Are manufacturer cash rebates on a new motor vehicle exempt from Kansas sales tax, and how long does the exclusion last?

Plain-English summary

Kansas Notice 21-15 explains that the sales tax exclusion for manufacturer cash rebates on new motor vehicles was extended for three more years.

The law. 2021 House Bill 2143 amended the definition of "sales or selling price" in K.S.A. 79-3602(ll)(3)(E) to extend the sunset on this exclusion. Under prior law (effective July 1, 2018, and ending June 30, 2021), cash rebates a manufacturer grants to a purchaser or lessee of a new motor vehicle are not included in the sales or selling price of the vehicle if the rebate is paid directly to the retailer as a result of the original sale. The bill extends the exclusion from June 30, 2021, to June 30, 2024. Its effective date is May 6, 2021.

Which vehicles qualify. The vehicle must qualify as a "motor vehicle" as defined by K.S.A. 8-126 -- which for this exemption includes passenger vehicles, trucks, motorcycles, and motorhomes. The sale must occur between July 1, 2018, and June 30, 2024, regardless of when the title is applied for.

What remains taxable. Manufacturer's rebates for trailers and non-highway vehicles stay taxable. Motorized bicycles, all-terrain vehicles, work-site vehicles, trailers, or any vehicle that is not self-propelled or not licensed for highway use does not qualify, so rebates on them remain part of the retailer's gross receipts and are subject to sales or compensating use tax. Manufacturer rebates for tangible personal property attached to the vehicle (running boards, brush guards, trailer hitches, etc.) are exempt only if shown on the bill of sale and paid directly to the dealer.

Proof and reporting. If a rebate deduction is shown on the bill of sale, it is presumed the rebate was paid directly from the manufacturer to the retailer and is exempt; if it is not shown, the rebate is presumed not paid directly and is taxable. Dealers report an exempt rebate by including its amount in "gross receipts" and then taking a deduction on Part II, line N, "Other allowable deductions."

What this means for you

Motor vehicle dealers

• Through June 30, 2024, a manufacturer cash rebate paid directly to you on a new qualifying motor vehicle is excluded from the taxable selling price.
• Show the rebate on the bill of sale (so it is presumed exempt), and report it by including it in gross receipts and deducting it on Part II, line N.

Vehicle buyers and lessees

• A manufacturer rebate paid directly to the dealer on a qualifying new car, truck, motorcycle, or motorhome reduces the amount subject to Kansas sales tax.
• Rebates on trailers, ATVs, and other non-highway vehicles are still taxable.

Buyers of add-on equipment

• Rebates on items attached to the vehicle (running boards, hitches, etc.) are exempt only if shown on the bill of sale and paid directly to the dealer.

Common questions

What rebate is exempt? A manufacturer's cash rebate on a new motor vehicle that is paid directly to the retailer as a result of the original sale.

How long does the exclusion last? The sunset was extended from June 30, 2021, to June 30, 2024; the sale must occur between July 1, 2018 and June 30, 2024.

Which vehicles qualify? "Motor vehicles" under K.S.A. 8-126 -- passenger vehicles, trucks, motorcycles, and motorhomes; trailers and non-highway vehicles do not qualify.

How is exemption shown? If the rebate deduction appears on the bill of sale it is presumed exempt; if not, it is presumed taxable.

How do dealers report it? Include the rebate in gross receipts and take a deduction on Part II, line N, "Other allowable deductions."

Citations and references

• House Bill 2143 (2021) -- amended K.S.A. 79-3602(ll)(3)(E) to extend the manufacturer-rebate exclusion sunset to June 30, 2024 (effective May 6, 2021).
• K.S.A. 79-3602(ll)(3)(E) -- definition of "sales or selling price"; excludes qualifying manufacturer cash rebates paid directly to the retailer.
• K.S.A. 8-126 -- defines "motor vehicle" (passenger vehicles, trucks, motorcycles, motorhomes for this exemption).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 21-15

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.org
Mark A. Burghart, Secretary Laura Kelly, Governor

                                          NOTICE 21-15

                   Sales and Compensating Use Tax Exemption
                          On Manufacturer Cash Rebates
                       For the Purchase of a Motor Vehicle

                                          (JULY 1, 2021)

   During the 2021 Legislative Session House Bill 2143 was passed and signed into law. The

bill amended the definition of "sales or selling price" found in K.S.A. 79-3602(ll)(3)(E) to extend
the sunset of the exclusion of certain cash rebates granted by a manufacturer from the sales or
selling price of a vehicle.

   Current law provides that, commencing on July 1, 2018, and ending on June 30, 2021, cash

rebates granted by a manufacturer to a purchaser or lessee of a new motor vehicle shall not be
included in the sales or selling price of the vehicle if the cash rebates are paid directly to the retailer
as a result of the original sale.

   The amendment made by the Bill extends the exclusion from June 30, 2021, to June 30, 2024.

   For a manufacturer's rebate to qualify for exemption from sales tax, the vehicle must qualify

as a "motor vehicle" as defined by K.S.A. 8-126. For purposes of the exemption, motor vehicles
include passenger vehicles, trucks, motorcycles, and motorhomes.

  To claim the sales tax exemption, the sale of the motor vehicle must occur between July 1,

2018 and June 30, 2024, regardless of the date the title is applied for.

  If a deduction for a manufacturer's cash rebate is shown on the bill of sale it will be presumed

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

   Manufacturer's rebates for trailers and non-highway vehicles remain taxable. Motorized

bicycles, all-terrain vehicles, work-site 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 retailer's gross receipts and
are subject to the retailers' sales or compensating use tax.

  Additional manufacturer's rebates for items of tangible personal property that are attached

to the vehicle, such as running boards, brush guards, trailer hitches, etc. are exempt from tax if
they are shown on the bill of sale and are paid directly to the dealer. These rebates are subject to
tax if they are not shown on the bill of sale for the original purchase, or if paid directly to the
purchaser.

  Motor vehicle dealers, please note: To report transactions that include a tax exempt

manufacturer's cash rebate you will include the amount of the rebate as part of "gross receipts"
and then report a deduction on Part II, line N "Other allowable deductions".

 The effect date of the amendment is May 6, 2021.

                                 TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.org. If you have questions about this Notice, please contact:

                              Taxpayer Assistance Center
                             Kansas Department of Revenue
                             Scott Office Building, 1st Floor
                                    120 SE 10th Ave
                                     P. O. Box 3506
                                Topeka, KS 66601-3506
                                  Phone: 785-368-8222
                                   Fax: 785-291-3614