Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

2012 Year End Delivery & Tax Credit Issues

This site may earn commission on affiliate links.

Robert.Boston

Model S VIN P01536
Moderator
It appears that time to transport the Model Ss across the country could result in hundreds of Model Ss being completed in 2012 but delivered in 2013. This is bad because:
  1. It shifts revenue recognition for these sales into 2013. In round numbers, 400 cars @ $80,000 = $32 million of deferred revenues for TSLA.
  2. It shifts the US and state tax credits from 2012 to 2013. This messes with some of us who did our tax planning relying on Tesla's assurance (mine, in writing and a phone call to me from Palo Alto) that I'd have delivery in 2012.

Rather than just whining, here's a proposal: Tesla should offer to move these end-of-year cars to Las Vegas. Buyers fly to Vegas, take possession, drive around the block, and fly home. Tesla then delivers the cars to us in due course.

Why Las Vegas? No sales tax for cars leaving the state (according to this Nevada Department of Taxation document), unlike California.

Does this make sense? The ~$600 or so in my cost is far lower than the penalty I may end up paying to the IRS. Heck, if work isn't too crazy then, I might even road-trip home!
 
It appears that time to transport the Model Ss across the country could result in hundreds of Model Ss being completed in 2012 but delivered in 2013. This is bad because:
  1. It shifts revenue recognition for these sales into 2013. In round numbers, 400 cars @ $80,000 = $32 million of deferred revenues for TSLA.
  2. It shifts the US and state tax credits from 2012 to 2013. This messes with some of us who did our tax planning relying on Tesla's assurance (mine, in writing and a phone call to me from Palo Alto) that I'd have delivery in 2012.

Rather than just whining, here's a proposal: Tesla should offer to move these end-of-year cars to Las Vegas. Buyers fly to Vegas, take possession, drive around the block, and fly home. Tesla then delivers the cars to us in due course.

Why Las Vegas? No sales tax for cars leaving the state (according to this Nevada Department of Taxation document), unlike California.

Does this make sense? The ~$600 or so in my cost is far lower than the penalty I may end up paying to the IRS. Heck, if work isn't too crazy then, I might even road-trip home!

Ok, Tesla open an experience and delivery center in LasVegas
I am sure the Casinos won't give you trouble giving you temporary accomodations :biggrin:
 
Hey Robert,

I've worked through this idea with Tesla, and because they are not a licensed dealer in Nevada, they can not make use of the waiver on collection of tax for out of state sales delivered in Nevada. The next option is to use Oregon to do the delivery, as there is 0% sales tax on EV's removing the issue entirely.

Peter

It appears that time to transport the Model Ss across the country could result in hundreds of Model Ss being completed in 2012 but delivered in 2013. This is bad because:
  1. It shifts revenue recognition for these sales into 2013. In round numbers, 400 cars @ $80,000 = $32 million of deferred revenues for TSLA.
  2. It shifts the US and state tax credits from 2012 to 2013. This messes with some of us who did our tax planning relying on Tesla's assurance (mine, in writing and a phone call to me from Palo Alto) that I'd have delivery in 2012.

Rather than just whining, here's a proposal: Tesla should offer to move these end-of-year cars to Las Vegas. Buyers fly to Vegas, take possession, drive around the block, and fly home. Tesla then delivers the cars to us in due course.

Why Las Vegas? No sales tax for cars leaving the state (according to this Nevada Department of Taxation document), unlike California.

Does this make sense? The ~$600 or so in my cost is far lower than the penalty I may end up paying to the IRS. Heck, if work isn't too crazy then, I might even road-trip home!
 
It appears that time to transport the Model Ss across the country could result in hundreds of Model Ss being completed in 2012 but delivered in 2013. This is bad because:
  1. It shifts revenue recognition for these sales into 2013. In round numbers, 400 cars @ $80,000 = $32 million of deferred revenues for TSLA.
  2. It shifts the US and state tax credits from 2012 to 2013. This messes with some of us who did our tax planning relying on Tesla's assurance (mine, in writing and a phone call to me from Palo Alto) that I'd have delivery in 2012.

Rather than just whining, here's a proposal: Tesla should offer to move these end-of-year cars to Las Vegas. Buyers fly to Vegas, take possession, drive around the block, and fly home. Tesla then delivers the cars to us in due course.

Why Las Vegas? No sales tax for cars leaving the state (according to this Nevada Department of Taxation document), unlike California.

