Just curious, do financing company normally charge sales tax on disposition fee? I was charged that with GM financial, I am thinking about fighting it
Yup, I’ve always been charged sales tax on the disposition fee.
They wrote me an email saying they would waive it, but of course I never got that check, but it’s only been 3 weeks
Sales tax is exempt on lease disposition fees in California. GM Financial inaccurately bills it (an probably pockets the funds). Refer to Regulation 1660. Leases of Tangible Personal Property—in General.
…The “rentals” subject to the tax include any payments required by the lease, including amounts paid for personal property taxes on the leased property, whether assessed directly against the lessee or against the lessor, but does not include amounts paid to the lessor for:
(A) Collection costs, including attorney’s fees, court costs, repossession charges, and storage fees; but tax does apply to any delinquent rental payments, including those collected by court action;
(B) Insuring, repairing or refurbishing the leased property following a default;
© Cost incurred in defending a court action or paying a tort judgment arising out of the lessee’s operation of the leased property, or any premiums paid on insurance policies covering such court actions or tort judgments;
(D) Cost incurred in disposing of the leased property at expiration or earlier termination of the lease;
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See I read this other form, it says disposal fees are taxable. Anyway I did end up getting a refund from GM.
I asked this question to GM financial and they say GMF does not charge sales tax on titles in California, however disposition fee is considered an EOT charge, of which all are taxable.
Yeah I read a tax book that says it is taxable, but they gave me my money back. I cashed it and they are not getting it back.
Hi all,
I just returned my BMW and surprisingly, they charged sales tax on the $350 disposition fee. I am in California so I believe it is illegal to do that per Regulation 1660. Leases of Tangible Personal Property—in General. I am fighting for it now and just want to know if anyone has the same experience?
Totally normally. Has happened on all my leases.
Uncle Sam wants his share.
When I turned in my Audi in late 2019, no sales tax was charged on the disposition fee.
Odd, because I turned in a VW lease in 2019 (same bank) and paid VW $350 + tax which was around $385, if I recall.
Maybe it’s a state thing ?
Sales tax is always state-specific.
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Here is the quote from California Regulation 1660:
The “rentals” subject to the tax include any payments required by the lease, including amounts paid for personal property taxes on the leased property, whether assessed directly against the lessee or against the lessor, but does not include amounts paid to the lessor for:
(D) Cost incurred in disposing of the leased property at expiration or earlier termination of the lease;
the initial response is I agreed to pay applicable sales tax when signed the contract. but how could it be legal?
I am in California, and was not taxed. I just looked at the invoice I received, and there was no tax added.
Here is a discussion that concludes that the disposition fee is taxable in California.
Chevy is a 395 disposition fee , GMC and Buick is 495 and Caddy is 595
So your tax is maybe $30 to $55 depending on your city/county.
It’s money but in the big sceme of a lease isn’t much.
I don’t think the discussion concludes that. it is just the opinion of the last poster. The second last poster states the opposite.
I agree that it is not definitive. However, it does point out to me that the language of Regulation 1660 mentioned above is subject to different interpretations. It is weird that Audi would not charge tax, while VW would.
Turned in a BMW lease last week in CA and was charged tax on the disposition fee.
– Emailed BMW Financial Services citing Reg 1660 and they insisted it was taxable.
– Called CA Dept of Tax and Fee Administration, and tax advisor confirmed “Disposition Fee” on lease is indeed taxable, and does not fall under Reg 1660 exception for “disposing of the leased property.” According to him, they’d literally have to be destroying the car (rather than reselling, selling at auction, etc.) for the exemption to apply.
