Tax impact mitigation

Is there anything I can do about the tax burden of the prize winning?

Technically yes, but practically it could be difficult.

Technically, the government should tax a vehicle on its fair market value (the actual purchase price) rather than the MSRP.  To take advantage of this, one usually negotiates a purchase price with the salesperson at a dealership.  This (plus a number of mysterious fees) is the amount from which tax is calculated.

What’s different in this situation is that the vehicle was won in a sweepstakes rather than purchased.  Money did not change hands between me and the manufacturer.  The government doesn’t care; they want their cut based on the fair market value of the vehicle that changed hands.

The federal government gets its cut because receiving the prize is like receiving income.  The Washington State government thankfully doesn’t have income tax to add to this, but it does have sales tax (again, they don’t care that I did not pay for the scooter).

If I want to legally pay less tax on this prize, I have to show that the fair market value for this vehicle is less than MSRP.  To do so, I will need to argue that if the scooter was sold in Washington State, a dealer would sell it for a specific amount less than MSRP.  As pointed out in my previous post, a very similar vehicle that is sold in this state is offered for sale at a price closer to $5.5K than $10K.  Tax on $5.5K would be closer to $2K than $4K—a much less bitter pill to swallow.

With that in mind, I’ll bring these pieces of information and see if this argument flies with the clerk at a nearby registration office:

Wish me luck!

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One Response to Tax impact mitigation

  1. Unfortunately, the WA Department of Revenue rules that in lieu of a local dealership selling this vehicle, its MSRP will apply–not a similar vehicle’s fair market value.

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