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Vehicle Sales Tax Questions

11617182022

Comments

  • fushigifushigi Chicago suburbsPosts: 1,459
    It's been a while but in the early 90s I lived in NW IN but was moving to a Chicago 'burb. Some of the Indiana dealers can get you Illinois sales tax (and avoid the IN tax). I believe they're part of dealer groups with locations in both states so they can do it easily.

    Without that option, what does work is to buy the car in IN, pay the IN sales tax as may be required, and then file a claim to get that back from the state. You will then owe IL sales tax. IL will make sure they get their due and you will be liable for it, probably when you go to register the car.

    Talk to the IL DMV or look for relative info at http://cyberdriveillinois.com/. Or better, talk to an IL dealer and ask them to price-match the IN dealer for an easy, quick sale.
    2017 Infiniti QX60 (me), 2012 Hyundai Elantra (wife)
  • toycashtoycash Posts: 139
    By Indiana law, the dealer must collect 7% sales tax from you, no matter where you live, unless the dealer pays a shipping company to ship the vehicle. Otherwise, if those dealers didn't charge you tax, they broke the law!

    Almost all states will then give you credit towards whatever the sales tax is in your home state. But you won't receive a refund if your home state tax is less.
  • cats13cats13 Posts: 27
    Sorry, but can't find the specific answer on this forum, and I CANNOT call the TN DMV again. Last time I called about my license, I spent almost an hour and a half on hold before someone answered.

    Anyway, I leased my car from a NJ dealer in Nov 09, but lived in NY at the time, so I paid the NY sales tax, with the amount being wrapped up in my monthly pymts. All's well to that point. I then moved to TN last month and I got a letter from my finance company - USBank - saying they were adding another $50/month to my monthly pymts b/c of a TN sales tax "issue". I asked what "issue" and their only response was that they didn't know and I should call the TN DMV to find out. This sounds like a bunch of nonsense to me. No? I already paid sales tax, and have the paperwork to prove. It's a 39 month lease so that's another $2K USBank wants to take from me. Can someone tell me what the auto leasing sales tax rates are in TN (Davidson County) and what portion of the leasing "deal" they're applied to, or direct me to a link that has that info?

    Many thanks
  • tidestertidester Posts: 10,059
    If I understand correctly, you are presently paying New York sales tax on your lease payments. When you moved to Tennessee, you should no longer be paying New York sales taxes but should expect to pay Tennessee taxes. That's what Tennessee is charging you for. You should no longer have to pay NY taxes. If the tax rates in the two states were the same (they're not) then your payments would now be the same. You need to talk to USBank about it.

    On the other hand, if NY charges taxes on the full amount of the lease (as opposed to taxes on lease payments) then you have already met your tax obligation and TN should not be charging you a tax at all. Perhaps someone with expertise on these matters will jump in and straighten us out. Anyone?

    tidester, host
    SUVs and Smart Shopper
  • stickguystickguy Posts: 34,245
    but I did drive past a Holiday inn express yesterday!

    anyway, my wonder is if Tenn. is a full price state, where you pay the sales tax on the actual sales price of the car in the lease, instead of just the monthly payment.

    I would be shocked if Tn. actually had higher sales tax rates than NY, but they might also have a personal property tax?

    1st check the DMV web site, but if that doesn't have your answer, might be best to actually make a trip to the office?

    Also, I would harass the leasing company. They have to know what they were asked to do by TN. that seemed like a lame answer to get rid of you.

    2019 Acura TLX A-spec 4 cyl. (mine), and 2013 Acura RDX AWD (wife's)

  • cats13cats13 Posts: 27
    thanks guys. NY charges sales tax on the usage (price - residual). The full amount of NY taxes is on my lease paperwork with the dealer. I can't imagine they were able to pull NY title and registration for me (which they did) without paying the sales tax amount to the NY DMV. Again, that amount was rolled into my monthly lease payments. Now, USBank wants to add the TN sales tax to that monthly pymt (which already has the NY sales tax in it). So, bam, double sales tax.

