Any way to avoid paying sales tax twice when buying your leased vehicle out and selling it to a family member? Maybe there are online dealers that offer this service for a fee? The family members are not immediate family in my scenario. Thanks
What state are you in? If CA, then there’s a 10 day grace period where you can buy and sell w/o paying tax. If not CA, then you still might check your state’s tax regulations, some have provisions that allow the transfer of a car within family w/o taxation.
Also not sure if you have any relationships with local dealers, you could try to arrange something where they buyout your lease (if allowed) for X with an agreement to sell it your family member for Y.
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Correct, but in the CA scenario below someone still has to pay CA tax and I think people sometimes get confused and think that there is a sales tax exemption in the 10 days from the initial buyout if sales tax was not paid up front on that buyout, which generally there is not:
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Parents buy lease out from Company A and pay no sales tax on purchase price (some companies/states do not require collection of sales tax at purchase on lease buyout)
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Title comes to parents and car is still registered in their name with Company A on reg as lienholder but Company A is no longer on lienholder on the title, parents want to “transfer” (i.e. sell, give, etc.) car to family member.
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Family member goes to DMV with signed off title from parents, release of liability, bill of sale, and app for new registration and clean title.
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Family member must pay CA sales tax on car at sales price even if within 10 days from initial buyout from Company A.
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If sales tax was paid at the buyout, and it transfers again within 10 days, there should then be an exemption.
I hope that makes sense!
My local dealer said he would do something like this for a CPO fee…ugh.
I’m in Maryland, but the two vehicles I am considering doing this for are in Pennsylvania and North Carolina, and the parents are in Maryland and Delaware. I’m familiar with the tax laws in each state. I think it comes down to finding the least expensive way to do the transfer of ownership.
If the CPO fee is reasonable, and we can get an extra year of warranty, that could be attractive. Did the dealer give you any idea about the cost of the fee?
the dealer gets to report a cpo sale, the cost of cpo is less than sales tax, everyone wins?
Sales tax implications on a vehicle are state-specific (sometimes with an additional local flavor).
It would improve your chances of getting useful feedback if you re-tag this thread (remove usa-nationwide and add a tag for your state).
Depends on the brand. Your use of generic tags and lack of specific info is not helping anyone help you here.
For any hope of a correct answer you can’t expect us to fill in a matrix. All the details may be relevant.
Both leased cars to be bought out are currently registered in MD:
- what brand is each, and which bank is it leased through (we can assume the captive but it’s not always clear - eg TFS vs SETF). Some allow 3P sales and some don’t.
- Which vehicle/oem/bank is being 3rd party sold to someone in what state?
If either vehicle is a Volvo
The purchase in PA may require transaction through a dealership if not bought/resold (where you will likely both end up paying sales tax).
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See if adding them to the Title as Co-Owners would work better, then buy out and remove yourself 
Only one tax to pay
Has anyone tried this approach?
Or maybe transferring the lease to the new owners may work better, if lease agreement allows transfers
For simplicity’s sake, I’ll pick one of the scenarios. Daughter who lives in North Carolina leased a Subaru Forester with me as a co-signor. My mother, who lives in Maryland, might be interested in purchasing the car. If my understanding of tax laws is correct, when my daughter buys the car out, she will pay North Carolina taxes on the residual value. Then, when my mother buys it from her, she will pay Maryland tax on the current value of the vehicle, effectively doubling the taxes.
if Subaru allows out of state lease transfer, then mom can pay whatever that fee is and initiate the proces… when she registers the leased vehicle in Maryland she will pay tax upfront…then when she buys it out from Subaru, Maryland will not tax her again…is my understanding.
This is what you’d hope to avoid by involving a dealer to arrange the resale. But it’s only 3% of what, $12k? 14k? Doubt you’ll find a dealer who’ll charge less than this dollar amount.
If anything since you’re the co-signer you may be able to execute the NC purchase for only 3% if you can legally gift it to your mother or sell it as a tax-exempt sale to a family member. Check MD laws on that
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I’m pretty sure mom will pay tax to Maryland on the market value.
SMF/Chase does not allow transfers but does allow 3P buyouts
Is your buyer financing the purchase or writing you a check in full for the purchase price? If they are buying it outright from you, then you may want to look into if MD allows you to “gift” the car to a family member and only pay the registration/transfer fees.
To avoid tax when gifting to family member in Maryland, the vehicle must have been titled in Maryland previously and it must be a bona fide gift.
https://mva.maryland.gov/about-mva/Pages/info/27300/27300-38T.aspx