Car dealership asking to pay more for tax after contract signing

I paid for the new car in full and drove it home already! Now, after 3 days, I am receiving a call and a letter from the dealer asking me to pay extra $500 dollars because they made a mistake on the tax. They are asking me to pay the tax difference. Do I have to pay it? We negotiated verbally about the “out of the door” price.

If you have a copy of the signed contract with the price you paid in full, then I don’t think the dealer could collect any more money from you, but you should probably check with an attorney. If I were the dealer and made this mistake, I would just eat the $500. I would be embarrassed to go back on a deal.

By paying in full do you mean you paid cash, used your own bank for financing, or did you allow them to handle the financing?

If it’s a done deal on the first 2 then tell them tough luck. If it’s the latter and you do not hold a copy of the contract then there could be a issue or two.

There are two aspects you need to consider. First, is the dealership asking you to pay them for the $500 sales or excise (it’s one or the other) tax, or are they advising you that $500 is still due? Read the letter carefully, since non-payment of sales tax (yes, even after the purchase and registration is complete) is your problem, not the dealership’s. Your RMV or DMV or what have you WILL suspend your car’s registration and nullify your insurance and may even suspend your license to drive. If you get pulled over on the road and these things have happened, you will pay a lot more than $500. You may even need a lawyer.
You can sue the dealership if they are at fault. But you have a verbal agreement, not a written contract. You’d need to prove your position in a civil court. You have the burden of proof.
But first I’d ask the dealership to first explain what tax was shortpaid, and exactly how it was shortpaid by the very suspect amount of an even $500 (think about it - the odds that you shortpaid any percentage tax assestment by EXACTLY $500 is so improbable that it almost proves itself to be untrue. Round numbers just don’t happen in math).
I’d agree to pay for the $500 amount but I would insist on all of the paperwork. No more verbal agreements. Then I would sue for the $500 in small claims.

No, if you think it’s a bogus charge, do not pay. It’s a lot harder to get it back than it is to keep it. Ask them to provide you with paperwork “so that my attorney can look it over.” Ask them to explain in detail how the calculation was messed up, and why you should be responsible for it.

If they don’t drop the matter right away, and they don’t have a VERY good reason to suddenly charge you more money, then I would advise them that you will be submitting a complaint to the attorney general’s office.

As for being responsible for taxes, yes, that’s true that the buyer is generally responsible for taxes when buying from a private party. However as a licensed dealer, the dealership is responsible for collecting those taxes from the customer. To lie about the total price by withholding tax collection until 3 days later (let me guess- buyer’s remorse in your state is 3 days) will be very interesting to your state’s attorney general.

If you have a bill of sale in hand, thats it. If they screwed up in the calculations its their fault. They are trying to get you to pay for it to make it easier on them. They can always adjust the price of the vehicle in their books (meaning, take a loss on the sale price of the vehicle) to make the numbers jive. In fact, when you are dealing with an out the door price kind of deal, the dealer plays with the price of the car and adds all the taxes to come up with that out the door price you all agreed on. Dealers adjust prices on their vehicles all the time when you are haggling with them. All that will happen is their profit on the vehicle will be less but it will be a lesson learned to them to RECHECK THEIR CALCULATIONS on all their contracts. If you had an out the door price agreed upon by both parties and you paid the out the door agreed upon price then you are good. They just miscalculated. They CAN fix that.


Yes, I paid all in cash/checks, and I do have the written contract with me. The dealership’s explanation is that they charged me the wrong county’s tax; a $500 dollars difference (with some cents). But we agreed that the final price including all fees and taxes should not exceed the amount I paid for. But now, with the extra $500 plus dollar, I am ending up pay more. It was the dealership’s fault for putting the wrong sales tax rate. And now they say that I HAVE TO PAY BECAUSE IT’S TAX.

They can fix that by reducing the price of the vehicle and adding the taxes to achieve the agreed upon “Out the door” price. You paid the agreed upon out the door price they just miscalculated. They are just trying to make you think you are guilty of a tax fraud by telling you that. Tell them that you paid what was agreed upon and they can adjust the sales price of the vehicle to make the numbers fit. They will lose a few hundred but Uncle Sam will get his fair LEGAL share. They are trying scare you into giving them more money.
I guarantee you that when you decided to purchase that vehicle and told them that you will only pay this much out the door, they lowered the listed price of that vehicle to bring the out the door price to what you both agreed upon. They just need to lower it a little more to compensate for THEIR error. They want you to pay for their error.


I think you need to speak with an attorney on this one. Automobile laws vary from state to state and are very specific because atomotive transactions are unique in so many respects. While the dealership is responsible for collecting the sales taxes, the obligation to pay them may not be theirs, and it may be that based on the contract you’re obligated to the state regardless of their error. It may also be that the contract under your state’s laws is such that the delivered price leaves the dealer responsible for the taxes and it’s their job to figure it ahead of time.

Having said that, and regardless of legal responsibility, if it were my dealership there is no way I’d go to the customer for more money. I’d “eat” the error.

Their mistake their problem.

