State sales tax on a service ?

[amboy49]

I just purchased a car (used). When I received the paperwork there was a charge for document preparation fee. I dislike that fee as I just wish the dealer would price the vehicle so that it covers any expense he incurs for that activity. I thought I had haggled to the point of the best price I was gonna get and said I wouldn't pay a penny more. When the salesman came back from presenting my third counter offer to the used car manager he said we have a deal.

THEN . . . . as he was beginning the paperwork he causally mentioned there was a document preparation fee of $245. I simply told him that was a deal breaker and stood up to leave. He then volunteered he would reduce his commission by the doc prep fee and we shook hands.

THEN . . . . . he turned me over to the "finance man." As I sat there I explained I didn't need financing as my offer was to pay cash for the vehicle. So . . . . .the paperwork reflected the price of the car plus the documentation fee - then. . . . they calculated the tax on the total amount including the doc prep fee. I told him I felt the doc prep fee was a service, not a product, and there shouldn't be a tax on it. He replied that was a definite requirement mandated by the state of Indiana.

The additional tax on $245 is $17.15. Obviously not much money but . . . . . . I tried to research the Indiana tax code but had no luck. Hoping a knowledgeable person on this subject can weigh in here. Why is there a sales tax on a service ?

TIA

 

[dmarsh8]

Doc fees are complete BS, not necessary. Not sure on the tax question really but you should have laid the money down minus a $20 bill and said this is what I'll pay right now, take it or leave it! Sounds like a new car store to me but I'm sure some independents do the same crap.

 

[Cameramonkey]

They violated state law with that doc fee.

By the letter of the law they are only allowed to charge actual cost for them to process.

But there is a gentleman's agreement with the AG that $200 is the point they will take notice. So you'll notice most dealers only charge $199.

EDIT: and the actual answer why? Its not taxable as far as I know. But they may be greedy and collecting the tax on it and then pocketing it since the state would not expect those tax dollars.

 

[Leo]

I will not pay document fee. Filling out the paper work is THEIR Job, there is NO value added for me. I sure will not pay sales tax on it. If they act like it is impossible, I tell them I want $200 to sign the back of my title.

I NEVER talk to the finance man, period. If they say I have to, I ask for the general manager. If still no-go, I walk. I have walked out of a lot of dealerships. I usually find someone who can do a deal with out drama. If some one really angers me and I have to walk, I drive the car from a different dealer over and show the salesman, and thank him helping me find a better deal.

 

[Cameramonkey]

answer?

What transactions are subject to the sales tax in Indiana?

www.salestaxhandbook.com

 

[KokomoDave]

I just purchased a car (used). When I received the paperwork there was a charge for document preparation fee. I dislike that fee as I just wish the dealer would price the vehicle so that it covers any expense he incurs for that activity. I thought I had haggled to the point of the best price I was gonna get and said I wouldn't pay a penny more. When the salesman came back from presenting my third counter offer to the used car manager he said we have a deal.

THEN . . . . as he was beginning the paperwork he causally mentioned there was a document preparation fee of $245. I simply told him that was a deal breaker and stood up to leave. He then volunteered he would reduce his commission by the doc prep fee and we shook hands.

THEN . . . . . he turned me over to the "finance man." As I sat there I explained I didn't need financing as my offer was to pay cash for the vehicle. So . . . . .the paperwork reflected the price of the car plus the documentation fee - then. . . . they calculated the tax on the total amount including the doc prep fee. I told him I felt the doc prep fee was a service, not a product, and there shouldn't be a tax on it. He replied that was a definite requirement mandated by the state of Indiana.

The additional tax on $245 is $17.15. Obviously not much money but . . . . . . I tried to research the Indiana tax code but had no luck. Hoping a knowledgeable person on this subject can weigh in here. Why is there a sales tax on a service ?

TIA

I would've told them they lost a sale. Period. Haggling back and forth is for amateurs. I used to sell new Vettes and know the game oh so well. There are a TON of YouTube videos about those stooges. Never play the game!

 

[Expat]

Let the Indiana Dept of Revenue know they are collecting it so they can make sure they are getting their money.

 

[Ingomike]

It sounds easy to walk away but might cost more in the long run, especially with used vehicles as there may not be a duplicate out there or close enough to do so. There is a reason I wanted that one.

I couldn’t care less if the doc prep fee is $3000 or if tax is collected on it or not. Heck they can bill the car at $2 and charge a $24,998 doc fee if they want if my bottom line is $25,000. I negotiate a bottom line number and how they play with that number or arrive at that number is not important. I often call it the out the door number the amount of my cash or check.

 

[amboy49]

It sounds easy to walk away but might cost more in the long run, especially with used vehicles as there may not be a duplicate out there or close enough to do so. There is a reason I wanted that one.

I couldn’t care less if the doc prep fee is $3000 or if tax is collected on it or not. Heck they can bill the car at $2 and charge a $24,998 doc fee if they want if my bottom line is $25,000. I negotiate a bottom line number and how they play with that number or arrive at that number is not important. I often call it the out the door number the amount of my cash or check.

