DaimlerChrysler Unit Tax Appeal Denied

Associated Press

Associated Press 11.22.06, 3:20 PM ET Wisconsin state appeals court ruled Wednesday that a DaimlerChrysler AG unit can't count sales tax from bad financing contracts as a tax deduction, .

The court said DaimlerChrysler (nyse: DCX - news - people ) Services North America was not entitled to the deduction because car dealers paid the sales tax to the Department of Revenue, not the company, according to court documents.

DaimlerChrysler Services North America, the financial division of Auburn Hills-Mich.-based DaimlerChrysler AG, claimed it paid the sales taxes.

Court records said dealers sold the purchasers' installment contracts to the company, but dealers in fact paid the state sales tax. The company paid the dealers the full amount of the contracts, including sales tax.

Purchasers then pay a portion of the sales tax each time they make a loan payment.

Previously, DaimlerChrysler asked the Department of Revenue for permission to deduct proportional shares of sales tax when customers defaulted on loans, but the department denied the claim. The company appealed to the Tax Appeals Commission, which agreed with the department.

A DaimlerChrysler spokesman didn't immediately return a call for comment.

DaimlerChrysler shares rose 46 cents to $60.57 in afternoon trading on the New York Stock Exchange.