rebates from sales and use taxes.”

The bill package includes a provision that prevents any revenue reduction from negatively affecting the state’s School Aid Fund. The reduction instead would impact the Michigan general fund by $30.9 million per revenue year, according to the House Fiscal Agency analysis. The agency also noted revenues would decline for the state’s Comprehensive Transportation Fund as well as local revenues shared with cities, villages and counties.

Groups favoring the proposed legislation include the Michigan Auto Dealers Association, the Michigan Association of RVs and Campgrounds and the Michigan Manufacturers Association. Ford Motor Company and General Motors also support the bills. The Michigan Department of Treasury opposes the bills.

This article was originally posted on Bipartisan bills would eliminate Michigan sales tax on vehicle rebates