VW Court Settlement - Sales and Use Tax Treatment

Volkswagen (VW) has reached settlements with federal and California regulators in which VW has agreed to provide cash payments to owners of certain VW and Audi diesel vehicles. The following tax treatment information will be helpful to owners affected by this settlement.

Selling Car Back to VW – If an owner chooses the buyback option, the owner is selling his or her vehicle to the manufacturer.

  • The owner's sale of the vehicle to VW is not taxable.
  • No refund of the tax paid on the original sale/purchase of the vehicle may be claimed by VW, the dealer, or the owner.
  • If an owner uses the money received from VW to purchase another vehicle from a dealer, no deduction from the dealer's sales price is allowed for a trade-in allowance, because the vehicle is not traded in to the dealer. In other words, the full purchase price of the new vehicle is subject to tax.

Keeping the Car and Receiving Cash and Emissions Modification – There are no sales tax implications to the owner, because no sale is taking place.

Questions about the settlement compensation, should be directed to the attorneys who negotiated the agreement or to the Federal Trade Commission:

November 18, 2016