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What is classified as a service vehicle?
Vehicles removed from inventory and committed to use as service vehicles, parts trucks, or service department loaner cars are classified as service vehicles. Dealers will often use vehicles for this purpose for only short periods of time.
How are service vehicles taxed?
Dealers may elect to report use tax on either the purchase price of the vehicle or on 2% per month or any fraction thereof that the vehicle is being used as a service vehicle or loaner.
Trade-in deduction
If use tax is reported based on total purchase price rather than on the 2% method, a trade-in deduction is allowed if the vehicle is returned to inventory and concurrently another vehicle replaces this vehicle for use as a loaner or service vehicle. The trade-in value is the wholesale value and generally will be the value recorded by the dealer in the inventory records, exclusive of any refurbishing costs at the time the vehicle is returned to inventory.
Maintenance of service vehicles
Parts used for the repair and maintenance of service vehicles are subject to use tax.
