sales tax when trading in
 

I hope you guys can clarify something for me. I'll describe my question in terms of a scenario for clarity.

In Ontario, our sales tax is PST 8% and federal GST is 7%.

Dealer ABC has a used Protege 5 I want for $20,000. We negotiate a trade in value for my car of $15,000. Which scenario is correct?

A. I pay PST and GST on $20,000 (item purchase price)
B. I pay PST and GST on $5,000 (item price less trade in)
C. I pay PST on $20,000 and GST on $5,000
D. I pay GST on $20,000 and PST on $5,000
E. Other

Would the scenario still be valid if the car is new instead of used?

Another part that is confusing me is I see private sales for used cars that advertise no GST, save by not going to a dealer. Why would that have a different tax scenario then through a dealership?

B

Individuals don't need to charge GST on sales .. for that you need to be a business, and have a GST number as far as I know. That's why private sales only require you to pay PST.

Hey:

I am from Ontario, but studying in British Columbia. I suggest making a trip to Alberta -- drive your current car -- and trade it in there. They don't have a provincial tax (or if they do now, it is VERY low).

Thanks for the clarification rowan. I asked around the office and got mixed answers on the subject. A search on Google reveals that in the US, scenario A is correct for California. However B is correct for New York; so it differs state to state. Then I started wondering if it might differ in Canada on the federal and provincial tax levels thus causing the seperation shown in scenario C or D.

Anyway, from your response I think this makes me more cozzy to trade in my car versus private sale because of the tax savings.

leafsboy: Though I plan to visit Alberta one day, the savings of no PST might not be worth the time. Count yourselves lucky that you don't have to pay so much taxes! It sure hurts on large ticket items.

I am in Toronto, When I bought my P5, I traded my car at 9500 + tax.

I only payed tax on the about of the P5 - trade in.

In your case, scenario B.

B

You will pay the provincial taxes when you register the car in your home province.

Think about it, if it were that easy EVERYONE in BC and Saskatchewan would be buying their cars in Alberta! ;)