    Again, any thoughts on where I can find the relevant TN sales tax info? I was on hold with the TN DMV for 2 hrs this morning before getting disconnected ...
  • stickguystickguy Posts: 34,245
    do they have a web site? You can start there.

    And if you need to talk to them, might be quicker to just go in person and talk to someone. Doesn't sound like they have much of a service center!

    2019 Acura TLX A-spec 4 cyl. (mine), and 2013 Acura RDX AWD (wife's)

  • delta737hdelta737h Posts: 626
    edited May 2010
    To All NY Lessees that Roll NY Sales Tax into Their Lease:

    The following is an addendum to my post #1901 which can be found at...

    http://townhall-talk.edmunds.com/direct/view/.ef9da43/1901

    If you are rolling NY sales tax into your lease, you are paying sales tax on sales tax. As far as I know, the constitutionality of this has never been challenged. In fact, I'm guessing that few New Yorkers realize that sales tax is being levied on sales tax in such instances. Here's the proof of the latter...

    Let's use the first case in my Post #1901 referenced above...

    Let:

    T = Total Payment Sales Tax Liabilty
    t = Sales Tax Rate = 8.875%
    F = Money Factor = 0.00190
    N = Term (months) = 36
    C = Sell Price = $39,359.20
    A = All Capitalized Fees Excluding Tax = $420.00
    V = Residual Value = $26,894.90
    K = Total Payments Excluding Sales Tax

    The total payments (excluding tax) = K = FN(C + A + V) + (C + A - V)]

    Plugging in the assigned values, we get total payments of K = $17,444.81

    Adding tax, T, to the total payments, K and, then, multiplying the sum by the sales tax rate,t, we have the formula...

    T = (K + T)t = Kt + Tt .... and this is where sales tax is levied on sales tax

    T = [t / (1 - t)] x K

    Substituting the assigned values, we get

    T = [0.08875 / (1 - .08875)] x 17,444.81

    = $1,699.01

    Now, let's examine the second case (time-value of money)

    Let:

    T = Total Payment Sales Tax Liabilty
    F = Money Factor = 0.00190
    N = Term (months) = 36
    C = Sell Price = $39,348.90
    A = All Capitalized Fees Excluding Tax = $420.00
    V = Residual Value = $26,894.90
    P = Monthly Payment including Sales Tax = $535.00
    N = Term (months) = 36
    t = Sales Tax Rate = 8.875%

    T = PNt
    = 535.00 x 36 x 0.08875
    = $1,709.33

    Because PN reflects the total payments, including sales tax, and PN, in turn, is multiplied by t, sales tax is necessarily levied on sales tax.

    Thoughts?

    John
  • drrodrro Posts: 7
    HI!
    I m looking for some help here or at least some pointers...
    I am currently in NYC and will be moving to PA by month end to start a new job for good. I have NEVER owned a car and thus no auto insurance before.

    Now i am TAKING over a lease from someone in NY for a TOYOTA for 19 months.
    SHE (the original lease holder) tells me that the the SALES TAX is INCLUDED in her 199$ monthly payment and TOYOTA has the docs for it which it will provide me when the lease gets transferred to my name. I called up TOYOTA and confirmed that.

    Now I plan to take an AUTO insurancewith the PA address were i will be on AUG 1. Go to NY DMV ask for a temporary interstate transit card and collect the car and drive down to PA and Register the car there.

    My question is will PA charge me a SALES tax Again when i register the car in PA?
    Will NY DMV give me the interstate transit permit WITHOUT having a NY insurance card.? Will it ask me to pay sales tax?

    i will appreciate any help on the issue..... I have been reading online about it on NY DMV and here and it looks muddled.
    Thanks
  • jwilliams2jwilliams2 Posts: 910
    Thoughts?

    My thoughts are that folks leasing cars in NY should pay their sales tax up front.
  • delta737hdelta737h Posts: 626
    edited July 2010
    "My thoughts are that folks leasing cars in NY should pay their sales tax up front."

    That's probably a very good piece of advice. The $1,699.01 includes the additional tax on tax which amounts to $150.79...