Does this make sense? The ~$600 or so in my cost is far lower than the penalty I may end up paying to the IRS. Heck, if work isn't too crazy then, I might even road-trip home!

I have a modest counter-proposal:
Reassign priority to cars destined for California, Oregon, and Washington, to take most advantage of the I-5 corridor for fast delivery.

-Andy, selfishly, and on the 2012/2013 cusp, too :biggrin:
 
P957 here. I am in total agreement that it would be a nice move for Tesla to assign a couple of enterprising employees to look seriously at getting some of these deliveries booked in a manner consistent with the tax code prior to year end. My understanding in Texas is that we can credit any sales tax paid in California, Nevada or elsewhere against the sales tax due in Texas. Accordingly, assuming the rates are similar for motor vehicles, factory "delivery" followed by gratis transport to Texas could theoretically work. I don't remember the details, but I think I saw here we need a registration date prior to year end for the IRS. So that is a hurdle to consider.

@bluetinc Are these situations something that Tesla is seriously looking at? If so, is there a person I should buzz on this?

@Mods Please consider creating a "Year End Delivery & Tax Credit Issues" thread and moving this line over there.

Thanks,
Andy



Hey Robert,

I've worked through this idea with Tesla, and because they are not a licensed dealer in Nevada, they can not make use of the waiver on collection of tax for out of state sales delivered in Nevada. The next option is to use Oregon to do the delivery, as there is 0% sales tax on EV's removing the issue entirely.

Peter
 
I was told this week that my car will arrive with California temp tags and registration.
I live in the western burbs of Philly, Pa. Pa has a $3500 tax rebate this year but it requires at least a temp registration to qualify.
Don't know how they will view a temp Calif. registration.
Also, I hope this doesn't mean I'm going to be required to pay Calif. sales tax!
 
Hey Andy,

I take it that you mean taking delivery in OR seriously? If so yes, and it looks like I'll be doing this, I'll be sure to let everyone know when this works smoothly. You are close enough to my number that if you are looking to also pickup on the west coast, you will be getting yours about the same time as me (if not prior to me) so you should be able to reference me to validate it with Tesla. If you need a direct contact that I've worked this with just pm me. Oh, I should note, this a full delivery, not a drive it around the block and hand it back to tesla to ship again.

Peter

P957 here. I am in total agreement that it would be a nice move for Tesla to assign a couple of enterprising employees to look seriously at getting some of these deliveries booked in a manner consistent with the tax code prior to year end. My understanding in Texas is that we can credit any sales tax paid in California, Nevada or elsewhere against the sales tax due in Texas. Accordingly, assuming the rates are similar for motor vehicles, factory "delivery" followed by gratis transport to Texas could theoretically work. I don't remember the details, but I think I saw here we need a registration date prior to year end for the IRS. So that is a hurdle to consider.

@bluetinc Are these situations something that Tesla is seriously looking at? If so, is there a person I should buzz on this?

@Mods Please consider creating a "Year End Delivery & Tax Credit Issues" thread and moving this line over there.

Thanks,
Andy
 
I was told this week that my car will arrive with California temp tags and registration.
I live in the western burbs of Philly, Pa. Pa has a $3500 tax rebate this year but it requires at least a temp registration to qualify.
Don't know how they will view a temp Calif. registration.
Also, I hope this doesn't mean I'm going to be required to pay Calif. sales tax!

I believe you only pay California sales tax if you take delivery in California so you should be good. I'd double check if driving with the California temporary registration is valid in your state as they did this for Texas too but supposedly it wasn't valid here.
 
I was told this week that my car will arrive with California temp tags and registration.
I live in the western burbs of Philly, Pa. Pa has a $3500 tax rebate this year but it requires at least a temp registration to qualify.
Don't know how they will view a temp Calif. registration.
Also, I hope this doesn't mean I'm going to be required to pay Calif. sales tax!

I live in the western burbs as well, and also hoping for delivery this year... I don't see any indication on the PA website ( Alternative Fuels Incentive Grant ) that the program expires in 2012. Rather, it seems like it ends when the allotted rebates run out. Per the site, as of Nov. 19, 2012, 105 EV & PHEV rebates remain at $3,500 each.
 
We covered this earlier and it was moved to another thread.

Some considerations in the following:

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?
 
