CAR Association

Valuation Rules for Determining Whether the 6.35% or

7% Tax Rate Applies

Sales Price: 

For purposes of valuation the sales price includes all taxable items such as "Doc Fee, Aftermarket Products (i.e. VIN Etch, Sealant) but would not include any title or registration fees or any insurance costs. 

NOTE: Extended warranties are NOT included in the sales price for determination of the tax rate.  Extended Warranties are taxed at 6.35%

Trade-In Allowance:

A motor vehicle with a sales price exceeding $50,000 will be subject to tax at the rate of 7% beginning July 1, 2011.  Please be advised that, as provided in Conn. General Statute § 12-403(4), the sales price of a motor vehicle is not changed or otherwise impacted by a trade-in, but instead is adjusted by the amount allowed for a trade-in.  Therefore, if the sales price of a motor vehicle exceeds $50,000 prior to the application of a trade-in, the transaction is subject to tax at the rate of 7%.

Leases:

The "Agreed Upon Value" as it appears in lease agreements will dictate the applicable sales tax rate.  Therefore, to the extent that the "agreed upon value" exceeds $50,000 all up front taxable items as well as any lease payments due and owing on or after July 1, 2011 will be subject to the tax at the rate of 7%.

If the Agreed Upon Value on your lease document does not include the lease acquisition fee or doc fee you must add them into the valuation calculation to determine the sales tax rate.

NOTE:  The "agreed upon value" of a motor vehicle has no bearing on the applicable tax rate if said vehicle is purchased at the conclusion of its lease.  The applicable tax rate will be based upon the sales price of the vehicle at that time.

Commercial Leases of Motor Vehicles:  Please note that the rules described above do not apply to commercial leases of motor vehicles. 

Extended Warranties:

Please note that Extended Warranties, Maintenance and Repair Contracts are taxable at 6.35% regardless of the $50,000 threshold. 

The State Department of Revenue Services Defines Maintenance, Repair and Warranty Contracts as:

DEFINITIONS OF MAINTENANCE, REPAIR AND WARRANTY CONTRACTS:

Maintenance contracts are contracts that provide for service to be performed on an item of tangible personal property at a future time. This service is rendered to sustain or support safe, efficient, continuous operation of tangible personal property, or to keep an item in good working order by preventing its decline, failure, lapse or deterioration. This service is not contingent upon the malfunctioning of the tangible personal property covered under the contract.

Repair contracts are contracts that provide for service to be performed on an item of tangible personal property which is broken, damaged, defective or malfunctioning at the time the parties enter into the contract. The essence of repair service is to mend or restore such tangible personal property to working order or operating condition.

Warranty or Guaranty contracts are contracts that provide for repair service only in the event of a future malfunctioning of an item of tangible personal property.