Unless I missed it, they need to define “lease price” as there are several ways to define it. Is it the gross cap cost (excluding non-taxable fees) plus taxable lease inception fees not capped? Is it the sum of the pretax monthly base payments plus non-capped, taxable lease inception fees?
You seem to define it as 40000 in your example below…
Just to clarify… the 40000 = Total depreciation + Total Rent charges. This may include taxable fees and assume it can include non-taxable fees… if so, too bad. What you’re describing reflects the sum of the base (pretax) monthly payments which equates to a pretax 36-month base payment of 1111.11. I choose to pay non-taxable fees upfront.
Now, let’s suppose I have non-capitalized taxable fees of 500. This means that your 1111.11 base payment is taxed as well as the 500. If the tax rate is, say, 7%, then your monthly payment including tax = 1188.89. You would also owe 7% x 500 = 35 tax at lease inception. I assume that cash/rebate cap reductions are taxed as well regardless of whether the tax is capped or not. If capped, you’ll pay tax on tax.
Regarding the 20000 trade with a 9800 payoff, your equity = 10200. As such, the sum of the pretax base payments less the trade equity = 29800. The 40000 is not just depreciation in your example. It is total depreciation plus total rental charges. The depreciation captures capitalized fees. Accordingly, the 29800 includes only a portion of the depreciation, the balance is rental charges. The taxable base payment = 827.78. So, the payment w/tax = 885.72. Again, you’ll owe tax on the taxable lease inception fee of 500 at signing.
To summarize…
Total CT Sales Tax = Sales Tax Rate x [(sum of the pretax monthly payments - trade equity) + taxable lease inception fees]
This should hold true whether the traded vehicle was purchased or leased.
