Current through September 18, 2024
A. General Rule
The purchase of a motor vehicle, trailer or other vehicle
by a licensed motor vehicle dealer who purchases the vehicle for resale in the
regular course of business is exempt from the sales and use tax. During the
period in which the vehicle is held for resale, the dealer may use it for
demonstration or display without incurring a liability for sales and use tax.
If a vehicle is used by a licensed motor vehicle dealer for purposes other than
demonstration or display, a tax is due on the total cost of the vehicle.
B. Use of Dealer Plates
1. A motor vehicle, trailer, or other vehicle
bearing a dealer license will be subject to tax if that vehicle is used for
purposes other than demonstration and display. The following uses of vehicles
bearing dealer plates are held to constitute demonstration and display:
a. The motor vehicle being driven is of the
type that the dealer offers for sale; and
(1)
The vehicles driven by sales personnel;
(2) The vehicles driven by bona fide
employees other than sales personnel whose duties include generating sales
and/or assisting the sales department in selling vehicles;
(3) Vehicles driven by potential buyers for
purposes of a test drive;
(4)
Vehicles transported by the dealership to and from auction, car swaps, etc;
or
(5) Vehicles driven by
technicians for road test purposes
2. The use of vehicles in §§
28.20(B)(1)(a)(1) and
(2) of this Part, are held to constitute
demonstration and display even though used on public thoroughfares and after
work since the visibility of the vehicles can stimulate customer interest and
the drivers of those vehicles are sales personnel or other bona fide employees
of the dealer whose duties includes assisting the sales department in selling
vehicles. In order for the operation of the vehicles to be deemed demonstration
and display, such operation is limited to a geographical area in which
potential buyers would normally be located.
C. Dealer Registered Vehicles
Franchised new car dealers holding a valid sales tax permit
may register new vehicles in the name of the dealer upon payment of a tax based
in one-third (1/3) of the cost of the vehicle to the dealer provided that said
vehicle is acquired for resale by the dealer and the use of the vehicle is
limited to demonstration and display as defined by §
28.20(B) of this Part.
D. Loaners
1. If a motor vehicle dealer which is also
engaged in leasing/renting vehicles on a daily or other basis elected to
collect the sales tax upon lease/rental of the rental fleet vehicles
subsequently allows the use of loaners from the rental fleet, the dealer will
be liable for a use tax based upon the fair market rental fee normally charged
to customers for the rental of the same vehicle. In order to qualify as a
lease/rental vehicle, the vehicle must be registered and titled to the dealer
as part of its rental fleet.
2. A
motor vehicle dealer that allows its customers the use of a vehicle from its
inventory while the customer's own vehicle is being serviced or repaired shall
be liable for a use tax to be computed at a rate of .15 percent (.0015) of the
list price of the vehicle for each day that the vehicle is used as a
loaner.
3. This provision shall
only apply to loaners that comply with the provisions of R.I. Gen. Laws §
31-3-20.
The surcharge imposed under R.I. Gen. Laws Chapter 31-34.1 shall not apply to
loaners taken from the dealer's inventory.
