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Jul 15, 2004

The new “motor vehicle tire fee” (tax) goes into effect on August 1, less than three weeks from now.This fee, in the flat amount of $1.50 per tire, applies to retail sales of motor vehicle tires.It not only applies to sales of replacement tires, but also to the tires that are supplied as original equipment on new motor vehicles.In the case of most new vehicles, which come equipped with a spare, the total fee would be $7.50. The Division of Taxation has responded to inquiries from NJ CAR as to how and when the motor vehicle tire fee will be applied and collected.The Division has provided clarification on the following details: ·”Donuts” and inflatable spares, as well as conventional tires supplied as a spare, will be subject to the fee. ·New tires which are put on used vehicles as part of “reconditioning” or preparation for resale are subject to the fee upon sale of the vehicle to a retail customer.Thus, if a dealership takes a trade and replaces two tires, a total fee of $3 would be payable on sale of the vehicle to a retail customer.However, there would be no fee if the vehicle is wholesaled, because the tire fee only applies to transactions which are subject to New Jersey sales tax. ·The motor vehicle tire fee is not subject to the sales tax, and when it is itemized it should not be added to the taxable total on a retail order form, retail installment contract, or lease agreement. ·In a sale transaction, the fee is payable by the purchaser.In the case of a lease, the dealer/lessor is liable to pay the fee (as is the case currently with the sales tax).If a dealer or leasing company wants to charge the lessee (“the “purchaser”) for the fee, then they should ensure that the lease agreement contains a provision that the lessee will be responsible for this fee.A dealer or lessor who collects this fee from the lessee when there is no contractual provision requiring the lessee to pay it may be in violation of New Jersey’s Consumer Fraud Act. ·There would be no fee for warranty replacement tires or for tires provided under a “free tires for as long as you own your car” promotion.Because the fee only applies to transactions where the sales tax applies, and no sales tax applies where the tire is provided at no charge, there would be no fee. The most important rule to remember is that the fee only applies to when the sales tax also applies.Therefore, no tire fee should be charged in any transaction where no sales tax is collected, such as a wholesale sale, a sale to an exempt entity such as a governmental entity or a charitable organization, or a sale to an out-of-state resident. The Division of Taxation has advised that the fee will be reported and remitted to the State on a quarterly basis, with the first report and payment due on October 20, 2004.It is likely that the procedures for reporting and remitting will be similar to those for the sales tax.The Division has not yet announced whether this fee can be reported using the on-line reporting system many dealers use for paying the sales tax.