Wednesday, May 28, 2014

Breaking: BMW i3 REx Not Tax Exempt in NJ After All!

My i3 REx. Will it now cost me $3,900 more than my contract calls for?

It what can only be categorized as a major misstep, BMW of North America has announced that the i3 with range extender is not tax exempt in the state of New Jersey as what was previously reported. Back on January 27th, BMW of North America manager of Electric Vehicle sales and strategy Jacob Harb told his client advisers on a conference call that the i3 REx would be treated as a zero emission vehicle in New Jersey, and qualify for the state's Zero Emission tax exemption. That was big news at the time for New Jersey residents including myself, and was one of the final deciding factors for me to actually choose the REx version over the BEV i3.

"The sales tax exemption in NJ only applies to zero-emission vehicles--and as such, does not apply to the i3 with range-extender as it does not apply currently to any vehicle with an internal combustion engine."... "Any assumption that the i3 with range-extender would qualify was premature" 
Dave Buchko, BMW's product and technology communications


The misinformation was further reinforced at the BMW i3 dealer training event held at BMW headquarters in Woodcliff Lake in April when the client advisers were again told that the i3 REx would be sales tax exempt in New Jersey. Now that BMW has begun delivering i3s with the range extender in the State since last week, the dealers haven't been collecting sales tax on the cars since they were instructed that they didn't have to. I'm one of the people that took delivery already and didn't pay sales tax. It's unclear if BMW is going to now ask me to go back to the dealer and pay the additional $3,900.00 I'd owe for sales tax. I'm not even sure they can do that. I have a signed contract that is paid in full and I wonder where the law stands on this. I don't even know if I'd want to keep it if I have to pay the sales tax now. Don't get me wrong; I love the car, and I think the REx is a great option, but this will double the cost of the range extender. Instead of it costing me $3,850, it will cost me about $7,750! It really is a great option and so far I have loved how well it works, but it's just not worth $7,750 in my opinion. I could buy a good used second car for less than that and use it for the long trips I need to take.

Then there are the people that have an i3 REx on order here in NJ and haven't taken delivery yet, what will they do? At the last minute they find out the car is now costing them nearly $4,000 more! My good friend Chris Neff's car just arrived at the dealer yesterday and he's planning on picking it up as soon as possible. I wonder how he's going to react to it now costing him nearly $4,000 more! My client adviser Manny Antunes of JMK BMW has nine i3s with the REx options on order for customers. How many will cancel their order when they find this out? I bet at least half of them. What happens to the people like me that have signed contracts, and paid for the car already? I wonder where the law stands on this? Can we now be forced to pay more than our contracts stipulate? Personally I'm not sure what I'll do if I'm told I have to pay the $3,900 now. Will BMW NA eat the extra cost for the few people that already took delivery of their REx in NJ? Will they push it on the dealers? Perhaps this was a sign that I was really meant to get the BEV i3 after all. I've already tinted the windows and now my car is being wrapped a new color at Designer Wraps down in Millville, NJ. Will JMK BMW end up with a custom-colored, Electronaut Edition i3 REx to sell as I wait another few months for a new i3 BEV to be made and delivered? This is going to be very interesting, stay tuned!

22 comments:

  1. My guess is that legally you would still owe the tax, unfortunately. BMW would probably have a worse PR nightmare if they grandfathered in people who already took delivery of the car, but not people post-May 28. I would guess that they'd offer to take the car back (and obviously not charge you for the time you've spent driving the car thus far), or else you can keep it and pay the tax. However, if they do just look the other way and pay the sales tax for you, then good for you and that's awesome!

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  2. Wow... This was one question I had for Manny two weeks ago as I had a bad feeling about NJ tax status for the Rex. I guess the ones not delivered or still on order can be allocated to other dealers outside of NJ.
    As for you, i'm afraid the state will get the tax at registration time - question is, who will pay for it... The other implication is that the CARB status and it's restrictions mean nothing outside CA... What a mess...

