When did a manufacturer's cash rebate reduce the taxable price of a new motor vehicle purchased or leased in Kansas?

Plain-English summary

From July 1, 2006 through June 30, 2009, a manufacturer's cash rebate on the original purchase or lease of a new motor vehicle was excluded from Kansas sales and compensating-use tax when the manufacturer paid the rebate directly to the retailer.

The bill of sale controlled the presumption:

• if it showed a manufacturer-rebate deduction, Kansas presumed the manufacturer paid the retailer directly; and
• if it did not show the deduction, Kansas presumed the rebate was not paid directly and was taxable.

The sale date, not the date the buyer applied for title, had to fall within the temporary window.

Qualifying motor vehicles included passenger vehicles, trucks, motorcycles, and recreational vehicles. Rebates remained taxable for motorized bicycles, ATVs, work-site utility vehicles, trailers, and other vehicles that were not self-propelled or licensed for highway use.

Dealers reported the rebate in gross sales and then claimed it as an other allowable deduction on Part II, line N.

What this means for you

Motor-vehicle dealers

Show the qualifying manufacturer rebate on the bill of sale and retain proof that it was paid directly to the dealership. Use the sale date to test the temporary exemption period.

Buyers and lessees

Not every manufacturer incentive reduced the taxable price. The vehicle type, direct-payment structure, bill-of-sale documentation, and sale date all mattered.

Common questions

Q: Did a rebate paid directly to the customer qualify?
A: Not under this notice's rule. The manufacturer had to pay the retailer directly.

Q: Did the title date control the exemption window?
A: No. The motor vehicle's sale date had to be between July 1, 2006 and June 30, 2009.

Q: Did ATV or trailer rebates qualify?
A: No. Those rebates remained part of taxable gross receipts.

Q: Which vehicles did qualify?
A: The notice lists passenger vehicles, trucks, motorcycles, and recreational vehicles.

Citations and references

• 2006 Senate Bill 404.
• K.S.A. 79-3602 — qualifying rebate excluded from sales price.
• K.S.A. 8-126 — motor-vehicle definition.

Subject

Manufacturer Cash Rebates for New Motor Vehicles

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 06-03

Original ruling text

Notice
Notice Number: 06-03
Tax Type: Kansas Compensating Tax; Kansas Retailers' Sales Tax
Brief Description: Sales and Compensating Use Tax Exemption on Manufacturer Cash Rebates
for the Purchase or Lease of a Motor Vehicle.
Keywords:
Approval Date: 06/19/2006

Body:
KANSAS DEPARTMENT OF REVENUE

               REVISED NOTICE 06-03

SALES AND COMPENSATING USE TAX EXEMPTION ON MANUFACTURER
CASH REBATES FOR THE PURCHASE OR LEASE OF A MOTOR VEHICLE

Effective July 1, 2006 and ending June 30, 2009 the manufacturer’s cash rebate for the original purchase
or lease of a new motor vehicle is not subject to sales tax if the rebate is paid directly to the retailer by the
manufacturer.

If a deduction for a manufacturer’s cash rebate is shown on the bill of sale it shall be presumed that the
manufacturer’s cash rebate was paid directly from the manufacturer to the retailer. Conversely, if the bill of
sale does not show a deduction for a manufacturer’s cash rebate, it shall be presumed that the rebate was
not paid directly from the manufacturer to the retailer and is not exempt from sales tax.

The date of sale of the motor vehicle must be between July 1, 2006 and June 30, 2009 to claim the sales
tax exemption, regardless of the date the title is applied for.

2006 Senate Bill No. 404 amended K.S.A. 79-3602 by stating the sales or selling price shall not include:

       Cash rebates granted by a manufacturer to a purchaser or lessee of a new motor vehicle if
       paid directly to the retailer as a result of the original sale. (Emphasis added).

For a manufacturer’s rebate to qualify for sales tax exemption, the vehicle must qualify as a “motor vehicle”
as defined by K.S.A. 8-126. Motor vehicles include:

       Passenger vehicles, trucks, motorcycles and recreational vehicles.

MANUFACTURER’S REBATES FOR TRAILERS AND NON-HIGHWAY VEHICLES REMAIN TAXABLE

Motorized bicycles, all-terrain vehicles, work-site utility vehicles, trailers or any other vehicle that is not self-
propelled or is not licensed for highway use does not qualify. Therefore, manufacturer’s rebates offered for
the purchase of these types of vehicles remain part of the gross receipts and are subject to the retailers’
sales tax.

Motor vehicle dealers: To report transactions that include a tax exempt manufacturer’s cash rebate you will
include the amount of the rebates as part of “Gross Sales” then take a deduction on Part II, line N “Other
allowable deductions.”

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Date Composed: 06/19/2006 Date Modified: 06/19/2006

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