LANSING—Legislation co-sponsored by Sen. Darwin Booher is heading to the governor to help spur vehicle and watercraft sales by reducing the cost of purchasing a new or used car, RV or boat in Michigan.
“This is about reducing purchasing costs for Michigan residents and helping out local job providers,” said Booher, R-Evart. “Next to owning a home, buying a car is the second-largest purchase most middle-class families will make. These reforms will help families save money when they buy a car or watercraft in Michigan and enable our local Michigan dealers to better compete with out-of-state sellers.”
When an individual today buys a new or used automobile or watercraft in Michigan, the state’s 6 percent sales tax is applied to the full sales price, even if the sale included a trade-in.
“This tax relief plan will have Michigan join more than 40 other states – and every Great Lakes state – in deciding not to tax the value of trade-ins,” Booher said. “The new law will end an unfair policy that was putting our in-state businesses at a competitive disadvantage and that was costing Michigan consumers millions of dollars each year in extra taxes. It is a great illustration of how a change in state policy can positively impact both job providers and consumers.”
Under Senate Bill 89, the sales tax would be applied only to the difference between the price of a new or used car, boat or recreational vehicle and the value of a trade-in.
Full trade-in value would be applied to boat sales. The trade-in value for cars and RVs would initially be limited to $2,000 and would increase by $500 in 2015 and each year after that.
Relief for watercraft purchases would begin on Nov. 15, 2013, and automobile and RV buyers would see relief starting a month later on Dec. 15, 2013.
“Once fully implemented, if someone trades in a car valued at $5,000 toward the purchase of a $15,000 truck, the sales tax will only be applied to the $10,000 difference — saving the consumer $300 in taxes,” Booher said. “That is real savings that can greatly impact the family budget.”