    You have the tax on the total payments of $17,444.81...

    0.08875 x 17,444.81 = 1548.22 PLUS tax on the total tax...

    0.08875 x 1,699.01 = 150.79 (tax on tax)

    = 1,699.01

    not to mention the total finance charges that would be levied on the $1,699.01 tax. A very taxing situation indeed!

    John
  • narobnarob Posts: 1
    If I have just purchased a new vehicle in NC and paid 3% "road usage tax" and I may have to move to Florida in 9 months or more, will I be charged sales tax in Florida even after six months? Thanks in advance for all your answers!
  • mbd8mbd8 Posts: 3
    If I buy a car from a Chicago dealership while living in PA then move to Chicago a month later does anyone know if I'll be liable for any IL/Chicago taxes? I realize that you pay the tax on the state/county/city that you currently reside regardless of where the car is bought. What I can't find is an answer to what taxes (if any) are due when moving or after moving if there's still payments being made on the car. Thanks!
  • delta737hdelta737h Posts: 626
    edited September 2010
  • mbd8mbd8 Posts: 3
    Thanks John!
  • ang4200ang4200 Posts: 2
    edited September 2010
    Mbd8,
    If you buy the car from a Chicago dealership, you will not be required to pay a sales tax in IL if you claim to be a PA resident and claim a non-resident buyer exemption, as per this link from IL.

    link title

    However, now your sales tax would be due upon titling your vehicle. If you title in PA, regardless of whether you move to IL in a month or not, you will pay sales tax to PA. Your PA title will be proof to IL of where sales tax was paid.

    You have 30 days after moving to IL to register and title your vehicle in IL. If you choose to wait and title in IL, you will have to pay sales tax to IL before you can title & register. If you have a PA title, no additional sales tax should be due.

    This document may be helpful
    link title
  • I purchased a new car from a dealer in Ohio, where the sales tax 7.75% one month ago. I have subsequently moved to Massachusetts where the sales tax is 6.25%. I am a bit confused if I have to pay the full 6.25% or if there is any reciporcity with MA and OH. Thanks.
  • tidestertidester Posts: 10,059
    If you paid the Ohio sales tax as resident of that state then you wouldn't be obligated to pay sales tax a second time after moving to Massachusetts.

    tidester, host
    SUVs and Smart Shopper
  • Here's a question: if I guy a car in Virginia, then register it in Oregon (where we have a residence, but which doesn't have a sales tax) do I have to pay the VA sales tax or can I have the dealer waive it? Any help appreciated!
  • kyfdxkyfdx Posts: 136,764
    If you have a VA driver's license, I doubt any Virginia dealer will sell to you, without collecting the sales tax.. It's hard to make the argument that you aren't a VA resident, if that is the case..

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • Thanks - that makes sense. But I have an OR license.
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,425
    In what state is the plate of the trade in? If Virginia, you pay their ST. ;)
  • dwynnedwynne Posts: 4,018
    If you are planning on garaging and driving the car in Oregon and have an Oregon driver's license than I would think the dealer would not be obligated to collect sales tax.

    If you then "move" the vehicle to VA then you could be subject to sales tax. The law says under 12 months from purchase you have to provide proof you paid tax elsewhere to be exempt in VA. Since you paid no tax, you would not be exempt. After 12 months from purchase, no proof is required.

    It should be noted that VA sales tax is a paltry 3% so probably not worth paying a fine or worse if you get caught trying evade VA taxes. If you are legitimately going to use and drive the car only on OR, then you should be OK.
  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 801
    Sales tax for out-of-state buyers seems to be handled differently in every state. Some states have 'reciprocal' agreements with nearby states so they can collect sales tax on behalf of one another. So if Georgia and South Carolina had such an agreement, GA residents who purchase a car in SC would pay the Georgia Sales
    Tax rate to the dealer in SC. The SC dealer would submit a Sales & Use Tax Return periodically (monthly or quarterly) and submit it with all the GA Sales Tax they collected. Georgia dealers would do the same with sales to SC residents.

