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No sales tax on EAP upgrade online in Cali?

Discussion in 'California' started by wwu123, Aug 14, 2017.

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  1. wwu123

    wwu123 Member

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    Can anyone in California who has AP2 hardware but not EAP verify that Tesla does NOT charge sales tax on software-only upgrades? I've heard speculation either way, but it would be nice to see a screenshot of the checkout screen verifying this.

    I understand sales tax IS charged for battery unlocking upgrades, but there are reasons those could be considered partially hardware-based upgrades and in a different tax treatment than EAP.
     
  2. cpa

    cpa Active Member

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    I cannot. (In fact, I have no clue what EAP means, so take what I say with a healthy dose of salt.)

    California's general rule for assessing sales tax is that any purchase of tangible personal property (with the customary exceptions for food and prescriptions, etc.) is subject to sales tax. Purchases of software that is received via the internet (only) are exempt as this is considered intangible personal property. Purchases of software on a hard medium is considered tangible personal property and is subject to tax.

    In addition, items that are included in a package that have hardware and software components are charged sales tax on the entire purchase price, even if the software is listed and priced separately. I believe (unconfirmed however) that the BOE considers the components as one item because the hardware will not operate without the software.

    But it has been a long time since I have had to battle with our friends at the BOE, and it was never regarding software.

    Short answer: if this EAP is a stand-alone, software only (like buying TurboTax online) function, then my guess is that it is exempt from sales tax. If the software determines what other taxable components of the car can and cannot do, then my guess is that it would be taxable.

    But I am prepared to be wrong.
     
    • Like x 1
  3. McManX

    McManX Member

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    EAP = enhanced auto pilot

    Based on what cpa said seems like no sales tax because it's only software and tax was already 'paid' for the hardware (included on all models).

    Whereas with software locked battery upgrades there was no sales tax paid on the locked battery hardware, so it would be paid when unlocking.
     
  4. miimura

    miimura Active Member

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    The BOE could argue that the extra cameras are non-functional without the EAP software, so the hardware was "enabled" and paid for with the upgrade, so taxable. Just playing Devil's Advocate here...
     
  5. commasign

    commasign Active Member

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    We could also ask current AP1 owners without the "Autopilot Convenience Features" whether their online upgrade option includes sales tax or not.
     
  6. cpa

    cpa Active Member

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    ^^^
    This.

    The hardware is inoperable without the software, so my conjecture is that Tesla will be collecting sales tax.

    And mea culpa, old habits are hard to break. Effective July 1, we now have the California Department of Tax and Fee Administration that has taken over for the Board of Equalization. Henceforth, we should do our best to use CDTFA instead of BOE. The BOE is still around but most of its responsibilities have been transferred to this new agency.
     
  7. SoCal Jimmy

    SoCal Jimmy Member

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    Plus tax. Just tried adding Full Self Drive and EAP to a car my buddy has with neither option enabled at the moment.

    See attached. Shows $10,000 plus $925 in sales tax
     

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    • Informative x 3
  8. hill

    hill Member

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    we sold our 2016 60D & wondered if the purchaser would have to pay sales tax on the over-the-air upgrade to 75. If so, it's a nice way to avoid a good chunk of change.
    :cool:
    .
     

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