Depending on where you live in the U.S., buying an electric car can mean that you can benefit from any number of incentives designed to make buying an electric car cheaper. In the state of New Jersey for example, a 100 per cent electric car is exempt from the state’s usual automotive sales tax.
When it comes to plug-in hybrids and range extended cars however, New Jersey’s sales tax incentives have been a little more confusing. Take the BMW i3 REx for example. Despite being told earlier this year that the BMW i3 REx would be exempt from sales tax, we told you back in May that no, the i3 REx would attract sales tax in the Garden State, because its small on-board gasoline-powered range-extending engine technically made the car a plug-in hybrid, a class not exempt from sales tax.
But a last-minute change in sales tax regulations last week from the New Jersey Department of Environmental Regulation (NJDEP) means the BMW i3 REx will, after all, be sales tax exempt after all.
With many BMW i3 REx customers taking delivery of their cars before the NJDEP changed its mind on the sales tax due on the car, it appears many early-adopting i3 REx owners have paid sales tax, while others have been given a rebate or discount to ensure they haven’t.
The question of sales tax arose before the BMW i3 REx even arrived in dealerships, with BMW claiming that their customers did not need to pay the sales tax. Because it was still required by law however, some customers who picked up their cars before the NJHEP’s change of heart found dealerships were adding sales tax on top of their car’s sticker price.
In other cases, attentive dealerships offered customers a discount or rebate on their vehicle equivalent to the unexpected tax they would have to pay.
We reached out to Electric car enthusiasts Tom Moloughney and Krishnamurty Kambhampati for their thoughts about the situation. Having both already picked up their BMW i3 REx cars before the change of heart over sales tax, both had to technically pay sales tax — but the effective price they paid was different.
“Yes, I did pay the sales tax,” said EV advocate and former BMW Mini E and ActiveE driver Tom Moloughney. But while he paid $3,921 in sales tax, his local dealership — JMK BMW — offered him appropriate discounts on his car equivalent to the tax bill he was facing, effectively cancelling out the extra cost added by the unexpected sales tax.
“Some dealers realized they needed to do something along the lines of a credit or discount of some amount because they had signed contracts which indicated the car was tax exempt, and they didn’t want the customers to walk away from the deal when they found out the terms have changed,” he said. “I’m very happy with how JMK BMW handled the situation.”
According to Moloughney, a total of eleven customers at JMK BMW ended up with an unexpected tax bill. Seeing that the true taxation problem stemmed from a BMW miscommunication however, his particular dealership dealt with each of the eleven customers accordingly.
The story isn’t the same at other dealerships however. Business entrepreneur and EV owner Krishnamurty Kambhampati — who also participated in BMW’s test fleet ActiveE ‘electronaut’ program — gave us another perspective on the issue from his experience buying the REx. From the start, he was told by his dealer that sales tax was going to be included. There was no situation in which the tax was added on later or not spoken about, and he had to pay the tax in full.
Kambhampati admitted that sales tax made the initial price of the REx go up more than he liked, but he was committed enough to owning the car that he decided to make the purchase anyway. He told us that the steeper price would be a much tougher situation for the average buyer, who could easily be turned away by high prices if they were not committed to specifically buying the REx.
Luckily for Kamblampati and other early-adopters who did pay the full sales tax on their cars, the state of New Jersey is now about to send out rebate cheques, since the NJDEP decision to reverse the i3 REx’s taxation status is retrospectively applied to May 1, well before a single i3 REx was delivered in the U.S.
From now on, if you’re buying a BMW i3 REx in the state of New Jersey, the sales tax exemption of this important plug-in will make the car more palatable to the average consumer. For anyone who already views the BMW i3 REx as having a steep sticker price, that’s a welcome thing.
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