CT resident leasing a Lexus from a NY dealer, confused about how sales tax is calculated, numbers are approximated for better read, other fees are irrelevant.
My understanding is tax on lease should be (80000 - 5000 - 80000 * 0.50) * 0.0775 = 2712.50. The dealer insisted another 10000 * 0.0775 = 775 to make a total of 3487.50
CT DMV Use the DMV’s vehicle sales tax calculator | CT.gov that states “Manufacture Rebate is taxable in CT – You will have to verify if the rebate amount is part of the selling price of the vehicle. If the rebate has not been deducted from the vehicle sale price, then you would not tax the rebate separately.” Based on this, I think the dealer tried to double tax me, I wonder if it is legal.
CT taxes the payment each month - so you need to calculate the base monthly payment (depreciation + interest) and then multiply by the sales tax rate. Will also have to pay the tax on the $10k rebate upfront or roll into your payment.
It did not go that far yet. Just to make it simple to check, I will make a cap reduction of the total lease amount with tax and fees so adjusted cap = residue and the depreciation would be 0. Monthly rent = (adjusted cap + residue) * MF * (1+0.0775). However it is irrelevant to my original concern.
Your calculations are incorrect, that’s not how you calculate the tax, the dealer is not trying to play you or double tax you.
As noted you will owe some kind of upfront tax on the $10k rebate. That’s tax #1.
You will also owe tax on the monthly payment amount, which is how CT works. So if your pre-tax payment is $500, 7.75% would be added to that each month, so your total monthly payment would be $538.75. That’s tax #2.
Tax #1 is question here. DMV’s clause in bold says if rebates are not deducted from the sale price, it should not be taxed again. My understanding is if the sale price is 80000 - 5000 - 10000 = 65000 plus its tax, the rebate should be taxed separately as another 10000’s tax; if the sale price is 80000 - 5000 = 75000 plus its tax, the rebate should not be taxed separately.
I agree with how tax #2 is assessed, the same as what my 2nd post described.
The rebate is being deducted from the sales price so it should be taxed separately, which it appears the dealer is doing, as you mentioned they added another $775 in tax. Maybe I’m missing it but I’m not following the confusion.
This language is confusing. But here are my two cents: just because a rebate is mathematically deducted doesn’t make it tax-exempt in your situation. The selling price is 75k and the rebate wasn’t deducted to reach a selling price of 65k on the contract. As long as the selling price on the contract is 75 the rebate was not deducted in CT parlance. In other words an itemized rebate is taxable.
Thanks for yoir reply. The DMV tax code says " If the rebate has not been deducted from the vehicle sale price, then you would not tax the rebate separately", also the leasehackr’s calculator is exactly the same as my calculation wile dealer’s number is 775 higher.
What that language on the CT website means is the following -
If the “rebate” is dealer trunk money that allows the dealer to offer a larger discount and is “built in” to the dealers selling price offer vs. deducted as a credit, that isn’t taxable. Dealer gets the money and can decide if they pass along to you or not.
If the “rebate” is from manufacturer/bank (ie lease cash) and subtracted from the dealers selling price - that is taxable.
