As has come up recently, it seems that GA TAVT is not calculated on “total of monthly payments” but rather in it’s own method not used anywhere else, on deprecation paid, plus down payment (actual CCR), and any amortized amounts added into the lease. We might need a “GA” checkbox, like the “NY” checkbox.
@delta737h might be best equipped to help with the math, but using some of the dealer tools I have access too, I can confirm that TAVT always comes up lower in the dealer tools vs the LH calc.
Doing manual math does seem to confirm that you don’t pay tax on interest/rent charge in GA (which is pretty awesome actually). I’ve also gone back and looked at some previous completed deals that were accepted by the GA DMV and they definitely were not charged as simply the total of the monthly payments.
There is also the option to pay it on agreed upon value, although that would likely never make sense on a lease.
Not exactly sure what GA does. Their written communication skills are poor at best. In general, the problem is that those that write state tax guidelines for leases know next to nothing about leasing including terminology. My favorite one is “tax is based on the total cost of the lease”. What does that mean?
GA computes TAVT as follows…
The current TAVT is 7.0% of the fair market value of the vehicle. Don’t know if the 7.00% tax rate is still in effect. GA defines FMV as follows…
For a new motor vehicle, the fair market value is the greater of the retail selling price (or in the case of a lease, the agreed upon value) or the value listed in the state motor vehicle assessment manual. The higher number that is used is reduced by the trade-in value, as well as reduced by any rebate or cash discounts provided by the selling dealer at the time of the sale. Retail selling price (or in the case of a lease, the agreed upon value) includes charges for delivery, freight, doc fees, and other such fees and is meant to mirror the taxable base that was formerly used for sales tax.
It references the state motor vehicle assessment manual for which I’m unfamiliar. If they tax the sell price, there is no way they should be taxing cap reductions as that would be a double tax on the CCR amount (i.e., the CCR is a portion of the sell price).
Many states tax the sell price which is the same thing as the agreed upon value. NJ provides the option of taxing the sell price. I believe Texas and VA tax the sell price as well. I can’t do the math unless the methodology is carefully defined and makes sense.
The method for calculating TAVT on leases in Georgia changed on January 1, 2022. The TAVT on leases can now be calculated based on the total of depreciation plus any amortized amounts, including any down payments.
The Form MV-7L linked below explains how the TAVT is currently calculated.
As set forth on the form, the TAVT is calculated as follows:
Depreciation Plus Any Amortized Amounts Method: The TAVT Base Value is the total of Depreciation Plus Any Amortized Amounts, including any down payments. (“Down payments” means cash collected from the lessee at the inception of the lease, including (1) cash supplied as capital cost reduction and (2) any upfront payments by the lessee. Down payments shall not include (1) rebates, noncash credits, or net trade allowances, (2) taxes or fees imposed by law, and (3) monthly lease payments made in advance.)
Agreed Upon Value Method: The TAVT Base Value is the vehicle value plus taxable fees specified in the lease agreement. Agreed Upon Value can only be used when (1) the vehicle is leased for business use and (2) the lease agreement states the rental price can be adjusted. The taxable fees include labor, freight, delivery, dealer fees and similar charges, tangible accessories, dealer add-ons and mark-ups. Taxable fees will not include federal excise tax or extended warranty, service contract, maintenance agreement or similar products.
Sure, you would. GA references the Agreed Upon Value for business leases and used it under the old method prior to Jan. 2022. I’ve seen leases that tax the agreed upon value (sell price). Am I missing something?
BTW, thanks for the info.
How is depreciation defined? Is it …
The difference between the MSRP and Residual Value, or
The difference between Sell Price and Residual Value or,
The difference between the Gross Cap and Residual Value, or
The difference between the Adj. Cap and the Residual Value
As you know, in consumer retail leases, book depreciation (as opposed to actual depreciation) is the difference between the adj. cap and the RV. Years ago, some state out west taxed depreciation defined as the difference between sell price and the Residual which seems to make the most sense. Adj. cap may include capped items that have nothing to do with the value of the vehicle (e.g., acq fee, sales tax, gov. fees).
Also, how are amortized amounts (plural) defined? Is it all capped items or, only those capped items that are taxable. Or is it the adj, cap cost which includes all capitalized items that may also include non-taxable items such as sales tax and gov. fees?
Clearly, more clarity is needed. The amortized amount that makes the most sense is the adj cap (excluding non-taxable capped fees). However, taxing the adj cap and then, taxing the depreciation, triggers a double tax no matter how depreciation is defined.
If it were up to me, my initial inclination would be to levy tax on…
The depreciation defined as the difference between sell price and RV plus,
Taxable items (e.g., doc fees, acq. fee, etc.)
I would not tax CCR to avoid a double tax as it reflects a portion of the depreciation as I have defined it.
What I mean is that that Georgia offers 2 options for calculation the tax owed on a personal lease:
Depreciation Plus Any Amortized Amounts + Amount Due at Signing
or
Agreed Upon Value
I am saying “you’d never use agreed upon value on a lease” because no person, given the choice between those two, would ever elect to choose option 2.
