What happens if you take over lease, that has sales tax, then register in a state that does not have sales tax?
Washington>Oregon for example. Would the new owner still have to pay the payment with tax if it’s registered in Oregon.
You pay tax based off of your location.
So how does the lease payment get changed? Does it do automatically when the lease is transferred? Thank you for the reply btw.
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It should automatically adjust since you will be providing all your info for the transfer. Whichever company you’re doing it through should take care of it on their end.
Doesn’t the finance company pay the state the tax upfront???hence why they add it into the payment. I wonder if the finance company gets paid back from the state reimbursement??? If not I’d say payment would stay the same??
Depends on the state… every scenario will be different based on where the car is coming from and going. @DonnyAudi statement is correct that it will readjust based on the new state’s tax rate, but much more complex depending on if it was paid upfront in the prior state, if they allow refunds for the unused portion, if the new state will provide a credit for taxes already paid, etc. there are scenarios where you can be double taxed or avoid a good portion of tax depending on the states involved.
Unfortunately you have to research every specific scenario. Definitely easier to do an in-state transfer and typically much cheaper as it relates to DMV fees too.
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My brother takes advantage of the different sales tax rates in different states. He has a residence in Rhode Island and will lease a car there where the sales tax is added monthly. Then after a month, transfer the car to Texas where he lives. But in Texas you pay all of the sales tax at signing. When he transfers registration from a state that collects sales tax to Texas, they do not collect the sales tax since there is not a purchase or lease being made. His monthly payment drops since there is no sales tax collected anymore.
+1 this.
I do recall a few years ago swapping into a car that came from a state that taxes up front. I could see there looked like there was a bunch of tax paid on it…And guess what? When it was transferred into Florida, the additional 7% FL tax was added into the base payment as well.
Hi,
Have a specific tax question in re to what you posted here - how your brother transfers cars, tax paid, from RI to TX.
This post is old so let me know if you’re still around.
Thanks
If you have a residence in a state where tax is added to each payment, purchase and register the car there. After a month or so, transfer the car to Texas and the sales tax drops off.
Recently took over a lease from GA to TX on a BMW M3CS.
Have read through the boring PDF on tax from both states.
GA - after 1/18 apply a “TAVT” tax of 7.0% on the sum of total lease payments
TX - use tax of 6.25% on price lessor paid, with credit given for any tax lessor paid to another state
Regarding the last part there, officially Texas says:
“A lessee may take credit for legally imposed sales, use, or similar tax paid to another state by the lessee or the lessor on the leased motor vehicle before that vehicle becomes subject to the Texas motor vehicle use tax imposed by Tax Code, §152.022.”
BMWFS provides the original lease, which has a line item of ~$3k of “GA TAVT”
The next section outlines another ~$3k in taxes, fees, etc. over the lease.
I don’t want to end up paying 6.25% of the value of the car.
From my understanding – calling the State Tax Comptroller, BMWFS – I should be able to subtract the GA TAVT already paid from anything due.
Question - has anyone had success reducing this? I see the best option is to calculate the portion of the monthly payment which was actually tax (technically paid by BMWFS but rolled into monthly), multiply by the months paid in other state, and then deduct from what TX bills.
Thanks in advance.
Discussed here: Lease Assumption in Texas from an out of State Lease - Taxes?
Short answer seems to be it depends on who you speak to at the DMV. Like most issues with tax in Texas it’s a mess and you’ll often find multiple different answers.
^ sums it up well.
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Thanks. I did read through that and arrived at the same conclusion as you. It’s a bit unnerving to show up to the Tax Assessor office and just cross your fingers on a several thousand dollar decision.
In the event of being billed tax on the full/SPV, I wanted to have some ammo re “credit given for any tax paid to another state”. Part of my Q is if anyone has been able to successfully show their county tax assessor that taxes were paid, and how.
I will post my DP once I get this done for those also out there wondering.
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Agree 100%, it’s something that has put me off taking over leases from other states and I’d be really interested in what you encounter.
Only thing I can think to do is speak to your county tax assessor and get clear guidance in writing or email. This might help smooth any issues at the DMV. Worst case scenario is you might have to pay the tax and then get a full/partial refund.
I’ve had the same nightmares of what if I took over a short term lease and had to pay full tax on the sale price.
Agree to an extent, unless the deal is smoking hot a normal transfer won’t do it for me, we pay 4.25% on value of the vehicle as a dmv doc fee… I’m sure other states that charge tax on sales price do the same thing in order to collect sales tax.
Depends on the state, many states that initially
charge sales tax on % of sales price have stopped this loophole by charging transfer tax, depends on your state and a bit of luck at the local dmv office.
Okay so excellent news from Texas.
I went to the local county tax assessor’s office to register/transfer title my BMW lease transfer. I was prepared to pay full tax on sale price and confident I could negotiate out the already-paid GA tax as it is clearly listed on the lease.
I went end of day. Right up front, she reviewed the GA title and told me I had to have it signed and return back. I pushed back slightly, nudging the literal letter from BMWFS to their office explaining the situation. She asked me a few questions, walked back to very quickly check with a supervisor.
I ended up paying the new title fee of ~$90. I got the plate on the spot. I walked out.
In my thorough search re this issue, I found some people with very similar experiences, via this forum and Bimmerpost. So, anyone doing a non-TX to TX transfer should understand the law and then simply cross your fingers and hope for the best.