 

[amboy49]

In essence the price of the car ended up what we agreed on only because the salesman agreed to take a cut on his commission.

There were other issues that came up when I went to pick up the car which is another chapter. One issue was that I gave them a down payment which wasn't reflected on the purchase agreement so I had to show the finance guy the charge to my credit card to prove what I was saying.

Just as info, this wasn't a fly by night corner car lot on 16th street. It was a major GMC dealership on the north side of Indy.

There are other facets of the deal that didn't sit well with me but the vehicle was pretty much what I had been searching for quite awhile. And. . . . . . my wife really liked the vehicle so there basically no backing out.

Luckily I only buy a car about once every 10-15 years. I currently own vehicles I purchased in 1997, 2011, and 2015.

 

[DoggyDaddy]

Just as info, this wasn't a fly by night corner car lot on 16th street. It was a major GMC dealership on the north side of Indy.

So, a big crook instead of a little crook?

 

[phylodog]

I will not pay document fee. Filling out the paper work is THEIR Job, there is NO value added for me. I sure will not pay sales tax on it. If they act like it is impossible, I tell them I want $200 to sign the back of my title.

I NEVER talk to the finance man, period. If they say I have to, I ask for the general manager. If still no-go, I walk. I have walked out of a lot of dealerships. I usually find someone who can do a deal with out drama. If some one really angers me and I have to walk, I drive the car from a different dealer over and show the salesman, and thank him helping me find a better deal.

We could be friends in real life. Depending on my mood though I might stick around and waste their time. I did that when I bought my 2012 Ram. It had been sitting on the lot for a year when I bought it in Aug of 2013. I was looking for a used F150 and they really wanted me to have that truck, it was very heavily discounted already. Told the salesman I'd pay $400/mo and no more and if they could make that happen I'd buy it. 45 minutes later, after the poor salesman had walked a bare path in the carpet from his desk to the finance guy's they got it done.

$398/mo for 7 years was the offer so I told them to give me a few minutes. I walked outside, called my credit union and secured a better financing deal over the phone. Walked back in, told them I'd be back with a check for the amount they had on their paper and left. They weren't happy but I'm sure it was a relief having that truck off the lot. Been a great truck.

 

[greg]

Most dealership want to finance the car that's where they make the money.

 

[Super Bee]

$398/mo for 7 years was the offer so I told them to give me a few minutes. I walked outside, called my credit union and secured a better financing deal over the phone. Walked back in, told them I'd be back with a check for the amount they had on their paper and left. They weren't happy but I'm sure it was a relief having that truck off the lot. Been a great truck.

I bet they were not happy. Many dealers will make 5% of the loan value from the lending institution. They add on document fees, title fees, then they try to sell extended service contracts which pay them very well. In most cases they make more on the back end of the deal then they make on the actual car/truck.

I had a customer in here last week and bought a camper, they were at Camping World in Coldwater Michigan the day before. They had nearly $6000 in fees and taxes. They tried to charge them $1500 for an "Out of state buyer fee". What the **** is that. From day one, I have always had the price of the camper and sales tax. No extra bull****.


A classic bit from Seinfeld and Puddy about this very thing.

 

[model1994]

there’s always hidden fees, but how much did you tip the salesman?

 

[1nderbeard]

Guy is a crook. There is no sales tax on services.
If the fee is for his secretary to staple the documents together, then absolutely there should be no sales tax.
If, by some chance, the fee is for the paper (I doubt you got $250 worth of paper) I could potentially see them getting away with charging sales tax. But I'm guessing they paid sales tax when they bought the paper, in which case they shouldn't be charging you another round of tax.
My guess? They pocketed the money.

 

[Destro]

This site does seem to say that document fees charged by dealers are subject to Indiana sales tax...gotta love our administrative state.

 

[Destro]

you should have laid the money down minus a $20 bill and said this is what I'll pay right now, take it or leave it!

Even a few months ago, they would have happily showed you the door. I don't know if the tides have shifted yet?

 

[firecadet613]

It's shady, but you could always haggle the OTD price.

I typically get my haggling done before I step foot in the dealership, so it's just a quick test drive, pay, and go.

I haggle the vehicle price, but always ask what fee's they tack on (often times the salesman will bring up their doc fees, etc, before I've asked).

I 100% get where you're coming from and agree with you on the principle of it, but if I've invested that much time on a deal, I could care less about $20. It'd leave a bad taste in my mouth, but not make make walk out (and my last purchase was a used truck, haggled 100% via text message and emails, with a dealer 3hrs away at the end of 2022).

The price we agreed upon was the final price, with no surprises.

 

[NHT3]

Finance guy is paid by the dealership to do the docs, that's his JOB. Why should I pay him again? It's like being forced to tip an annoying bartender. If they don't like that I will find another dealership.