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Post-Delivery FSD Feature taxable?

AKAWally

Member
Dec 9, 2020
6
2
83709
Hello,

I have my delivery scheduled for tomorrow for my new MY.

I am asking if anyone has upgraded through the app (post-delivery) and, if so do they charge sales tax on this? I live in a state where software subscriptions and non-packaged software are not subject to sales tax and curious about how this qualifies. I have already confirmed that FSD will be reflected as an increase in the purchase price and will result in a taxable increment for upgrading the feature prior to (or at) delivery.

I am planning to wait and purchase the FSD upgrade post-delivery after I decide to keep the car long term, but I was curious to know the answer to this question as it might affect how others might order this feature.

Wally
 

glide

Active Member
Jun 6, 2018
3,779
5,303
USA
Depends where you live. I live in a state with no sales tax and was not charged for my post-delivery purchase.

States that have exemptions for software are probably a bit more iffy knowing how Tesla operates.
 

AKAWally

Member
Dec 9, 2020
6
2
83709
I live 60 miles from a state that doesn't have sales tax, and theoretically a person could make the purchase while the car is geographically present in such a state and that if so they shouldn't be subject to paying sales tax. Tesla probably hasn't accounted for this but they could actually use the position of the car to determine sales tax for features like this. I will investigate after I take delivery to find out if the sales tax is calculated based upon where your tesla account is listed, where the car is registered, or where the car is physically located.

I would think most people would drive a few miles to shave $600 off the cost.

Wally
 

SilverSp33d3r

No Longer Silver
May 23, 2018
633
448
LA
Model 3 in cali.
BEF7AEA5-A629-4F56-A0D3-27940778F4C4.jpeg
 

Kodemonkey

Member
Oct 15, 2020
134
51
Los Angeles
Funny how the acceleration boost wasn’t taxed in California. Maybe because it’s just an “unlock” and FSD is software that is taxable.
 

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frankvb

Supporting Member
Supporting Member
Feb 29, 2020
927
571
San Diego, CA
Funny how the acceleration boost wasn’t taxed in California. Maybe because it’s just an “unlock” and FSD is software that is taxable.
I believe the reasoning is that you are paying for the FSD hardware. Slightly illogical as every car already has it built in.
 

kadify

Member
Nov 19, 2020
272
130
colorado
I live 60 miles from a state that doesn't have sales tax, and theoretically a person could make the purchase while the car is geographically present in such a state and that if so they shouldn't be subject to paying sales tax. Tesla probably hasn't accounted for this but they could actually use the position of the car to determine sales tax for features like this. I will investigate after I take delivery to find out if the sales tax is calculated based upon where your tesla account is listed, where the car is registered, or where the car is physically located.

I would think most people would drive a few miles to shave $600 off the cost.

Wally
Even if you drive across the border and purchase the care you'd owe tax when you go to register the car at the DMV.
 
  • Disagree
Reactions: glide

2101Guy

Active Member
Jan 6, 2020
2,100
2,786
USA
Even if you drive across the border and purchase the care you'd owe tax when you go to register the car at the DMV.
im not following you.

If the car has already been purchased and titled and registered, then a month or two later (or whenever) a person decides to drive to Delaware with the car, and use the app in delaware to upgrade to FSD, then I believe what the assumption is, is that there is no tax on the upgrade purchase.
 

kadify

Member
Nov 19, 2020
272
130
colorado
im not following you.

If the car has already been purchased and titled and registered, then a month or two later (or whenever) a person decides to drive to Delaware with the car, and use the app in delaware to upgrade to FSD, then I believe what the assumption is, is that there is no tax on the upgrade purchase.
Oh I misunderstood. Yeah I'm not sure if that would work. Depends on if the app cares about where you are or where the car is registered.
 
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AKAWally

Member
Dec 9, 2020
6
2
83709
If the car has already been purchased and titled and registered, then a month or two later (or whenever) a person decides to drive to Delaware with the car, and use the app in delaware to upgrade to FSD, then I believe what the assumption is, is that there is no tax on the upgrade purchase.

Yes, I am obligated to pay sales tax on the car in my state when I apply for the title. The dealer charges me and then provides proof that I paid the sales tax. If I purchase out of state, then I usually pay sales tax on the purchase price when I file my application for title. This is unique and likely unprecedented because these features can be delivered anywhere but the actual vehicle also has a title in a homed state. Though if I owned a '64 impala and drove it to an Oregon shop for new upholstery, I don't think I would be obligated to pay Idaho sales tax on the upgrade because sales tax depends upon the geographic jurisdiction at the time of delivery.

