News and Insights

Wisconsin Issues Guidance on Sales Tax Implications of Volkswagen Settlement

Tax Development Nov 22, 2016

Recently, Volkswagen (VW) reached a settlement with Federal and California regulators, whereby it agreed to make cash payments to certain VW and Audi diesel owners. In an effort to avoid any confusion, on November 18, 2016, the Wisconsin Department of Revenue (Department) issued a press release on the sales tax implications of this settlement for Wisconsin residents. Under the settlement, owners have the option to sell their car back to VW or retain the car and receive cash and emissions modifications from VW. Below is the sales tax guidance provided by the Department for each option:

Selling Car Back to VW
If the owner chooses to sell their vehicle back to the manufacturer e.g. VW, the sale will not be subject to tax. Furthermore, no refund of the sales tax paid on the original purchase may be claimed by VW, the dealer or the owner. If the owner uses the VW payment to purchase another vehicle, the full purchase price is subject to tax and no trade-in allowance is allowed because the vehicle is being sold back and not traded in.

Keeping Car and Receiving Cash/Emissions Modification
There is no sale taking place in this instance and therefore, there are no sales tax implications.

The Department further stated that any questions regarding the settlement should be directed to the attorney who negotiated the agreement with VW or to the Federal Trade Commission. Contact information for these parties can be found in in the Department’s press release