I have a question regarding how sales tax is charged for a lease takeover and I cannot find anything on the internet. I called BMW FS twice but they gave me different answers each time. I am hoping someone with similar experiences can help me:
I am trying to take over a lease from the original owner who lives in MD. MD requires all sales tax paid upfront so we agreed upon the cash down to cover part of that paid tax. I live in MA so the sales tax is rolled into monthly. I am under the assumption that I do not have to pay tax again, or at least I will only have to pay the differences in tax (6% in MD vs. 6.25% in MA?)
Upon paying the $500 in the stage one application page I see an estimated monthly payment of base payment plus the 6.25% sales tax, which means if I register the vehicle in another state, I will have to pay full tax again?
Can anyone share similar experiences and whether this payment amount is final, or will it adjust?
MA requires that they collect 6.25% on your monthly payment. The tax already paid to MD is a sunk cost unless MD has a process to request a prorated refund (assuming not).
You might be in luck here. I did some quick googling (so not super diligent) & I’m not a lawyer or a tax professional but it seems that MA allows for credit for taxes paid to other states in select circumstances
Relevant section from link below: " See G.L. c. 64I, § 7(c). If the amount paid the other jurisdiction is equal to or greater than 5%, no use tax is owed Massachusetts; where the tax is less than 5%, the tax due is the difference between the amount of Massachusetts use tax that would otherwise be owed and the amount of sales tax already paid."
Also from the same link but lower on the page: V. Reciprocity with Other Jurisdictions
A. The following jurisdictions have a credit similar to that provided in G.L. c. 64I, § 7(c) for all state taxes lawfully required by, and actually paid in, other states, and the applicable tax rates in these states equal, or exceed 5%. Accordingly, except as otherwise noted, Massachusetts use tax is not due on any item on which a sales or use tax or its equivalent was required to be paid and actually was paid without any right to a refund or credit in: Maryland is one of the states listed here.
To me it seems since the tax paid in MD was 6%, thereby being greater than 5%, you’re in the all clear.
But like I told you, I’m not a lawyer or a tax professional so do your own due diligence on this.
The original owner paid the tax and you are just giving him some money. Where’s your proof that you paid the tax? I don’t think that you have a strong case, but you should check with your DMV.
The tax is actually 6.25% in MA so I might have to pay 0.25%. However this does not discuss the condition where the person who will be registering the vehicle also changes? Even though BMW owns the vehicle throughout. It definitely implies that the same person who will be transferring the vehicle from out of state to MA, will not pay full tax again
So to answer the first part:
My understanding is you have to pay the difference if the where you’re transferring from the tax was less than 5%. I.e. if you were transferring from NC where the tax is 3%, then you will have to pay 6.25-3=3.25%. However, since its above 5%, you don’t have to pay anything.
This seemingly does create somewhat of an arbitrage situation, but I guess in the eyes of MA lawmakers any amount above 5% seems to be the amount they don’t want to tax you again on.
Personally, I would not be concerned about this. Car’s in BMW’s name, and BMW was the one who paid the tax on it (which they reimbursed themselves with by charging the lessee).
BMWFS actually has an internal department that is specifically for tax matters during transfers. Were you ever routed to them during your discussions?
Yep - the 3rd time charm a gentleman tells me I WILL be paying the monthly tax. I think that is the verdict regardless of all the information I’ve read so far
Were you able gauge his level of certainty from your conversation?
In my experience a lot of these guys tend to take an ultra conservative approach which necessarily isn’t accurate in light of the research found online. I would claim I don’t have to (cite the information from above) and then see what they rebut with. That will allow you to gauge their level of knowledge/certainty. Worth pushing back just a bit if you haven’t done so.
Yes, ofc, because no one’s going to credit 6% of the selling price (paid in a lump sum upfront) against 6.25% of the monthly payment on a monthly basis. How does that math even work?
“You have a monthly payment. MA will tax you on a monthly basis.” No one in the entirety of the MA state government will spend any brainpower to figure out any alternative solution (if it even exists) beyond this equation.