If the dealer is processing the paperwork for titling and registration they might withhold turning over your license plate to you until you pay the tax. That could make the situation kind of dicey if you are driving with a temporary plate that will expire in a couple of weeks.

Do you actually have the title in hand? If the dealer promised to mail it to you later, then don’t expect it anytime soon, if you need it to complete your registration process. Likely they will not release it until after this issue is resolved.

Cost for a lawyer to help you go to civil court to get the title released is probably more than the $500.

I would be inclined to pay the fee, and sue in small claims court. Let a judge tell you that the dealer could renege on the deal by changing the bottom line price. Costs and time incurred is less, and if you lose, you still have use of the car.

I tend to believe that the dealer has you over the barrel if he still holds the title in his office.

An alternative is to see if the State Attorney General Consumer Protection Div can help out. Many times, this is really a drawn out arbitration process that may not suit the immediacy of needing to get your new car properly registered (procedures are state-dependent, of course).

Any mistake they made is on them so it can come out of their petty cash drawer. This is all assuming there was even a mistake was really made and this is just not an attempt to see if you might cough up 500 without even questioning why.

Look at this way. Any tax was fully paid. Any deficiency is in the sales price of the car so they need to take that up with their sales manager and F&I people.
The point could be made they’re using the tax shortage angle of this to make it appear this is not of their doing and it’s the government. This would make it more understandable or palatable to you than to say we shorted ourselves 500 on the actual sales price.

If you had inadvertently overpaid them by 500 dollars do you think they would have called?

Look at your sales receipt. What vale as a percentage and dollar amount did they charge you? Contact your DMV and find out how the county tax is assessed. Is it the county the car was sold in or is it the county you live in? Make sure you understand the error first. If they really did charge you the wrong county tax, you need to find out if they are liable for it or if you are. You may need to contact an attorney to determine this. If you know one, they might do it for free.

Sounds a lot like a shakedown. Out the door price in most cases includes all fees and taxes. Any error is theirs. If they hold the title then go straight to small claims with your receipt. The Court will send them a summons usually within 3 days. You can request a default judgement and immediate release of title, based on your receipt, until the court makes a final decision. This could cost $75 or so. At the same time contact the District Attorney and get a false claims complaint started, many DA offices are sick of this bait and switch. They may give them a quick call or a form letter with the type of laws that the dealer is in violation of.

You’re right, its so simple. The OP and the dealer both agreed on a set price out the door. The dealer knew from the get go that he would have to adjust the price of the vehicle so that when the tax tag and title fees are added the bottom line would read that agreed upon out the door price. The OP lived up to his end by giving the dealer that money, the dealer accepted it, did the paperwork, and gave him the keys and waved as the OP left in his new paid for vehicle. The dealer figures out later that OOPS, I calculated the wrong tax percentage. Well guess what, you now have to go back to the drawing board and re figure the numbers so that bottom line still reads the agreed upon price. The OP is fine, He PAID the amount that him and the dealer agreed to. If the dealer still gives him flack about it, tell them to pound sand. I hope the OP has a title. I would not have walked out of that dealer without a signed title on a vehicle that I paid in full.


Yeah, it’s actually very common for crooked dealerships to say this. Now that you’ve provided this extra detail, here’s what I would do.

Send them a certified letter explaining that you will not pay the difference because you paid the agreed-upon price, and any taxes were theirs to calculate and collect. CC it to the attorney general. If you want to really have fun with them, also CC it to every local television station and the local newspaper.

Above all, do not pay.

Can you tell the dealer that you want the whole deal canceled and your money back. I think that would make them at least meet you half way. Your logic is that you could afford the car for X price, but X+$500 would put the car out of your reach, so no thanks…

“We negotiated verbally about the ‘out of the door’ price”.
Including everything except the cost of the car, terms and downpayment. Come on. You all but shook hands with a car dealer to agree to any other costs he could come up with.

I’m assuming that you are talking about sales tax and not some arcane excise or otherwise unknown tax. Did you get the car’s title and a receipt saying that the sales tax was paid? If not, the dealer still holds the trump card. If you got all the above paperwork, then he’s the one who got screwed. The way states collect taxes on cars varies from state to state. In order for the dealer to calculate the correct “out the door” price for the car he needs to lower the agreed price so that the total is equal to exactly what you said you’d pay for it. I’m going to say that your sales tax is 6.5% for purposes of my example. To calculate the price, he needs to divide 1 by 1.065 to get the factor to be used. Then he takes that factor of 0.9389671 times the exact price you said you’d pay out the door. Say you said you’d pay $10,000. The the price of the car has to be reduced to $9389.97. When the 6.5% tax is added to that figure, the price “out the door” is $10,000. Of course your sales tax may not be 6.5%. In that case you just divide 1 by 1.0XX, XX being the sales tax percentage. If your dealer doesn’t know how to do this math, you can enlighten him.

Just wonderin’, but you state you have a written contract. What does the contract state against what you agreed to verbally?

(Keep in mind that verbal contracts are often only worth the value of the paper they’re written on.)