It's hard to tell from your description exactly what they deducting and whether they're double dipping. Although, it sounds like they're trying to squeeze money out of your winnings, so they can pay out as little as possible. If I was you, I would have an attorney deal with the dealership on your behalf. This way, the attorney can review the terms associated with winning the prize and make sure you get what you deserve. From my experience, car dealers are not to be trusted with being honest about financial dealings.
I'd be happy to help. It would probably only take a couple phone calls with dealer to make sure you're not getting ripped off.
Ali Eatwmadpour, Esq.
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Congratulations on winning the car. Now the issue is getting things settled with the dealer. You're correct in what appears to be a double tax situation. If you can't get it resolved quickly with them, get an attorney involved - it's a simple math issue but you may need a little professional clout to resolve it.
Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.
You should not have sales tax imposed on a car that you won. A prize is simply not subject to sales tax. The car dealer will have use tax on the car which is not something that they can impose you. Selling the car back to the dealer would be exempt from sales tax as both an occasional/isolated sale since you don't regularly sell cars or the dealer can give you a resale certificate for the car. Either way, you should not have to charge sales tax to them when selling the car back to the dealer.
In fact - if the dealer charges you sales tax on the price, then you could request a refund of the sales tax as a transaction that is exempt from sales tax.
I smarter way would be for the dealer to not give you the car and buy it back. It would be much smarter just to give you the option to take a cash prize equal to the value of the car. Then the dealer would not have to incur a use tax on giving you the car as a prize onto to buy it back immediately.
There very well might be a required federal income tax withholding on the prize, which might be the 20%.
If you have any questions on this, then please let me know. Florida sales tax is my primary practice area.
I hope this helps.
James Sutton, CPA, Esq.