Is EAP and FSD taxable after initial purchase?

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#1
I'm not planning on buying EAP (and obviously not FSD) during the initial purchase. If I decide I want them, I'll enable them later. The consensus seems to be that I'll pay a $1000 penalty for each of those features if enabled after the initial purchase. Question is, will you pay tax on the $5k/$8k initial purchase, that you won't pay if buy the software upgrade later?
 

SoFlaModel3

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#2
I'm not planning on buying EAP (and obviously not FSD) during the initial purchase. If I decide I want them, I'll enable them later. The consensus seems to be that I'll pay a $1000 penalty for each of those features if enabled after the initial purchase. Question is, will you pay tax on the $5k/$8k initial purchase, that you won't pay if buy the software upgrade later?
It's not consensus, it's printed right in the design studio. It's an extra $1,000 for each item after initial purchase.

As far as taxes, you're going to pay that up front for sure and I have to assume after the fact as well.
 

Vin

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#3
I'm not planning on buying EAP (and obviously not FSD) during the initial purchase. If I decide I want them, I'll enable them later. The consensus seems to be that I'll pay a $1000 penalty for each of those features if enabled after the initial purchase. Question is, will you pay tax on the $5k/$8k initial purchase, that you won't pay if buy the software upgrade later?
Good question, but I think it would be taxed as normal sales tax (at least in PA), of like 6-7%.

Of course another advantage to waiting on EAP/FSD is you could invest the 5k-8k and most likely make the $1000 in a year or two to nullify the extra cost of unlocking it later.
However, it's tough for me to wait at least for EAP (part of the allure of owning a Tesla), but I also like manually driving so it isn't too hard to wait a little for the feature if saving the 5k initially.
 

SoFlaModel3

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#4
Good question, but I think it would be taxed as normal sales tax (at least in PA), of like 6-7%.

Of course another advantage to waiting on EAP/FSD is you could invest the 5k-8k and most likely make the $1000 in a year or two to nullify the extra cost of unlocking it later.
However, it's tough for me to wait at least for EAP (part of the allure of owning a Tesla), but I also like manually driving so it isn't too hard to wait a little for the feature if saving the 5k initially.
So I'm waiting -- unfortunately EAP just takes the car out of my budget and it's not a must have feature for me.

If I decide I want it later, I'll get it.

Many will finance the car. Paying $5,000 for EAP at a low interest rate over 5-6 years will be much easier for some than $6,000 out of pocket will be.
 

Vin

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#5
So I'm waiting -- unfortunately EAP just takes the car out of my budget and it's not a must have feature for me.

If I decide I want it later, I'll get it.

Many will finance the car. Paying $5,000 for EAP at a low interest rate over 5-6 years will be much easier for some than $6,000 out of pocket will be.
Sorry a little off topic, but since you've mentioned financing, just curious if Tesla usually has a prepay early penalty, ie you decide to pay off the financing a year or two earlier. Not that I would do that because 99% of my stocks are making more than 2.74% so I would invest rather than pay off but was just wondering if anyone knows that answer. thx
 

SoFlaModel3

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#6
Sorry a little off topic, but since you've mentioned financing, just curious if Tesla usually has a prepay early penalty, ie you decide to pay off the financing a year or two earlier. Not that I would do that because 99% of my stocks are making more than 2.74% so I would invest rather than pay off but was just wondering if anyone knows that answer. thx
Tesla is not a bank, so the financing may vary based on location. To that end, it's probably tough to answer.

I will make sure my financing has no pre-pay penality though.
 
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#7
Ok, did a little more research on my question. It looks like it varies by state whether or not non-tangible digital goods are taxed:

https://en.wikipedia.org/wiki/Taxation_of_digital_goods

I found a few different posts that state that OTA updates are not taxed in California.

So depending what state you live in, your penalty for waiting to purchase EAP/FSD may be decreased.
 

MelindaV

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#8
it would be taxed if you are in a sales tax area... now, living in WA with near 9% sales tax and my Tesla service will be in OR with 0% sales tax... if I were to purchase wheels, service or some other accessory after the fact at the service center it would not be taxed. BUT would something that would be an OTA upgrade if done at the service center? I assume not.... ?
 

Steam613

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@Vin, when discussing your loan with a financial institution ask and look for the phrase "rule of 78's" or "sum of digits". These terms indicate an early payoff penalty or that fees are front loaded and delay payment into the principle. Not that I'm a licensed financial advisor but I would encourage all to seek loans from a credit union. The NCUA has tools on their website to assist in your search.
 

oey192

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#10
I'm curious how registration fees play into this. The annual fee to renew your registration every year is quite high in Seattle (approx 1.3% of the car value I think). I'm seeing this referred to as a "tax & tag" fee on the Internets so that's what I refer to it as for the rest of this post.

I'm assuming if I buy a car for $58,000 my tax & tags fees are going to be on the full $58k even though $8k of that was for a software enhancement (EAP + FSD). If I instead pay $50k for the car and later purchase a $10k software enhancement, do I start paying higher tax & tag fees every year? Assuming this is not the case, I could save ≈$104/year in tax & tag fees by paying for EAP + FSD after delivery. Combine this with tax savings* and interest savings and my calculations show I'd have saved money by getting EAP + FSD after delivery after about 10 years of ownership. (I'm ignoring the fact that I could make money by investing the money because I'd buy EAP within a week of delivery and save up for FSD and buy it whenever it becomes useful)

Am I completely off the mark with this or do you guys think it's possible to save money by paying $10k for EAP+FSD after purchase (whether all at once or spread out) rather than $8k at time of purchase?


