Tesla Versus the Taxman

Tesla Versus the Taxman

As much as it tries to be the company of the future, Tesla shares a present-day problem with the rest of us—it has to deal with the Internal Revenue Service.

Tax rules were a boon when it was almost the only electric-vehicle game in town. Its well-to-do customers got a $7,500 federal rebate and many states added to that. Now it has sold so many cars that customers no longer qualify for the federal subsidy. That matters more now that it is competing in the increasingly crowded mass-market category.

Buyers will face an even bigger hit if they choose to pay with bitcoin since the IRS will treat this as a sale of the recently appreciated asset. Say a buyer from California pays for its entry-level Model 3 sedan with $33,690 in bitcoin purchased three months ago. At the marginal tax rate of the average Model 3 buyer according to automotive research firm Hedges & Co., she would owe $4,056 at the federal level and $1,572 to California for short-term capital gains. Starting this year,