    Then there are some states that require you to pay THEIR tax rate regardless of where you intend to register the car. In situations like this, most states will accept sale documents showing that you paid sales tax to the dealer even though your state will never see a penny of it. At least they don't force you to pay twice in those situations. But if you paid less than your state/county's sales tax rate, your state will require the difference before you can register the car.

    Back in 12/2005, I was shopping for a new Mazda3 but couldn't find the exact one I wanted anywhere in the Atlanta area. I finally found it in Knoxville, TN, which is about 230 miles away from Atlanta and, obviously, in another state. I had never bought a car in another state and wasn't sure how it would work, but it ended up being fairly simple. The Mazda dealer in TN didn't charge any sales tax at all. The following week, I stopped by one of the Georgia DOR Regional offices and paid the 7% sales tax on the car's net price. The tag office wouldn't issue a tag without proof that the taxes were paid ...

    If there's one thing about sales tax differences from state to state that ticks me off, it's the huge variance in the rates! For instance, my best friend lives in Alabama and the general sales tax rate is 8% in his city/county. But auto purchases are only taxed at 3%. Here in Georgia, a car is taxed at the same rate as a pair or socks- 7% in most counties! On a $25,000 purchase, the sales tax would be $750 (3%) in Alabama compared to $1750 in Georgia. A full $1000 difference...maybe I should move to Alabama???
    2015.5 Volvo S60 T6 Drive-E Platinum, 2012 Mazda CX-9 GT
  • agbiggsagbiggs Posts: 19
    I checked with a couple dealers in VA and MD and they said that if you're legitimately registering the car in a different state (meaning, you've got an address there, driver's license, etc.) then they'll charge you that state's tax rather than the VA or MD taxes. In this case (OR) that means no sales taxes,which is good.
  • jlrharleyjlrharley Posts: 3
    edited October 2010
    I am currently leasing my car and I want to trade it in before the lease is up. Will I pay sales tax on the difference or the sale price? I have had different answers from several dealerships. Please advise. I guess I should tell everyone I am in Phoenix AZ. Thanks
  • jwilliams2jwilliams2 Posts: 910
    edited October 2010
    Depends. In many states there is no tax savings because you don't own the car you are trading in. My state makes an exception if you are leasing from the same company as the ownership is the same. I would suggest you check with your state DMV.
  • dwynnedwynne Posts: 4,018
    AFAIK Arizona is a tax on the payment lease state- so you have not paid tax on the whole car, just the depreciation (and interest) so far. You also don't own the car, the lease bank does.

    So I am pretty sure there will be no trade in tax savings when trading in a lease vehicle.

    I many states, trading in a vehicle you own (and paid sales tax on) results in a tax savings on the replacement vehicle. Say you get a $30k new car and your tax is 7%, then $2,100 in tax would be due. Trade in a car you own and get $10k for it, then only $1,400 in sales tax would be due. "Trade" in a leased vehicle and I think you would be paying $2,100 in tax.

    You have to be very careful when "trading" a lease car. Often they are not worth the lease buyout so you will be rolling negative equity into your new deal. Sometimes the dealers will "take your trade" but in reality are just "accepting your early turn in" - which lease YOU on the hook for missed payments and such. Since there appears to be no tax break for trading in a lease, I would make this 2 transactions. SELL you car to a dealership and break even, pay out, or make money depending on the value - then buy your new car. It can then be from different dealerships - Carmax, for example, may give you more for your current car that the dealership will. Call and get your current lease buyout out (not including tax) from your lease bank and compare to the trade in appraisals for your car here on edmunds and on kbb and nada. See if you owe more than it is worth or what.
  • giavidgiavid Posts: 1
    I live in Texas but am going to be moving to Maryland. Does anyone know where it would be better to buy a car? Texas or Maryland? I know in Texas I will pay 6.25% in Taxes.
  • kyfdxkyfdx Posts: 136,764
    Maryland tax is 6%

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 801
    Maryland doesn't technically charge "Sales Tax" on vehicle purchases. They have a "Titling Tax" which is collected when you apply for the vehicle title or a lender/dealer does on your behalf. The sales tax rate is 6% in Maryland and the titling tax rate is....also 6%!? How and why they think the titling tax is a better idea than simply charging sales tax is anyone's guess!!!

