Tennessee Issues Guidance on Sales Tax Implications of Volkswagen Settlement

DALLAS, Dec. 9, 2016 /PRNewswire/ -- Recently, Volkswagen ("VW") reached a settlement with federal and California regulators, whereby it agreed to make cash payments for certain VW and Audi diesel vehicles. Last week, in an effort to avoid any confusion, the Tennessee Department of Revenue ("Department") became the second state to issue guidance on the sales tax implications of this settlement.¹ Under the settlement, owners have the option to sell their car back to VW or retain the car and receive a cash settlement and emissions modifications from VW. 

Owners who sell their vehicles back to VW will not be required to pay sales or use tax on the sale. However, they will not be entitled to a refund of the tax paid on their original purchase of the vehicle. Furthermore, if the owner chooses to purchase a new vehicle with the proceeds of the VW buyback, they will need to pay sales tax on the entire purchase price of the new vehicle.  Owners who choose to keep their vehicles and accept the cash settlement and emissions software modification will owe no Tennessee sales or use tax.

We can expect to see more guidance from other states as consumers seek to understand the sales tax implications of the settlement as it applies to where they live.

¹ Ryan Tax Development, Wisconsin Issues Guidance on Sales Tax Implications of Volkswagen Settlement, November 22, 2016.

About Ryan
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.

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SOURCE Ryan