Hi all, I’m trying to do another deal for a family member and have encountered some issues specifically related to tax. Oregon has a “Vehicle Use Tax” per Oregon Department of Revenue : Vehicle Privilege and Use Taxes : Businesses : State of Oregon “One-half of 1 percent (.005) is due on the retail price of any taxable vehicle.” Specifically, for leased vehicles “The tax is calculated based on the retail sales price paid by the lessor to the dealer “agreed upon value of the vehicle” as stated in the lease agreement.”
I have attached my previously posted lease agreement from Toyota as reference.
Out of state Toyota contract: Note that section J “Monthly sales/use tax” is N/A & the 13b “Taxes.” The calculated taxes $232.39 = 0.005 x 46,478.00 (agreed upon value of car in section 9a)
Out of state Lexus contract: Note that section J now has a monthly tax is $38.67 and section 13b has N/A. I’m frankly not sure how they calculated the monthly tax…but it adds up to a total of $1392.12 over the course of a 36 month lease versus an expected 0.005 x 59,395.00 = $296.98.
Typically I would just move on but this deal was secured by a broker on here and I’m out a portion of the broker fee if the deal doesn’t go through. Dealer won’t budge and risk under collecting the tax payment and reassured the broker that I will get a refund of the taxes if they overcollect the taxes. I’m a bit skeptical of getting a refund from a car dealership/Lexus financial services without hassle.
Anyone experience something similar to this? Should I just go ahead with the contract and hope to get a refund.
In which state(s) did each of the contracts originate and what is the lease inception date of each contract? The monthly sales tax for the Lexus contract is calculated as follows…
644.44 x 6.00% = 38.67
Could be that the Oregon sales tax rules changed between the lease inception dates.
6 months between the two dates. I doubt the state increased the tax from 0.5% to 6% over the new year without causing a riot.
They are two different types of tax rates. The 0.5% is levied of the sell price whereas the 6.00% is levied on the base payment. When some states change their tax rates, they often become effective at the beginning of a quarter such as July 1 or January 1… Happy New Year!
You may want to inquire if there had been any rate changes and how those rates are applied during that 6-month period.
Oregon definitely doesn’t tax the monthly payment. The only taxes are the 0.5% upfront and any pass through of the Corporate Activity Tax (I’ve seen between 0.4% and 0.57%) but the latter wouldn’t apply for an out of state purchase.
What state is the dealership in? Could they be charging their local sales tax?
I would think that if that were the case, Oregon would have flagged the Lexus lease where the base payment was taxed at 6%. The registration/title/license would not have been issue without the correct tax.
They haven’t signed the lease yet, so it hasn’t gone anywhere to be issued.
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Yeah, I just saw that. OP needs to take control. So far, the dealer is controlling the deal. This is what can happen when you relinquish control to other people. Either they calculate the tax correctly, in the event that they haven’t, or the deal is off.
OP mentions the Lexus contract is out of state. My assumption is that the dealer is in a state that taxes the monthly payment. It appears the out of state dealer has filled out the form as it would be in their state, not as it would work in Oregon.
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The Lexus lease contract shows the Oregon address. And, if there is a disparity between the lease contract address and the registration address, that will raise a red flag. I think the title/reg. docs are sent to LFS as part of the doc package. Oregon DMV may not catch it immediately but it’s likely that LFS will. Furthermore, in order to renew the registration annually, LFS would have to provide OP with a power of attorney which would show his address. I know mine does. Somehow, the mistake will be discovered.
You’re overestimating the thoroughness of the Oregon DMV. I’ve had a couple of instances where dealerships insist on charging my county fee on a plate/registration transfer when it shouldn’t be and justify it by saying it will be refunded. It never was. The DMV seems to accept whatever payment it receives, so I’m almost certain they won’t question or call out tax being paid to another state. Lexus Financial might catch it though.
Oregon also issues four year registrations on new vehicles, so there won’t be any renewals.
1). A dealership cannot keep the over-taxation amount… Should they over-collect
2). This sounds like it is tax + Oregon reg, which runs about 1k based on my own customers and deals.
Respectfully, posting this in the forum when you have a broker, as opposed to relying on their expertise and relationship with the store, defeats the purpose of using a broker.
I would never sign a lease agreement that contains inaccurate information. If the dealer screws up, why would I reward them with my business? Before I go to the dealer to sign docs once we’ve agreed to a deal, I always ask them to email me a copy of the completed lease agreement and their worksheet that they send to the fund provider to ensure that there are no mistakes.
That’s totally understandable, but that’s not my point here…
Also, I assume you’ve bought many cars from dealers out of your state?
Maybe OP’s broker needs to be more proactive if they haven’t already. I know I would be.
Yup. Leased vehicles outside of my state (Ohio) but for people other than myself. I’ve negotiated leases in Ohio (of course), PA, FL, NY, NJ, IL, WA, and a few others.
On any of those deals, have you ever received a check from the dealer or state, after the sale?
Nope… knock on wood. I always ensure that all calcs, including tax, are done accurately before the lease is signed. That’s what I do. If I were to receive a check from the dealer or the state after the sale, that reflects poorly on me… shame on me. Now, there could be instances where the title/registration/license fees might be off a but that has not happened to me… at least not yet. That might be forgivable.
I have no idea where the dealer is pulling the 6% tax from. It is higher than the dealer’s state tax, lower than my state tax (TX), and obviously not my family member’s state tax (OR).
Yes, the Lexus lease contract shows the correct address/ZIP code. I think the only reason the contract would bounce back to be corrected is if Oregon demands the 0.005% tax upfront to title the car…even then Oregon is never going to say no to free money from section J “Monthly sales/use tax” so I’m not sure how that would be corrected.
I’ve actually had a previous experience where the dealer accidently sent the DMV the tax money instead of the Department of Revenue…never heard a peep until I followed up why we still hadn’t received our registration/plates 2 months later.
Couple points in response to your post:
#2 - Section 13c “Initial Title, License, and Registration Fees” is documented at 750.97. This is in addition to J “Monthly sales/use tax” at $38.67/month or $1392.12 over the course of the 36 month lease. This totals 2,143.09…seems high compared to your own deals?
My broker actually tried to reason with the dealership but the dealership is refusing to budge. Dealership states I will be refunded if they over collect. I’m out a portion of the broker fee even if this deal doesn’t go through. Point of my post was to see if others would go ahead with the deal and hope the tax issue is resolved once the contract is finalized…most of the comments here seem to lean towards not moving forward.