    Vehicles transferred from other states are taxed based on the sales tax rates in the state where they were previously registered.

    If no sales tax was charged, they charge 6%
    If sales tax rate was less than 6%, they charge the difference (if you paid 4%, they'd charge an additional 2%)
    If sales tax was 6% or higher, the titling tax is a flat $100 fee....

    The $100 fee is a ripoff, since no one else has to pay more than a total of 6%???

    So, if you bought in Texas, you'd pay 6.25% and another $100 when you move to Maryland. If you buy in Maryland, you'll pay a flat 6%...and save hundreds (or thousands) of miles driving it there, too!

    Based only on sales tax policy, waiting until you get to Maryland to buy will save you a little cash. On $25,000, the 0.25% higher rate in Texas would only be $62.50, then you'd pay $100 in Maryland. BUT, if you can get a better deal in Texas (by at least $162.50), you'd still be saving money overall....

    Do you know what make/model you're planning to buy? What about a trade-in? If a trade-in is involved, it could make a BIG difference! Texas only charges sales tax on the difference between the sale price and trade-in allowance, so a $10k trade-in would reduce the sales tax by $625. Maryland applies their titling tax to the full purchase price, regardless of trade-in....
    2015.5 Volvo S60 T6 Drive-E Platinum, 2012 Mazda CX-9 GT
  • We returned our Mini we had leased for 3 years to the dealer in PA. We were told we had to pay a disposition fee for $350. Since this is not part of the lease of the vehicle how can they charge a sales tax on the fee? (tax $31.50) And the fee is going to Phoenix, AZ. Is this correct?

    Larry
  • ken117ken117 Posts: 249
    Actually did recently turn in a leased vehicle in Maryland early and purhased a new vehicle. I had leased the leased vehicle in Maryland. On the new vehicle, I only paid the 6% tax on the difference between the price of the new purchased vehicle and the trade-in value for the old leased vehicle. Since the leased vehicle was traded at about $15,000, the tax savings on the new purchased vehicle was about $900, which made turning the leased vehicle early a bit more easy on the pocket book.
  • kyfdxkyfdx Posts: 136,764
    Actually, the disposition fee is part of the lease cost.. just like the acquisition fee, and any other fee that doesn't go to a government entity..

    If it is part of the cost of the vehicle, it gets taxed... They might fool the buying public with the term, "fee", but they aren't fooling the state..

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 801
    Thanks for that info, the info on Maryland "titling tax" that I found didn't indicate either way. Since they didn't mention it, I inferred that they didn't give credit for the value of trade-in off of the taxable amount.
    2015.5 Volvo S60 T6 Drive-E Platinum, 2012 Mazda CX-9 GT
  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 801
    In Georgia, there is no sales tax on a used vehicle sale if the buyer and seller are both private parties (person to person). Are any other states similar regarding private party sales?
    2015.5 Volvo S60 T6 Drive-E Platinum, 2012 Mazda CX-9 GT
  • I moved to Nebraska from Georgia and am trying to get the tag for my truck. The DMV wants me to show the proof that the sales tax was paid when it was first bought. My truck was purchased 9 years ago by my husband (soon to be ex husband) who gifted it to me in 2007. How am I suppose to show the DMV that the sales tax was paid on the truck when it was bought 9 years ago? Please help me understand!!!
  • dwynnedwynne Posts: 4,018
    You should have a bill of sale somewhere for the truck. Failing that, you should have a copy of the registration /. title app when you first tagged the truck. Either of those should have the sales tax paid on it.

    Also, in our state (maybe GA too?) the title shows the sales tax paid on it. Surely you have the title to the truck?
  • I have the title that is in my name and a copy of the old title in which was in his name, signed over to me. I have the tag receipts for the last 3 years but it was purchased 9 years ago and I do not have access to the original bill of sale. I only see ad valorem tax and tag fee that has been paid every year. I have never registered the truck in Georgia either though in my name. According to Georgia tag office there was no sales tax on record 9 years ago. Do I really have to pay sales tax on the truck that was bought so long ago because I moved?
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,425
    Does NB DMV want to collect a sales tax based on the cost new 9 years ago or the present value?