I live in Idaho where there is a 6% sales tax. Idaho does not tax most software subscriptions where delivery occurs through electronic download. So in my state it may be exempt (possibly) in a post-delivery transaction whereas it would certainly be taxable if purchased with the vehicle. I live 60 miles from Oregon, where there is no sales tax at all. One could argue that if I made the purchase while both me and the car were physically located in Oregon that it would be exempt from sales tax. One might also make an argument that a vehicle titled or registered in Idaho might be subject to Idaho sales tax for any upgrade which increased the value of the asset, but I honestly don't think there is really a precedent for this situation. Thinking about this just made me curious.

It appears that the Tesla app does calculate sales tax, but the unknown part is the basis it uses to calculate the sales tax - does it use the account address for this, the address on the title, the physical location of my phone or the car, or something else? If I don't have to drive into a service center to activate the upgrade, then I would contend that the most proper method should be the GPS location of the car, since that is the exact point that the goods were delivered. I do have a legitimate Oregon address that I can use to test this after I receive the car, and I'll post my findings.

Yes, I am crippled by my curiosity and tend to overthink things, but it helps me pass the time while I wait for my new ride to show up. My current delivery appointment is for tomorrow, but I am fully prepared for it to be pushed to Monday.

Wally
 
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Kodemonkey

Member
Oct 15, 2020
134
51
Los Angeles
I believe the reasoning is that you are paying for the FSD hardware. Slightly illogical as every car already has it built in.

Yes, but I can kind of see the difference now that I think about it. The performance boost is just a slight change to the software that unlocks a different power map. FSD is a suite of software - even though the hardware was already there. Analogous to using an existing server farm that you already have but upgrading the software to an expanded suite of features. The hardware didn't change, but now your system might be able to do payroll now when it did not before. That is definitely taxable.
 

acarney

Active Member
Jul 9, 2019
2,794
1,792
Richland, WA
Hello,

I have my delivery scheduled for tomorrow for my new MY.

I am asking if anyone has upgraded through the app (post-delivery) and, if so do they charge sales tax on this? I live in a state where software subscriptions and non-packaged software are not subject to sales tax and curious about how this qualifies. I have already confirmed that FSD will be reflected as an increase in the purchase price and will result in a taxable increment for upgrading the feature prior to (or at) delivery.

I am planning to wait and purchase the FSD upgrade post-delivery after I decide to keep the car long term, but I was curious to know the answer to this question as it might affect how others might order this feature.

Wally

I live in Washington state and upgraded post delivery. I was charged sales tax. Interesting enough, I was charged the same tax rate I would pay for a vehicle, which is a slightly higher tax rate than just general goods.

Edit: Mine appears to use the address on my Tesla account for the tax rate, which obviously is also the address the vehicle is registered to. As mentioned, the "motor vehicle sales" tax is higher (8.9%) compared to our standard sales tax rate of 8.6%, and I was charged the higher 8.9% for the FSD software unlock.
 

AKAWally

Member
Dec 9, 2020
6
2
83709
I live in Washington state and upgraded post delivery. I was charged sales tax. Interesting enough, I was charged the same tax rate I would pay for a vehicle, which is a slightly higher tax rate than just general goods.

Edit: Mine appears to use the address on my Tesla account for the tax rate, which obviously is also the address the vehicle is registered to. As mentioned, the "motor vehicle sales" tax is higher (8.9%) compared to our standard sales tax rate of 8.6%, and I was charged the higher 8.9% for the FSD software unlock.

Picked my Model Y yesterday. I was able to verify that the sales tax calculation follows the billing address attached to the account. In my case I input my Oregon address and a credit card I have that uses that address. Note that the resulting credit card transaction will use the zip code from the billing address for validation.

I did not actually purchase FSD. I am waiting to see how much I like the car before I pull the trigger.

Wally
 

GeorgeC1

Member
Jun 2, 2020
170
129
NC
Be aware that almost every state that has a sales tax also has a use tax. They are normally the same amount. You owe the use tax on purchases made out of state and imported into the state. Catching you may be a different matter but under the law you will owe the tax either way. Purchases made in Oregon as a example would owe use tax if you live in Washington. Use tax is normally collected via your state tax return.


Even though the "use tax" has been in effect since 1935, many people still do not fully understand how it functions as a substitute for the sales tax.

What is use tax?
As the name implies, use tax applies to items being used in Washington where sales tax has not been paid. It applies to both businesses and individuals. The tax is due when the item is first used in the state, and the tax rate is the same as the sales tax rate where the item is being used.

Use tax must be paid by each new owner of the item, and is calculated on the value of the property, which is generally the purchase price.

When is use tax due?
Use tax is due on:

  • items purchased over the Internet or through catalogs, without paying sales tax, and delivered to Washington for use here.
  • any consumer item purchased in another state, without paying sales tax, and brought into Washington for use here.
  • items purchased in Washington where sales tax has not been paid. This includes items purchased through private parties.
 

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