Incentives_Rebates Before or After Taxes

[Oyiwaa]

Hello,

I went to a dealer yesterday trying to negotiate a price for a 2014 Nissan Pathfinder.  There is a $2K manufacturer incentives / rebates.  I live in NJ and there is a 7% sales tax.

It is my understanding that the rebates are usually applied after applying the sales tax .  (i.e, Cost of car  + Tax) - Rebates_Incentives = Amount Financed. 

But the dealer is telling me that I am wrong and that they have to substract the rebates first from the sales price, and then tax the remaining amount. 

Which is the correct approach ?

Cheers, Oy

[pipeguy]

Generally you pay sales tax on the selling price of the vehicle which would mean the net price after rebate and discount. In fact this is better for you because the taxing amount will be less, ie less sales tax. If you were to pay sales tax on the "sticker" a dealer could add on all kinds of junk (using nice term) like a paint protection package (aka wax job) for $499 and you'd pay sales tax on these charges too.