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  3. Tom: I'm sure you have connections at BMW, have you not approached them about this yet? Certainly someone there will try to work something out for you after all you have done for them. Alex is right, this is a mess :(

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  4. I also had bad experience with how BMW handles tax before. Eventually I wound up paying sales tax twice: once in NJ and once in CT.

    When I leased a BMW X5 through BMW Financial in NJ, I was asked to prepay all taxes for the whole lease term. Shortly after I leased the car, I had to move to Connecticut. BMW Financial insisted on my paying CT sales tax again for each payment. Unbelievable. So my guess is that: don't count on BMW to give you any break on tax.

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    1. Why would they? Isn't the onus on the individual to figure out the tax due? Advice can be taken from a variety of sources but ultimately the responsibility is with the vehicle purchaser?

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    2. When you buy or lease a car, the vehicle purchaser has no choice but to pay whatever the sale tax the dealership imposes on. Do you have the option to figure out the amount of sales tax you'd like to pay? Which state do you live in?

      After I had paid BMW made me to pay NJ sales tax upfront, I was told to pay CT sales tax again after I moved to CT. While I was negotiating/figuring out what to do, I only made my regular monthly payment without the additional sales tax.

      BMW Financial chose heavy-handed solution -- they tried to destroy my credit record by reporting the additional tax due as late payment. It wasn't pleasant experience.

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    3. No, I'm not talking about what tax you'd "like to pay" as this is defined and you obviously don't get to choose. The amount of tax due is explained in Dave Buchko's statement in Tom's article. That might not have been clear when some people were ordering their car but BMW only gave advice about what it might be so to now claim that BMW are liable to pay this tax because their advice was incorrect seems wrong to me.

      Having said that, I agree that it's a very unfortunate situation and I sympathise with the NJ people caught up in it.

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  6. Seems that BMW should/should have to bite the bullet on this. You bought in good faith and you would think they should/should stand by their assertions made.

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  7. Here are my 2-cents:

    1) If BMW chooses to be silent on this issue for you, you'll face a conundrum when you file your tax return -- it's almost like you did internet shopping without paying sales tax. In principal, you'd be liable for either sales tax or "use tax" for purchases.

    2) I bet BMW will stick to their statement "Any assumption that the i3 with range-extender would qualify was premature" -- they won't give anyone any break publicly. Perhaps you can negotiate a private settlement with BMW and the dealership where you brought the car because it's was done already and you did a lot of good work for the car.


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  8. Just to be clear, I have no problem with paying sales tax on the car. If the Zero Emission Tax exemption in New Jersey is strictly for ZEV's then the REx shouldn't qualify, I guess. It has been assumed that part of the reason BMW restricted the functionality of the range extender was to qualify for things like this, HOV access in CA and other various rebates. If that isn't the case, and the only thing that these restrictions accomplish is to garner more CARB ZEV credits for BMW, with no benefit to the consumer, then that is very unfortunate.

    As for me, like I said, I have no problem paying my fair share of sales tax. The problem is we were told for the past four months that it was indeed tax exempt, and many of us altered our purchase with that in mind. Some would have not bought the REx version. Others may have passed on an option or two to keep the total cost from exceeding what they are able or willing to spend. Now, after waiting many months our cars are arriving at he dealers and people are being told "By the way, the car costs $3,700 more". That's really unfortunate will likely force people to walk away from the car and BMW unless they make some kind of goodwill effort.

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    1. You described my situation perfectly as I indeed chose packages in a way that makes financial sense assuming no state tax on the Rex and after few month of waiting I may have to reluctantly cancel my order. .. But at least I have that choice vs people that already got their cars in NJ. I'll keep driving my old 15 mpg car for now...

