I’m a little out of my element here, so please let me know how this works.
I’ve recently completed my second lease transfer from another state. On my first lease transfer the tax rate between states was a difference of 2% and taxes in both states were collected on the monthly payments each month, so my payment went up the difference between the tax rate in both states. It was pretty straight forward.
In my current situation I took over a lease from a state where the original lessee paid 6% tax on the entire cost of the vehicle up front (roughly $3600 on a $60,000 vehicle). Now my state wants to charge me 7% on the monthly lease payment for the remainder of the lease. Isn’t that double taxation? Should either I be entitled to a credit for the amount already paid to the other state or the original lessee should get a credit for the unused portion of the taxes paid up front on his end?
I’m obviously not an accountant or tax professional so please help me understand.
Unfortunately, I am unable to help you but great question.
Edit
My best guess is that since each state operates when it comes to taxes independently (even county and city vary within a state), they can (and are attempting to) collect.
In the absence of any bilateral tax treaty between those two states which addresses this very exact situation, you are 99% SOL.
States that tax upfront (on either the selling price or the total lease cost) never give you anything back, or at least it’s unheard of here.
If your billing statement from the finance company says X and doesn’t break out any monthly tax because it was all paid upfront and capitalized, the second state will just tax X at their monthly % rate …
the chances of anyone understanding your situation and backing any taxes out of X are close to nil.
According to the department of revenue site “If a lease of a vehicle is entered into in another state and the customer pays sales or use tax on the entire lease stream upon entry into the lease, the customer is entitled to a credit on the sales tax due to Indiana on the periodic lease payments”
However, Indiana’s reciprocal agreement with Maryland ended on 11/30/16. This lease was entered into on 12/31/16 so I may indeed be screwed. I’m going to contact them tomorrow and see what they say. I’ll post what I find in case anyone else runs into a similar tax situation.
