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Delivery and tax implications

Discussion in 'Model S: Ordering, Production, Delivery' started by JRP3, Oct 27, 2012.

  1. JRP3

    JRP3 Hyperactive Member

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    I wonder if there is a way to take legal possession of a car before you get it, could they just mail you the paperwork?
     
  2. adurstewitz

    adurstewitz P3853, VIN3062

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    Same as European delivery, show up to the factory, take possession and do a tour. Then have them load it on a truck and send it to your house.
     
  3. artsci

    artsci Sponsor

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    I live in Baltimore, MD but travel to Palo Alto about 4 times a year. So you're saying: when my car is ready, I can go to the nearby Fremont factory, take possession, then have it shipped to my home in Maryland? That would be fantastic.
     
  4. gg_got_a_tesla

    gg_got_a_tesla Model S: VIN P65513, Model 3 Res Holder

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    Only catch is that you'll have to pay Calif. sales tax. Not sure if you'll have to pay sales tax again in MD.
     
  5. JakeP

    JakeP S P4996 / X P6028

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    Plus there is the question of registration, which may trump the sales tax issue. If the car VIN is registered to PA where I live, I think I just pay the PA sales tax, and not CA. I am not sure about this, but this is what happened when I bought an Acura across the border in Ohio. Though that may have been due to reciprocal agreements between bordering states.

    GG, if I was able to come out to CA to place my car in-service for business in 2012, it would require me having a business meeting (aka lunch at Redwood Shores, drag races around the Emerald City)...I am a long-time Oracle implementer and ex-Oracle guy!
     
  6. ckessel

    ckessel Active Member

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    Further info on this should probably go to the CA sale tax thread, but most states credit you for sales tax paid elsewhere, so you'd only pay the amount of MD sales tax that's beyond what was paid to CA. Given CA has a high sales tax, that may be zero.
     
  7. gg_got_a_tesla

    gg_got_a_tesla Model S: VIN P65513, Model 3 Res Holder

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    ckessel's right. This was the official word from a few months ago:

    Factory Delivery - Page 10

    JakeP, lunch at Redwood Shores is on me! You are welcome to put your S "in-service" in CA :)
     
  8. donauker

    donauker Member

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    Not as far as the tax credit is concerned. The Federal credit considers state titling of the vehicle as acquisition.

    Excerpt from IRS
     
  9. contaygious

    contaygious Active Member

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    But what does titling entail? Don't they register your car ahead of time? What's the difference if I pay and sign everything ahead vs actually drive the car off the lot from the factory,
     
  10. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    As far as I know, it would be the date that the State puts on the title document. So if you pay on Monday, and the State gets the papers Tuesday and it's next Wednesday before they get around to creating the title document, the date would be next Wednesday.
     
  11. JakeP

    JakeP S P4996 / X P6028

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    Yes that is what I was wondering in the other thread. Car could be fully registered to my home state, I visit the factory, hand in my check, take some pics of the car, possibly drive it around (so long as that alone didn't make me responsible for the CA tax), and then let Tesla ship it to me in PA. I don't see how this scenario differs from me mailing them a check before they ship it to me. The only difference is that I hand-delivered the check.

    And in my case, perhaps had lunch with GG at Redwood Shores, with a fantastic photo opp of two green Teslas in front of Larry Ellison's Emerald City!
     
  12. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    There is a thread on this and the conclusion was, if you take delivery in California you have to pay their sales tax and perhaps other local taxes. Of course, you might get a credit on those taxes from your State but it depends on your State's tax laws.
     
  13. JakeP

    JakeP S P4996 / X P6028

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    Yes I fully understand that, but I am trying to identify if a certain scenario constitutes "taking delivery in California". What I am proposing is hand-delivering my check, touring the factory, receiving my delivery specialist training in Fremont, and then allowing Tesla to ship the car to my home state, where I will accept delivery and take possession.

    This to me is very different from driving off the lot in Fremont in possession of my car. And it has several benefits to Tesla: they get their money whenever they let me take the tour, and they no longer need to send a DS to train me and hand over the car in my home state...I can take it straight off the flatbed.
     
  14. bmek

    bmek Member

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    Let’s start with two scenarios. The first scenario is factory delivery and the customer drives the Model S home. That has been covered in other threads. The second is a hybrid delivery scenario, where the customer visits the factory (or some other location) to ‘accept’ the vehicle and then Tesla still has to deliver it in the same condition to the customer-specified location.

    The second scenario applies to cars that have been manufactured and passed all inspections, and just need to be delivered to the customer. If these vehicles are manufactured but not delivered by December 31, 2012 then those vehicles will be in ‘finished goods’ inventory on Tesla’s balance sheet on that date.

    With this hybrid delivery scenario, I believe there are three major issues (Tesla may be already working on these issues as December 31, 2012 looms). First, Tesla wants to have customers take delivery of vehicles and Tesla wants to ‘recognize’ the revenue for their financial statements. Second, customers want to claim the $7,500 tax credit and need the vehicle to do so. The $7,500 tax credit requires the vehicles to be placed in service during the tax year and Form 8936 requires the date and VIN to be reported. The third issue is sales tax and when/where that tax is payable.

