I am planning to sell my leased vehicle as its market value is about $1,500 higher than my buyout price.
However, the Toyota Financial Service (TFS) will only let me buy it and then I have to sell it myself. If I do that, I will have to pay the tax to own this vehicle myself first, and then the person buying it from me will also pay the tax.
Is there any way to avoid this double taxation? I heard there is a law that I don’t have to pay the sales tax on a car if I end up selling the car in 14 days. Not sure if there is any such law applicable in my state of IA.
I just did something similar in my state. I sold my leased Accord to an individual buyer. The buyer went to a bank to get a loan to purchase from me. The bank wrote a check to Honda for the payoff, and wrote me a check for the equity. The title was sent to the bank. Although not much time has passed, I don’t expect to pay sales tax. My state charges sales tax when you go to register the vehicle. I never tried to register the vehicle in my name, so I don’t think anyone would come ask me for any sales tax. I made about $1,500 extra dollars of equity to sell it to an individual versus the best dealer buyout quote I could find.
I think this is a good idea. TFS will surely be willing to release the title to bank.
Whom do you talk to regarding all these things? With the dealer or directly with the financial company that leased your vehicle?
From what I can see, what are called “isolated” or “occasional sales” (which is what this is) are not exempt from sales tax when the item is a vehicle. You can contact TFS, but your buyout likely includes tax anyway.
This could be a state by state thing, but my buyout from Honda did not include sales tax. I don’t think it matters how you buy it, in my state, i.e. if I buy it, a dealer buys it, or transferred to third party, the buyout wouldn’t include sales tax.
Try calling Toyota Financial (if that’s who holds the note), and ask them if they charge sales tax directly on the buyout. I basically decided to “risk it” when I tried it, because the sales tax was less than my equity. So, worst case scenario, if I ended up owing sales tax I would basically break-even. I think my state’s way of making sure you pay sales tax is charging it at registration, and I never tried to register it in my name. I also never paid off the vehicle with my own money. The new owner registers in their name, then state charges them sales tax at that time. All that said, this is my understanding in my state, which could be wrong, so please look into this further and don’t take my word for it.
I’m not going to spend forever looking for a niche item, but I cannot find anything that gives any different circumstances to the buyout of a lease. What Iowa clearly says, however is this:
The sales or lease price of vehicles subject to registration is exempt from sales tax. These vehicles are subject to a one-time registration fee equal to 5% of the sales or lease price. This one-time registration fee also applies when vehicles are sold between private individuals.
It really depends on: (1) whether they immediately require you to re-register/re-title the vehicle and thus pay tax (some states require leases to be registered in the company’s name); and (2) whether they tax on lease buyouts, even if it is immediately sold to someone else. I can’t say anything for certain, since I don’t see any information on that anywhere, and not only am I not providing tax advice, I can’t guide you on something for a state with which I’m not super-familiar. You might have to call the IA Dept. of Revenue AND request confirmation in writing so it doesn’t come back to bite you:
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