It recently became necessary for NJ CAR to seek an opinion from the New Jersey Division of Taxation concerning the taxability of add-on items during an EV sale. The opinion NJ CAR received has confirmed our understanding of the treatment of add-on items and the treatment of documentary fees during an EV sale. These add-on items range from aftermarket parts, gap waivers, extended service contracts or extended warranties, and tire and wheel protection.
The opinion from the NJ Division of Taxation makes clear the following points:
- The exemption applies only to the “sales price” of the vehicle.
- Aftermarket parts sold as part of the original sale follow the taxability of the vehicle, therefore, the exemption will apply to the aftermarket parts. (Please note that aftermarket parts added to the car after the original sale are subject to Sales Tax).
- Documentary fees are considered expenses of the dealer or services necessary to complete the sale, both of which are included in the definition of “sales price” and thus is also exempt from Sales Tax.
- Gap Insurance provided by a third-party insurance carrier is not taxable. (Please note that Gap Waivers are taxable).
- The sale of an extended warranty as an agreement to provide taxable services to tangible personal property is also subject to Sales Tax.
- Tire and wheel protection programs in the form of warranty or service agreement are taxable.
- The exemption is NOT applicable to partial zero emission vehicles, which includes hybrids such as the Toyota Prius and Honda Civic Hybrid.
- The exemption is NOT applicable to labor or parts for qualified vehicles.
- Separately stated charges for actual costs of title and registration fees imposed by the New Jersey Motor Vehicle Commission (NJMVC) are not subject to Sales Tax.
With the volume of sales of EVs in New Jersey increasing by the day, it is necessary for membership to become familiar with the sales tax exemption for EV sales and what is and isn’t included in the exemption.
NJ CAR staff is available to answer membership questions on EVs and a wide range of other issues. A copy of the letter opinion is attached for your review. If you have any questions concerning this or any other issue, please contact Greyson P. Hannigan, Director of Legal & Regulatory Affairs at (609) 883-5056, x340 or via email at firstname.lastname@example.org.