Just leased in-state in IL and the calculator is showing the taxes wrong. It shows several hundreds less on the calculator than what it is in reality. I confirmed with the IL tax department that they tax everything on a lease, including the taxes! Basically any amount that is showing as your total monthly payment + total due at signing (including any dealer cash, rebates, registration fees, doc fees, title fees, trade-in value, even the taxes!) are taxable. The only thing not taxable is the disposition fee which is paid when you turn the car in, not up front. If something is paid or attributable up front then it’s taxed, but the calculator seems to exclude certain items from being taxed like the taxes.
Are you in Chicago?
The calculator does tax incentives and rebate, as long as you entered them as taxed incentives. If you put them as untaxed or rolled them into the selling price, they wouldn’t be taxed by the calculator, but that’s user error.
Not in Chicago. I’ll have to see if I put them into untaxed, but I did not roll them into selling price. Also, that is just a small part of the tax variation. The fact that IL taxes the taxes is nutso to me, and that accounted for the bulk of the difference in the calculator.
Chicago taxes registration/titling fees and taxes paid upfront?!
Yes. That was selected in the calculator.
I’ve leased several cars in Illinois - they don’t tax the taxes paid on the lease. The calculator has worked for me in the past.
Can you post your calculator and the numbers youre comparing against?
It makes no sense to me either. I argued with the dealership and then I sent it to the IL tax department to ask for a refund. Both confirmed that they tax the payments and money due at signing, and the difference between the calculator (which I thought was correct) vs what I was required to pay is exactly the tax on the tax (over $100). Let me post my calculator and the amount of taxes I paid. Maybe I’m missing something.
@Benedetto yes, the dealer put in #1 of the form all the monthly payments and the entire amount due at signing (including the sales tax that the dealership computer calculated) to determine the tax amount. This was the sales manager who then called the finance manager and said that’s how they do it. And the IL sales tax department says that’s correct. If it’s part of the amount due at signing, it’s taxable. I was floored.
What county do you live in?
The calculator is wrong for IL. I always add $10/mo to the payments since taxes are calculated in a weird manner.
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Lake County. Purchased in Lake County. Tax is 7%
Total monthly payments including 1st payment is: $19,883.88
Total DAS:
Rebate (as capitalized cost reduction): $1,000
Registration: $306
Sales Tax: $1,684
Acquisition Fee: $795
Doc Fee: $347.26
E-filing Fee: $35
The dealer put “purchase price” as $24051.14 (which included a $1,684 tax amount) in line #1 of the lease worksheet to calculate the $1,684 tax amount.
Calculator shows $1,544 as taxes, which is the same calculation as the above, but not taxing the taxes. (Well, I come up with $1,566, but it’s close enough.)
IL Department of Revenue confirmed that the $1,684 was correct, which was insane to me. Do I need to escalate this further?
Here is my calculator:
Yes, posted.
Oh interesting. So the tax is calculated on the taxes in your experience? I’ve never leased a car in IL before, so it seems insane to me. The last car I leased was over a decade ago in CA and I don’t recall this being an issue. I’ve just purchased my last few cars outright, so there was no ambiguity on what was being taxed.
You only get taxed on taxes in Chicago. Most states just tax the base monthly payment or the total lease amount. So $1000/mo x 7% = $1070/mo and maybe a tax on the downpayment and rebates depending on the state. However, IL uses a completely different formula that essentially adds $5-$10/mo. I don’t have it and no one really wants to explain it since it just gets inputted into our dealer calculator and out comes the payment. I have been trying to get it for years but like Plankton trying to get the Crabby Patty formula, it hasn’t happened yet. From what I have heard, I believe they have some sort of tax that involves the money factor, which is where the extra $5-$10/mo comes from.
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I found this guide from IDOR https://tax.illinois.gov/content/dam/soi/en/web/tax/research/publications/documents/sales/st-9-lse.pdf
In page 22 it says,
If the selling price used is the actual amount paid by the purchaser (lessor) to the seller, the selling price
includes accessories, dealer preparation, federal excise taxes, freight, labor, rebates or incentives for
which a dealer will be reimbursed, and documentary fees. Selling price does not include federal luxury tax.
In general, any cost passed on to the customer as part of the sale of an item and for which gross receipts
are received should be included in the selling price.
If the selling price is the amount due under the lease contract, you must include in the selling price the
amount due at lease signing, plus the total amount of lease payments, and any charges factored into the
lease contract, including, but not limited to the following:
• extended warranty;
• registration fees;
• title fees;
• negative equity;
• tax reimbursement collected from the lessee; and
• finance charges on the tax reimbursement.
In addition, if the selling price is the amount due under the lease contract, you must include in the selling
price any deductions taken for the following:
• manufacturer’s or other rebates; and
• cash down payments.
Finally, even if the following charges are included in the amount owed under the lease contract, they are
excluded from the taxable selling price:
• a “disposition fee,” if included in the lease contract, and
• amounts, if any, collected under Chicago’s Personal Property Lease Transaction Tax
I think the idea here is the lessor is the one who pays the taxes, not the lessee. The amount paid by the lessee is just a tax reimbursement towards the amount owed to IL by the lessor, hence the tax paid at the signing should be included in the selling price. Also, registration and title fees should also be included in the selling price.
Imho, the calculator needs to be updated for IL.
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The formula to calculate the tax is as follows.
(( Depreciation + Finance Charges + Rebates + Registration Fees + Title Fees + Dealer Fees + Aquisition Fees + Negative Equity Rolled In + Other applicable charges ) * tax rate) / ( 1 - tax rate))
Of course you need to round this to the nearest dollar.
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@tmx2001 thank you so much for this. That makes so much more sense now. I’m not paying taxes. The dealer is paying taxes. And the dealer charges it back to me as another type of “fee” as reimbursement. So that’s why it’s taxed to me (again). Got it.
It boggles my mind that neither the dealer nor the IL sales tax division could explain this or even point to this guidance. Appreciate your help in cracking the code! And yes, the calculator here needs to be updated to reflect this for IL.
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Sounds like an NY situation basically, taxes that are capitalized in the lease are taxed again at the same rate in NY.
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