States Banning Tesla Sales Are Risking Millions In Lost Taxes

Tesla’s unique business model allows them to sell vehicles directly to consumers through both retail locations and Tesla’s online design studio. Direct-to-consumer sales of its vehicles have led to some turbulence with existing car dealerships in many states, including Utah, Louisiana, Connecticut, Texas and Michigan. New Jersey allowed Tesla to open direct sales in the state in 2015, but with conditions. New Jersey’s legislation limited the number of direct-to-consumer dealerships per manufacturer to four stores and required at least one service center in the state. Tesla CEO Elon Musk once compared local car dealers to a mafia protection racket, stating in a Tesla blog post, “The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures ‘consumer protection’…Unless they are referring to the mafia version of ‘protection’, this is obviously untrue.”

TheSteve - 6/27/2017 3:03:32 PM

0 Boost

It's purely protectionism, like banning Amazon.com for not being a brick-and-mortar store.

dumpsty - 6/29/2017 12:06:45 PM

+1 Boost

Only those that stand to loose the most (competition), have been shouting the loudest & pushing the hardest to keep more Tesla stores from being established.

TomM - 6/27/2017 3:55:29 PM

+8 Boost

While there will be lots of arguments about whether this is protectionism - in the end - the Tesla sales/service model will FAIL miserably. It has already raised Insurance premiums due to the cost of replacement parts. Auto Body shops regularly receive big discounts on their parts from competitive dealers - something that Tesla is trying to maintain a non-competitive monopoly on. AND- having ONLY manufacturer owned sales outlets is Non-competitive as well - when with any other car - I can take my pick of several outlets to buy from - who CANNOT coordinate their pricing and trade-in offers - and compete for my business.

The Tesla model will only work as long as they have little competition. Add a few other brands - and the advantages of numerous dealers will overcome the monopolistic practices they espouse. Certainly - adding higher insurance rates and higher parts costs for repairs will take its toll.

SanJoseDriver - 6/28/2017 12:54:01 PM

-4 Boost

So far I have paid less on service with Telsa over a 4 year period than I did with a new Lexus, and it is a better experience where they pick up the car and work and give me a $100k loaner (mine was a super-base model).

Part prices are still an issue, but should go down as they expand their network of authorized repair shops.

supermoto - 6/27/2017 6:08:27 PM

-2 Boost

On the flipside, politicians who continue to favor banning Tesla in their state are likely raking in big $$$ of campaign contributions from dealers and their lobbyists.

MDarringer - 6/27/2017 8:00:12 PM

+3 Boost

This is pennies in tax money.

Vette71 - 6/27/2017 8:05:18 PM

+7 Boost

Many states collect sales tax with registration. They don't need the dealer to be in the state.

atc98092 - 6/28/2017 8:04:50 AM

0 Boost

Depends. Washington does collect a tax (although it's not called a sales tax) at purchase, but if it's purchased outside the state and doesn't come into the state for 90 days there is no tax. Worth coming up with somewhere to keep it for 90 days, since our sales tax is 10% in some counties.

Vette71 - 6/28/2017 8:33:47 AM

+7 Boost

So do I park it somewhere in another state for 90 days and then bring it in? East coast states collect the tax when you register the vehicle. To not pay it you have to prove you were the resident of another state where you paid a tax there. If you paid a smaller tax then you owe the difference.

What percentage of people are willing to jump through hoops and inconvenience themselves to do what you propose? very few.

atc98092 - 6/28/2017 5:06:50 PM

0 Boost

I'm not saying it's easy. I believe the car has to be registered somewhere else for the 90 days. And I'm sure you're correct that few would go through the hassle.

I looked into it when I was on a three month detail in another state. You'd pay tax in the state it was first registered in, but for me that would have been at less than half the rate of my home state. Since I was living temporarily in another state, I wouldn't have been dodging any law, just using the law to my advantage. I ended up just doing without a car for three months, but it was tough. :)

GeorgeD - 6/27/2017 8:15:17 PM

+4 Boost

Another thing to consider. If a resident in Texas can't buy a Tesla and ends up buying a different car from the state, then there is no tax loss from the buyer.

MDarringer - 6/27/2017 8:21:55 PM

+2 Boost

BUT if Tesla's are indeed banned, are they legal? And if they are, Texas could easily do a VAT.

SanJoseDriver - 6/28/2017 12:49:50 PM

-3 Boost

If someone wants a Tesla, they are going to get a Tesla. The tax dollars are going to California on all Texas purchases. A Texan can still very easily buy a Tesla, but they have to buy it online (from California) and then it gets delivered to their house.

Vette71 - 6/28/2017 5:15:55 PM

+3 Boost

San Jose. States with income tax have this line on the form that says how much$ did you buy and bring into the this state and not pay sales tax on? Write it here and multiply by (insert the state tax rate) and write Tax owed here. So California would let you buy stuff from NH, DE et.al. and have it shipped to San Jose?

SanJoseDriver - 6/28/2017 8:59:54 PM

-4 Boost

I think you're right. It looks like you do not pay CA sales tax if you buy a Tesla online in Texas, but you have to pay a 6.25% Texas tax when you register the car. Now I'm confused about the sales tax argument. Perhaps the other four states have different laws where they are not collecting taxes on the out-of-state sale.

CANADIANCOMMENTS - 6/27/2017 9:54:44 PM

-2 Boost

I am sure if you looked in the recent history there were cities and towns that banned cars when they first came out. Resistance is a bit futile in this case. Let them sell their cars in all 50 states and move on.

SanJoseDriver - 6/28/2017 12:50:56 PM

-2 Boost

Right.. and consumers will go back to horses and buggies in 2019.

SanJoseDriver - 6/28/2017 12:51:37 PM

-4 Boost

You mean putting consumers first by eliminating the ridiculous sales process at current dealerships.

MrEE - 6/29/2017 12:13:43 AM

+2 Boost

Lots of people buy vehicles out of state, new and used. States still collect their sales tax, what is lost is the business taxes and employment from retail outlets.

dumpsty - 6/29/2017 12:01:37 PM

+1 Boost

These state direct-sales bans are kinda insane. That's like saying you can't purchase an iPhone directly from Apple. Or order generic supplies directly from Walmart.com - so the customer is being forced to purchase a vehicle from a dealership?

Lets not go into furniture & appliance stores & their twisted sales chain of pile-on gouging....