    As I don't like their demand, I'd be tempted to say that you will produce evidence of ST when they show you the President's birth certificate. :mad:
  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 801
    Was the truck purchased from a dealer or from an individual owner in Georgia 9-years ago? If it was used and purchased from an individual owner, no Georgia sales tax would have been paid because private party transactions aren't taxed in Georgia.

    Otherwise, is there any chance that the dealership is still around where it was purchased? If they charged sales tax when the vehicle was sold originally, they should (might?) still have the bill of sale and send you a copy?

    Is the Nebraska tag/tax office trying to base the tax on the original value of the vehicle or the current value? What is the current value of the truck and what is the tax rate they will charge?
    2015.5 Volvo S60 T6 Drive-E Platinum, 2012 Mazda CX-9 GT
  • pseidpseid Posts: 2
    I LEASED A CAR IN NY IN NOV 2010, AND I TOLD THE DEALER I WAS MOVING TO NJ IN A FEW WEEKS ,HE TOLD ME FINANCE CO WOULD ADJUST SALES TAX WHEN I CHANGED MY ADDRESS ,WELL THEY SAY THAT THEY CANT DO THAT SINCE THEY PAID THE TAXES UP FRONT IN NY.THE DEALER SAYS I CAN APPLY FOR A REFUND FOR THE DIFFERENCE ON LINE. DOES ANYONE NO IF THIS CAN BE DONE AND HOW I GO ABOUT DOING IT

    THANK YOU PESEID
  • pseidpseid Posts: 2
    I LEASED A CAR IN NY IN OCT 2010,IT WAS REGISTERED IN NY AND SALES TAX WAS PAID BY THE LEASING COMPANY,I MOVED TO NJ IN NOV 2010,AND RE REGISTERED CAR IN NJ,I WAS TOLD BY CAR DEALER AT TIME OF LEASING CAR THAT ONCE I MOVED MY MONTHLY PAYMENT WOULD BE REDUCED BECAUSE OF LOWER SALES TAX.AFTER TALKING TO THE LEASING CO THEY SAY THAT TAXES WERE PAID UP FRONT TO NY SO MY PAYMENTS REMAIN THE SAME,THE DEALER SAYS THAT I CAN GET BACK THE OVERPAYMENT OF TAXES FROM NY ,AND THAT THERE IS A FORM ON LINE THAT I CAN DOWNLOAD FROM NYS DOES ANYONE NO ABOUT THIS FORM OR IS THE DEALER NOT TELLING ME THE RIGHT FACTS
  • I lease my car in MD and pay 6% tax on the entire sticker price of the car.

    I am going to pay an additional 6% titling tax if I decide the buy the car?

    Thanks.
  • robr2robr2 BostonPosts: 8,863
    I am going to pay an additional 6% titling tax if I decide the buy the car?

    Looks like the answer is yes but contact the DMV to confirm. It's looks like MD charges a 6% excise tax on the sale of used vehicles.
  • I am in the process of assuming a lease. Based on what I have read I will not have to pay sales tax on the lease assumption (transfer of equity). Also, I have read that in Texas sales tax is charged on the full value of the vehicle at lease inception, not just the leased value. Dealers usually pass on this charge to the lessee.

    The lessor (dealer) has informed me that they only charged sales tax on the leased value of the car, and that if I opted to purchase the vehicle at lease end, I would need to pay sales tax on the residual value. Looking at the original lease agreement, I am having trouble determining if the original lessee paid sales tax on the full value of the car, or just on the leased value. Please help.

