Have a Tax Question? Ask a Tax Expert
Welcome and thanks for your question!
Unfortunately, if the $750 is considered a rebate, then the car dealer is correct. Rebates are not considered to be a reduction in the invoice price for sales tax purposes.
If you look at section 8 on Connecticut Form H-13, you will see that sales tax is calculated on net purchase price, which is defined as invoice price less trade-in allowance. It may seem illogical, but the rebate isn't treated as a reduction in the purchase price. It is treated like a cash payment -- a separate transaction -- to the buyer even though that may not directly relate to the actual flow of the transaction.
However, if the $750 is not a rebate and is simply a reduction in the purchase price as part of your negotiations with the dealer, then you should not pay tax on it.
I know it may seem illogical since they are giving you the rebate off the top, but think about mail-in rebates. If you went to an appliance store and purchased a stove for $1,000 and received a 10% mail-in rebate, you would pay tax in the store on $1,000 and receive a check in the mail for $100. The state is still viewing your rebate similarly to the two separate transactions in this example.
I am sorry that I could not deliver better news. If you have any follow-up questions, please do not hesitate to ask and I will gladly assist you. If not, then please accept this answer with a positive rating. I hope you have a wonderful day and enjoy your new vehicle!