    Tesla’s business model is to sell cars over the internet, not in stores, and then deliver the cars to wherever the owner requests delivery to be made. Payment must be ‘cleared’ at the time of delivery so there can’t be any question regarding the funds going to Tesla.

    Regarding revenue recognition, in general, revenue is recognized when performance obligations are satisfied, which occurs when the customer has obtained control of the vehicle. Indicators that control has transferred include whether the customer has an unconditional obligation to pay, the customer has legal title, or the customer has physical possession of the vehicle.

    So, accepting the vehicle at the factory and signing the ‘papers’ showing unconditional acceptance of the vehicle, with the payment made and cleared, and leaves only the delivery obligation to Tesla. If Tesla delivers the car to the location (state) that the owner specified then Tesla may be able to recognize the revenue for the vehicle except for the delivery charges (or, that portion of the purchase price relating to delivery).

    For this to work, customers would have to come to the factory, inspect their vehicle, sit in it and take it for a short drive, and ‘accept’ the vehicle as is. Recording the distance driven on the odometer and having their picture taken at that time may provide assurance that the vehicle was ‘placed in service.’ If there was any way to have the registration/plates available at the acceptance location that would be very desirable. Insurance would help, too.

    The remaining commitment by Tesla would be to deliver that same car to the location specified in the purchase agreement in the same condition as it was upon customer acceptable (e.g., same number of miles on the odometer).

    If the car was delivered within days of the meeting at the factory then it would be easy to review such a transaction. If the actual delivery was not made, for whatever reason (e.g., transport truck crashed), then the sale could not be recognized. Complicating the matter would be if delivery was delayed for more than, say, 20 days then it may be much more difficult for Tesla to recognize the revenue at the factory and the buyer to claim the tax credit for the vehicle that was purchased, placed in service, but subsequently not delivered. By the way, the acceptance and in service location would not have to be at the factory – it could be at some other location where ‘acceptance’ but not final delivery could occur.

    Regarding sales taxes, Tesla would have a binding purchase agreement and an obligation to deliver the vehicle to the owner-specified location. If the delivery location was in California, then sales tax would not be an issue. If delivery was to another state then the sales tax issue could be complicated. Given the sale occurred over the internet, it may be argued that the transaction did not occur in California, especially if Tesla has some type of physical presence in that other state (e.g., store front or service center). Often, sales taxes may depend on whether the seller has a ‘nexus’ in that state. If the customer takes delivery in California and then drives the vehicle back to their home state then it is clear that the sale occurred in California. It is less clear when the vehicle is accepted in California and then Tesla delivers the vehicle to another state.

    As 2012 draws to a close, Las Vegas could be an easy and logical interim location for accepting cars in the final days of December as it is (relatively) close to Fremont and easy for customers to fly into/out of. What could be better than accepting your Model S on the last day of 2012, taking a short drive on private property and getting your picture taken with you behind the wheel of your new car, being able to claim the tax credit, and then ringing in the New Year in Las Vegas?
     
  15. JakeP

    JakeP S P4996 / X P6028

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    Thank you, Bmek, that is exactly what I envisioned. And due to the complexities that you describe, I wonder if such a hybrid delivery scenario would even be offered.
     
  16. bmek

    bmek Member

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    Many companies in the Silicon Valley develop innovative ways to recognize revenue at the end of each quarter, knowing the markets have a keen eye on their revenue growth.

    If Tesla needs to be creative to recognize revenue to meet guidance at December 31, 2012 then they will have a huge incentive to do so. Also, if the tax credit is in risk of being eliminated then customers may have a significant incentive to juggle their activities at year end, too.

    Of course, the cars need to be manufactured and pass all inspections first ...
     
  17. artsci

    artsci Sponsor

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    The tax question for me is further complicated by the fact that the State of Maryland provides a $2,000 sales tax credit for EVs. I surely don't want to jeopardize that. I may need a tax attorney to resolve all these complications but that will end up costing a small fortune. So based on the additional comments on this thread it seems to me that the less risky and less expensive choice would be to take delivery in Maryland, sign the papers, and make final payment when that happens. So that raises another question. Will Tesla let me take a factory tour once my ownership is official, even if that happens in Maryland? A factory tour is really all I want.
     
  18. JRP3

    JRP3 Hyperactive Member

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    Actually the question I was posing involved no special travel or deliver parameters. You pay Tesla for the car in advance, they send you the paper work including the title, you register the vehicle in your state, and then, when it's ready, Tesla ships it to you. When I go to the DMV to register a car, I don't have the car with me and they don't ask if I have the car in my possession.
     
  19. donauker

    donauker Member

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    For PA registration you will need the Certificate of Origin, Bill of Sale and a check from Tesla for sales tax and registration fees. It took them three weeks after delivery of the vehicle to provide this paperwork. Then you will need a VIN certification performed by the person registering the vehicle. So you need the vehicle present or a certification by a PA state police or inspection mechanic. Another option is providing tracing of a raised letter VIN plate of the vehicle if there is one accessible to do this.

    State registration is not a simple process without a local dealership.
     
  20. DouglasR

    DouglasR Member

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    TM offers factory tours only to those who take delivery at the factory. I already asked.
     

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