    Here are the numbers:

    Agreed upon value of vehicle (I think this is called base cap cost): 32267.50
    Gross cap cost: 33560.55
    Cap cost reduction: 2755.14
    Adjusted cap cost (I think this is net cap cost): 30805.41
    Residual value: 16242.20
    Depreciation amount and any amortized amounts: 14563.21
    Rent charge: 3251.75
    Total of base payments: 17814.96
    Lease payments: 36
    Total monthly payment: 494.86
    Lease term in months: 36

    Amount due at lease signing: 3250
    - itemized
    -- cap cost reduction: 2755.14
    -- first monthly payment: 494.86
    How amount due at lease signing will be paid
    -- Rebates: 250
    -- Amount paid in cash: 3000

    Texas sales tax rate = 6.25%.

    Thanks,
    Al
  • delta737hdelta737h Posts: 626
    edited February 2011
    Hi Al,

    The dealer should define what he or she means by "leased value". This is not a term used in leasing and so I have no clue what they mean. In Texas, sales tax is levied on the selling price less credit for a trade. To wit...

    http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc- - =&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=70

    In a lease, the selling price is the Agreed Upon Value. So, the sales tax liability should amount to...

    0.0625 x $32,267.50 = $2,016.72

    assuming that there is no trade. The tax can be capitalized in the lease or paid upfront. If it's capitalized, then it's simply added to the Agreed Upon Value; plus any other capped items, to give the gross cap. However, the difference between the gross cap and agreed value is only $1,293.05 which doesn't make much sense. And so, without additional information, I can't comment further. Do you have a copy of the lease contract? If so, that should speak volumes and will likely answer your question.

    All the Best,

    John
    The Auto Lease Geek
  • kyfdxkyfdx Posts: 136,764
    It makes you wonder if the sales tax was paid separately... because, I've never seen a Texas lease that didn't charge sales tax on the full purchase price of the car..

    On the other hand, captive lease companies often have sales tax credits available, at certain times of the year, that they pass along to consumers. I assume these credits are from their lease returns. I've seen as much as 5% of the 6.5% tax covered by the credits... So, that would be a possibility in this example....

    However, it is the leasing bank, not the lessee that purchases and pays the tax.. It's possible that you would owe tax on the residual, if you exercise the purchase option at lease end.... as you would be buying used car. Balloon note loans are popular in Texas (and IL) for this very reason.. Even if the bank pays the full sales tax on the leased car at inception, you are not the bank. Even the original lessee might have to pay sales tax again in the same scenario, even if they paid on the full purchase price at inception.

    regards,
    kyfdx

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • sweendogysweendogy Left lanePosts: 1,307
    a month ago i posted

    "can a dealer call you months later (2.5 mths) and tell you they made a mistake with the tax on your car (and trade) and say you owe 1k more then what you agreed and financed?? I bought a new car out of state and traded my old car into the dealership.. This dealer, a new and used car dealer, was not the best at doing paper work (obv)...well they called me 2 months later and said they needed me to go to my local dmv and see if the dmv would issue a tax check for the car i traded in and then forward that check to the dealership to make up for the difference.I called the dmv and they had no idea what i was talking about. net net - i traded a car in and swapped plates onto the new car-- i paid the difference in my state tax verse the new car tax in my state..and now they call me telling me i need to pay the whole tax on the new car.. -- first question -- i know they can ask for more money but do they have any right to this after a contract has been signed, a state registration is in hand, and I have the car (which is being financed thru the car company finance) "

    well today i got a letter from the dealer under legal code UCS-124 that states its a demand letter for the difference the dealer made on the the tax situation stated above. Car is now 3 months old. What is my next recourse>>??

    any thoughts would be great..
  • jfitz2jfitz2 Posts: 9
    This sounds very suspect to me. It actually sounds like 'the financing fell through' scam. Presuming that this transaction is complete and that you have all the paperwork/financing/title etc. I do not see any need for you to do anything. Why would any DMV/tax office issue a tax check on your trade-in? That does not make sense.

    I will say this - dealers are never 'bad' with paperwork. This is their job and they do it every day. Financing never falls through - if it did you wouldn't get the car off the lot.

    I would ignore them or refer them to the local tax office. Lets see how successful they are in getting the tax office to issue a check.
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