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  9. I don't think BMW can be silent on this as the tax needs be paid for the car to be registered. Moreover, of some compensation for cars on order is not available, many near Rex owners might cancel their orders in NJ so nobody wins. Not sure about any future Rex sales - would hate to try to sell it and have to tell a customer what the Rex costs vs a BEV in NJ. At $7000 for around 70 more miles it is a weak offer... So it will be BEV or nothing in NJ, I'm afraid...

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  10. Tom, yes it's unfortunate that this situation has arised in NJ. I really hope BMW can find an acceptable compromise for people like you which already got the i3 REX in NJ. It would be a pity if you returned your i3 REX and got an i3 BEV in several months. As you witnessed, the REX makes the i3 a pratically unlimited range car and many i3 REX owners would not need a second gas car for longer trips. And considering the fact that the battery of the i3 is much bigger than the one of the Volt, the percentage of battery drive would will approach 90-95% for most users. Some german i3 REX users which have already driven >4000 miles in their i3 REXes reported 90-95% battery-only drive.
    90% EV usage means 400MPG in the sense that if you charge your i3 REX with renewable electricty, the pollution caused by your i3 REX is 10 times less than the one of a 40MPG gas car. The i3 REX really helps to clean up the air and minimize fossil fuel usage without big compromises on comfort driving range.

    As you have seen on your blog articles, many users are very interested about the REX in real world conditions and it would be a pity if you gave your i3 REX back and could not blog anymore about your experience on using the REX during commuting or road trips.
    You are a good i3 ambassador and it would be sad that because of this sales tax incident your excellent articles about the i3 REX would not appear anymore.
    People in the US drive a longer distances than in Europe so the REX option for the i3 is IMHO a very important feature. Many would not buy the i3 without a REX because they want to be able to use their car in any situation without range anxiety. Often people live in places where charging stations are uncommon so the REX is the only way to drive 90-95% electric without needing to wait for the charging infrastructure being developed.
    Thanks again for your excellent articles about the i3.
    Mark

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  11. Hi Tom, I just don't believe the mess they've created before, and now after the US introduction... The european intro was challenging at times, but this trumps it by a margin...
    It is such a shame that this will not help i3's rep, for it's such a lovely little car. We've enjoyed all the 12216km/7541mi we've driven so far.
    Regards from NL, Steven

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  12. I know this is totally off-topic, but ... I just learned that the i3 has no AM radio! Yikes! Any ideas on how to ameliorate this? It's almost a deal-killer for the i3 BEV I've got reserved. For the first time since I became an ActiveE driver, I'm now seriously considering not getting the i3. I listen to AM radio all day in my car, and streaming it from my phone or using alternative satellite radio channels are not good substitutes. Argh ... BMW - I wish you focus grouped this thing in the US before deciding to do away with AM radio, sunroof, slick-rather-than-funky design, the 94 mile range of the Active E, etc etc.

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  13. BMW i3 is a concept car comes under Project i by the company. It is an Eco friendly car with driving modes, attractive design and other features.

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  14. In GA a true BEV gets a $5,000 state tax credit. The REx does not qualify for it. It was one part of my decision (there were others) to get the Tesla Model S instead of the i3 REx...

    I do believe that the Limits BMW placed on the i3 REx in the U.S. are for no other reason that to give BMW more ZEV credits to sell more ICE's in California and provides no benefit to the customers.

    I hope I am wrong, but I just do not see any evidence to the contrary...

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  15. I think along the same lines, this was done for them and the tax mishap was secondary... For the price of the Rex plus the NJ tax, , so about $7700, that little engine better be gold plated and diamond coated :-) No news on how that will be handled by corporate (and I am not holding my breath, they have more important things to plan than the few NJ Rex owners that ordered the car already...)

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  16. No news on this, Tom? A biggie for me, the difference between really joining the community of i3 or just spending time online... Not sure it is a priority or even in the works at BMW...

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  17. I would argue that the REx is not an internal combustion engine, but is just a generator on board, that charges the battery. It is an external combustion engine, placed under the hood for convenience.

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