I am not saying “you’d never use agreed upon value on a lease” as if to suggest that it has not and will never be used by anyone for any reason, which seems to be the literal meaning that you took from what I wrote.
I would just like to add on a side note, the confusion seems to extend to the tag office in Georgia as well. They had the hardest time figuring out how much TAVT I owed when I moved to the state with 2 years left on a 3 year lease. Fairly certain they charged me like 1/2 if not 1/3 of what I should have owed (even with the reduced rate for new residents), but who am I to complain about a mistake in my favor.
As asked above, how does GA define depreciation and amortized amounts? They need to be precisely defined with no ambiguity. Do you know precisely how GA defines these terms? Plus, there is tax levied on DAS which is broadly defined.
Okay, change “lease” to “personal lease”. So sorry.
They don’t, anywhere, as far as I can tell:
I think they are using an extremely simple definition here. Lease payments are, at their core, finance charge and deprecation. You can amortize things into a lease, which become part of deprecation, such as a warranty.
If we read
The term “any down payments” as used in this subparagraph shall mean cash collected from the lessee at the inception of the lease which shall include cash supplied as a capital cost reduction; shall not include rebates, noncash credits, or net trade allowances; and shall include any upfront payments collected from the lessee at the inception of the lease except for taxes or fees imposed by law and monthly lease payments made in advance; or
This to me means simply, if a lease payment is $800/mo, and $600/mo is deprecation and $200/mo is rent charge, and the customer paid $2,500 down + Registration Fee + 1st month at signing, then the taxable amount would be (60036).07 + 2,500*.07 = TAVT, as the registration fee is imposed by law.
Let’s use a version of my example above and see how it compares.
Here is a lease, with $660/mo in deprecation, and $98/mo in rent charge, with an Acquisition Fee amortized into the lease, and a $1,430 CCR.
LH calc shows, $2,010 in taxes.
By “hand math”, this should be (660 * 36) *.07 = $1,663.20 + $1,430 * .07 = $100.10 + $1,663,20 = $1,763.30 in TAVT.
NOW… I run this exact same lease scenario in my dealer desking tool, same setup, Acq Fee in cap cost, $1,430, down payment, same money factor, same residual… drumroll… it calculates $1,763.85 in TAVT… so the dealer tool is within .55c of my manual math and that discrepancy could very well just be due to the fact that the LH calculator rounds to the nearest whole number and this tool is down to the penny…
So yeah, I’d say that’s how you calculate it at a basic level, it is as simple as they make it sound.
Okay, so what you’re telling me is your desking software computes GA TAVT as following using your lease example…
7.00% x (36 x 600 + 1430) = 1763.30
Apparently, depreciation is defined as book depreciation which is…
Adj. Cap - RV
In general,
GA TAVT = Tax Rate x [(AC - RV) + CCR + Taxable DAS Fees]
I don’t believe it is the intent of GA to tax non-taxable fees paid at lease inception (e.g., sales tax, Gov. fees). If so, all seems reasonable. Wish I could see a bunch of GA leases underwritten after Jan 2022.
The computer result was technically $1,763.85, my manual math was $1,763.30, but as mentioned, my manual math was based off whole, round numbers from the LH calc, the desking tool doesn’t round, so that’s likely why the small difference.
I also believe this to be accurate.
I also must say, this might be one of the most “fair” tax schemes for leasing I’ve seen anywhere in the USA, especially considering they don’t have any excise taxes on registration I’ve seen, and reg costs are low.
I agree. BTW, in your LH calc, the AC = 49495.00 and RV = 25725.00 so that…
GA TAVT = 7% x [(49495 - 25725) + 1430] = 1764.00
which is a difference of 0.15 between my calc and your desking software. So, I’m not sure what’s triggering the difference. Do you know whether the AC and RV in my calc are identical to the AC and RV in your desktop?
12 CFR § 1013.4 defines Depreciation and any amortized amounts as “the difference between the adjusted capitalized cost and the residual value.” This disclosure is required to have an explanation that it is “the amount charged for the vehicle’s decline in value through normal use and for any other items paid over the lease term.”
This is exactly what @IAC_Scott thought and put it to the test. I, on the other hand, wasn’t sure and offered several different definitions of depreciation with no way to test. Now that I’ve thought about, AC - RV makes the most sense as it captures both the depreciation and amortized amounts. Thanks for doing the leg work and confirming. I feel much better now knowing that…
GA TAVT = Tax Rate x [(AC - RV) + CCR + Taxable DAS Fees]
The calculator is saying taxes are $2,463, while the dealer (located in GA) is seems to be calculating them at $1,965.51 ($1,073.49 tax due at signing, $892.02 tax as part of gross cap cost)
I’m sure Delta will chime in here about me not rounding to the nth degree, but doing the basic math of Selling Price minus RV (69,493-43,203) = 26,290 .07 = 1,840.3, Acq+Doc is 645+899=1,544.07=108.08 so I’m at 1840 + 108 for $1,948 total tax which is close, who knows if I’m really doing this right, but based on my understanding of TAVT, the $1,9XX number should be more-so accurate.