> 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. [bmek]

Which proves nothing. In my experience States routinely allow sales tax on vehicles to be collected by the State of residence, the State to be issuing Title. Temporary registrations are viewed as a convenience only, so have no bearing. Keep in mind also that many States call it "sales/use" tax, payable to the State where it will be used. The bigger the ticket, the starchier States become.
--
 
>
Which proves nothing. In my experience States routinely allow sales tax on vehicles to be collected by the State of residence, the State to be issuing Title.

Then you haven't met the Franchise Tax Board of California. :)

They are, without exception, aggressive about getting their money, whether you live in the state or not. They will attempt to collect taxes on retirement account gains for money you made while working in the state, even if you've moved out of the state years earlier. They will get their money and THEN leave you hanging to deal with your own state with no help.

To paraphrase the line in Licensed to Drive... "You mustn't f*&k with the [FTB], Mr. Anderson, we can make your life a living hell."


...brought to you by an ex-Californian whose tax accountant despises the FTB with passion.
 
Then you haven't met the Franchise Tax Board of California. :)

They are, without exception, aggressive about getting their money, whether you live in the state or not. They will attempt to collect taxes on retirement account gains for money you made while working in the state, even if you've moved out of the state years earlier. They will get their money and THEN leave you hanging to deal with your own state with no help.

To paraphrase the line in Licensed to Drive... "You mustn't f*&k with the [FTB], Mr. Anderson, we can make your life a living hell."


...brought to you by an ex-Californian whose tax accountant despises the FTB with passion.

Yep. I had not been working in California for over a year when they decided that I owed them tax on money they *thought* I earned there. They didn't even bother to figure out where I lived to ask me about it---they just put a tax lien on me and took the money! Took me months to get it back and another year to get it removed from my credit report.
 
Yep, the transaction definitely has to close outside of California, or we're going to get taxed in CA and then again wherever we actually reside. Oregon could work; I was trying to find the shortest drive from Fremont. Oregon could work, but with most RV campgrounds closed for the winter, driving cross-country from there would be a real challenge. Perhaps Arizona?
 
Robert I hope Tesla can do something to help you out. It really hurts to do all the right tax planning, only to be foiled by something like this.

@Robert.Boston This sounds good. We can have a Vegas delivery party and then convoy home to the east coast in our new cars. I'm in!

I can't think of anything worse. A line of Teslas all arriving at a charging destination at the same time. It wouldn't be a convoy for very long.

I was told this week that my car will arrive with California temp tags and registration.
I live in the western burbs of Philly, Pa. Pa has a $3500 tax rebate this year but it requires at least a temp registration to qualify.
Don't know how they will view a temp Calif. registration.
Also, I hope this doesn't mean I'm going to be required to pay Calif. sales tax!

You won't have to pay CA sales/use tax if it's delivered to you in PA. Also my Roadster arrived with CA temp plates and there was no problem in my home state and I'm pretty sure PA is the same. I think you're safe if they don't run out of $3500 rebates.

Then you haven't met the Franchise Tax Board of California. :)

LOL. There are several states competing to have the worst tax department. CA is one of them. NJ is another. VT has won a few battles in this contest.

It appears that time to transport the Model Ss across the country could result in hundreds of Model Ss being completed in 2012 but delivered in 2013. This is bad because:
  1. It shifts revenue recognition for these sales into 2013. In round numbers, 400 cars @ $80,000 = $32 million of deferred revenues for TSLA.

I don't know GAAP very well but I don't think it would make that much difference. It's only 8 million in gross profits. I know you want an incentive for Tesla to help with your delivery plan, but not sure it's big enough. OTOH compared to a typical auto mfgr, the cars on trucks might look like inventory that's a long way from being sold. But I don't really know...
 
Yep. I had not been working in California for over a year when they decided that I owed them tax on money they *thought* I earned there. They didn't even bother to figure out where I lived to ask me about it---they just put a tax lien on me and took the money! Took me months to get it back and another year to get it removed from my credit report.
You're lucky they just did a tax lien. I had an acquaintance to whom the FTB actually pulled money out of his checking account for the amount they "estimated" that he owed without telling him. He just woke up one morning several thousand dollars lighter than the day before. I worry about what will happen if I ever leave California. Wait, wasn't there a song about that? :p
 
You're lucky they just did a tax lien. I had an acquaintance to whom the FTB actually pulled money out of his checking account for the amount they "estimated" that he owed without telling him. He just woke up one morning several thousand dollars lighter than the day before. I worry about what will happen if I ever leave California. Wait, wasn't there a song about that? :p

No, this *is* what happened. They filed the lien and then the bank took the money out of my account for them.