$7500 EV credit and pickup in another state

[drawfour]

So I was thinking about this, and wanted to find out if anyone else has done an out-of-state pickup. The scenario is this - let's assume Q3 hits the 200k mark, and so Q4 has the last of the full credits. Let's assume that the estimated delivery time for the vehicle I want is late 2018, which is Q4. Let's assume it's getting really close to end of December. I've configured, etc..., and now I'm just waiting on the final delivery.

I live in Washington state. If Telsa tells me there is no way they can ship it to my state for a Dec 31st delivery, but I can come pick it up in say Fremont by Dec 31, is this an easy process? Will I end up having to pay the California sales tax to purchase the car there, and then when registering it in Washington, pay the additional sales tax? What is the delivery date dependent on? Is it when I register the car in my state, or based on some bill of sale from Tesla? (Might be a nice road trip to fly to Fremont, pick it up, and drive back...)

Can I just do all the paperwork in Washington, and then go down there and just pick it up? Can they just take all my money and have all the paperwork filed on Dec 31 but actually give the car to me in January in Washington? I realize that there is a risk in giving them my money first without having seen the car, but I'm just wondering if anyone knows the actual logistics when it gets really close to the end of the quarter with the full tax credit.

 

[boaterva]

I've seen many times the fact that if you get it in California, you pay all taxes there. No exceptions. No credits (on taxes). Really not worth it.

 

[drawfour]

I've seen many times the fact that if you get it in California, you pay all taxes there. No exceptions. No credits (on taxes). Really not worth it.

Washington State sales tax is higher than California, so then I'd just have to pay the difference when I register it. I guess I'm more concerned about losing $3750 in federal credit than I am about some hassle. I want to make sure what the delivery date means for purposes of the federal tax credit - is it day you physically receive the car, or day you attempt to register the car? And can Tesla do anything to "pre-register" in some way where you don't physically have the car, but you have paid them and all paperwork is filed.

 

[MP3Mike]

Washington State sales tax is higher than California, so then I'd just have to pay the difference when I register it.

Is that true even after the first $3,200 of tax is forgiven for EVs? (In Washington)

I guess I'm more concerned about losing $3750 in federal credit than I am about some hassle. I want to make sure what the delivery date means for purposes of the federal tax credit - is it day you physically receive the car, or day you attempt to register the car? And can Tesla do anything to "pre-register" in some way where you don't physically have the car, but you have paid them and all paperwork is filed.

The IRS says it is the day the car is "put in to service". Which essentially means the day you get it titled.

 

[NOLA_Mike]

Washington State sales tax is higher than California, so then I'd just have to pay the difference when I register it. I guess I'm more concerned about losing $3750 in federal credit than I am about some hassle. I want to make sure what the delivery date means for purposes of the federal tax credit - is it day you physically receive the car, or day you attempt to register the car? And can Tesla do anything to "pre-register" in some way where you don't physically have the car, but you have paid them and all paperwork is filed.

The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.

Plug In Electric Vehicle Credit IRC 30 and IRC 30D | Internal Revenue Service

 

[drawfour]

Is that true even after the first $3,200 of tax is forgiven for EVs?

Won't matter since that credit is going away long before I will be able to get the car. Otherwise, I assume it would be true. They look at the total amount of tax you paid to the other state, and subtract that from the amount of tax you owe to Washington. You pay the difference. No refund if you owe less to Washington than you paid. So based on that "simple" idea, I would expect that I would get that credit if it still existed. Quick math tells me $59k for AWD (assuming 4k AWD + PUP, EAP, LR, paint). So I would pay 7.5% in CA, or $4425. If I got the $32k credit in Wash, I would owe taxes on 27k. At 10%, that's 2700. So I would pay $0 to Washington State since I already paid more to CA. But since I don't expect it to last, I'm not considering it as part of my deal...

 

[drawfour]

The IRS says it is the day the car is "put in to service". Which essentially means the day you get it titled.

But it would be titled by the state of California, since that is where the sale took place, right? Title is about ownership, not registration. My state may wish to re-title it to me after I register it, but I would expect that Califnornia titles it, and probably same day as the sale completes. But not sure.

 

[ItsNotAboutTheMoney]

The IRS says it is the day the car is "put in to service". Which essentially means the day you get it titled.

To me the wording of the rules actually means:
- The tax year of your claim is when it was put into service, which just means you're using it, which you can do before you have the title.
- In order to claim the tax credit the title must have been issued to you.
- The amount you get depends on when the manufacturer had 200,000 sales and when the state recognizes your ownership.

E.g.
Say Tesla reaches 200,000 sales in 2018Q2.
You pay Tesla for the car, apply for the title on December 2018, register and start driving the car.
For some reason there are a bunch of delays the Title isn't issued until April 2019.

- You started driving in December 2018, so you will claim the tax credit in your 2018 taxes.
- But you can't file for the tax credit until April 2019 because the Title hasn't been issued yet.
- April comes and you claim the tax credit, but you only get $1875 because the Title wasn't issued until April 2019, which is when the state finally recognized ownership, and that's 2019Q2, which is 4 quarters after 2018Q2. (2018Q3 100%,2018Q4 50%,2019Q1 50%, 2019Q2 25%, 2019Q3 25%).

I'd like to see the IRS provide more clarity on this.

 

[ItsNotAboutTheMoney]

But it would be titled by the state of California, since that is where the sale took place, right? Title is about ownership, not registration. My state may wish to re-title it to me after I register it, but I would expect that Califnornia titles it, and probably same day as the sale completes. But not sure.

No. You title it in your state of residence.

 

[Omaha]

IRS filings are essentially attestations. The 8936 form doesn't care if you execute purchase in your home state or not. Many of us (myself included) will purchase out of state because direct sales are still banned in our home states. Just enter VIN and date the vehicle is placed into service and you should be golden.

 

[boaterva]

Washington State sales tax is higher than California, so then I'd just have to pay the difference when I register it. I guess I'm more concerned about losing $3750 in federal credit than I am about some hassle. I want to make sure what the delivery date means for purposes of the federal tax credit - is it day you physically receive the car, or day you attempt to register the car? And can Tesla do anything to "pre-register" in some way where you don't physically have the car, but you have paid them and all paperwork is filed.

Since you get credit for the Out of State taxes, excellent. Most other states aren't so lucky.