* I'm assuming there will be tax savings because the tax I will pay at time of purchase is 10.4% and I think the tax on digital purchases in WA state is 4.71%. I'm not a lawyer but that's what I can tell from searching through this WA state bill

Here are details on my calculations:

Tax savings:
2000-(10000*1.0471-8000*1.104) = 361

Interest savings (Used this calculator, assumed 3% interest):
4901-4211 = 690

Annual tax & tags fee difference:
8000*.013 = 104

(2000 - 361 - 690) / 104 = 9.125

So after 9.125 years of ownership I'd save money (though I suppose if tax & tag fees decrease as the car's value decreases, this value could end up being higher)
 

Gizmo

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#14
I’m buying this car assuming it will never be FSD capable. They have a long way to go on that.
Very sensible approach, what is to say you will still own the car when FSD becomes available or even IF it becomes available (legal to use)
 

SoFlaModel3

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#15
I'm curious how registration fees play into this. The annual fee to renew your registration every year is quite high in Seattle (approx 1.3% of the car value I think). I'm seeing this referred to as a "tax & tag" fee on the Internets so that's what I refer to it as for the rest of this post.

I'm assuming if I buy a car for $58,000 my tax & tags fees are going to be on the full $58k even though $8k of that was for a software enhancement (EAP + FSD). If I instead pay $50k for the car and later purchase a $10k software enhancement, do I start paying higher tax & tag fees every year? Assuming this is not the case, I could save ≈$104/year in tax & tag fees by paying for EAP + FSD after delivery. Combine this with tax savings* and interest savings and my calculations show I'd have saved money by getting EAP + FSD after delivery after about 10 years of ownership. (I'm ignoring the fact that I could make money by investing the money because I'd buy EAP within a week of delivery and save up for FSD and buy it whenever it becomes useful)

Am I completely off the mark with this or do you guys think it's possible to save money by paying $10k for EAP+FSD after purchase (whether all at once or spread out) rather than $8k at time of purchase?


* I'm assuming there will be tax savings because the tax I will pay at time of purchase is 10.4% and I think the tax on digital purchases in WA state is 4.71%. I'm not a lawyer but that's what I can tell from searching through this WA state bill

Here are details on my calculations:

Tax savings:
2000-(10000*1.0471-8000*1.104) = 361

Interest savings (Used this calculator, assumed 3% interest):
4901-4211 = 690

Annual tax & tags fee difference:
8000*.013 = 104

(2000 - 361 - 690) / 104 = 9.125

So after 9.125 years of ownership I'd save money (though I suppose if tax & tag fees decrease as the car's value decreases, this value could end up being higher)
Spending $2,000 more to save $104/year doesn’t make sense though :)
 

MelindaV

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#16
I'm curious how registration fees play into this. The annual fee to renew your registration every year is quite high in Seattle (approx 1.3% of the car value I think). I'm seeing this referred to as a "tax & tag" fee on the Internets so that's what I refer to it as for the rest of this post.

I'm assuming if I buy a car for $58,000 my tax & tags fees are going to be on the full $58k even though $8k of that was for a software enhancement (EAP + FSD). If I instead pay $50k for the car and later purchase a $10k software enhancement, do I start paying higher tax & tag fees every year? Assuming this is not the case, I could save ≈$104/year in tax & tag fees by paying for EAP + FSD after delivery. Combine this with tax savings* and interest savings and my calculations show I'd have saved money by getting EAP + FSD after delivery after about 10 years of ownership. (I'm ignoring the fact that I could make money by investing the money because I'd buy EAP within a week of delivery and save up for FSD and buy it whenever it becomes useful)

Am I completely off the mark with this or do you guys think it's possible to save money by paying $10k for EAP+FSD after purchase (whether all at once or spread out) rather than $8k at time of purchase?


* I'm assuming there will be tax savings because the tax I will pay at time of purchase is 10.4% and I think the tax on digital purchases in WA state is 4.71%. I'm not a lawyer but that's what I can tell from searching through this WA state bill

Here are details on my calculations:

Tax savings:
2000-(10000*1.0471-8000*1.104) = 361

Interest savings (Used this calculator, assumed 3% interest):
4901-4211 = 690

Annual tax & tags fee difference:
8000*.013 = 104

(2000 - 361 - 690) / 104 = 9.125

So after 9.125 years of ownership I'd save money (though I suppose if tax & tag fees decrease as the car's value decreases, this value could end up being higher)
The RTA/ST3 fee is based on the base config’s msrp. Based on the Model S as an example the 60, 60D, 75, 75D, etc. options and software are not included. WDOL used those msrp rates, not the sale price on passenger vehicles.

So for the Model 3, it would have a msrp of $35k and $44k (until the dual and P models come out). The state also does have a steep depreciation per year chart that it uses equally for all cars, so with the Model 3 expected to hold value for the first couple of years due to demand, you should get an advantage from this over the actual car’s value in the second, third years until the Model 3ks depreciation catches up with other cars rate of depreciation.
 

oey192

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#17
OK. So in that case I won’t save any money in yearly registration fees by getting EAP/FSD after purchase.

Do things like PUP and paint/wheel options increase the MSRP as far as RTA/ST3 are concerned?
 

MelindaV

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#18
OK. So in that case I won’t save any money in yearly registration fees by getting EAP/FSD after purchase.

Do things like PUP and paint/wheel options increase the MSRP as far as RTA/ST3 are concerned?
no. it is the flat MSRP, like I said. $35k or $44k.
 

oey192

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#19
Spending $2,000 more to save $104/year doesn’t make sense though :)
If you look at my calculations (assuming they make sense) it looks like it would be more like spending $949 to save $104/year but based on Melinda’s response it sounds like it would just be spending $949 for no savings per year