WASHINGTON -- The IRS today said dealers can use “safe harbor” methods of accounting that relieve them of having to capitalize handling and storage costs at their dealerships.
The IRS's technical guidance “favorably (resolves) several contentious and potentially very costly income tax issues” that have arisen during federal audits of dealerships, the National Automobile Dealers Association said.
The NADA hailed today's Revenue Procedure 2010-44 (go to www.compartners.com) as “a major victory for car and truck dealers.”
The IRS said most dealers can use one or both safe harbor accounting methods under its guidance to treat their stores as retail sales facilities and “resellers without production” for tax purposes.
“A motor vehicle dealership using this retail sales facility safe harbor method is not required to capitalize handling and storage costs incurred at its retail sales facility,” the nine-page guidance said.
The NADA encouraged dealers to consult with their tax advisers about the IRS statement.
The dealer group also said it will host a webinar with current and former IRS advisers on Nov. 30, with details to be announced.