Follow up question on lease transfer from New York State to another…
My basic understanding:
Question: Would I then pay sales tax in my state (Michigan) on the remains payments?
Thanks!
Here is some weekend reading if you really want to dig in to NYS sales tax for auto transactions: https://www.tax.ny.gov/pdf/publications/sales/pub839.pdf
As for when a car leaves NY to another one, almost every states has different rules so you need to do your research. For example, some states will waive sales tax if you can prove it was paid in a different state. NJ allows for you to request a refund for unused tax while NY does not.
To complicate matters, the laws don’t seem to be applied consistently, since a lease transfer is rather unique as ownership isn’t technically changing and the outcome could be solely dependent on who processes your paperwork at the DMV and/or bank.
Michigan is very vague on taxes for leases in general. The law states that you can pay the tax up-front or you can pay tax on the monthly payments. I haven’t found anything (sorry, don’t have time to further research) that specifically states what happens on lease assumptions or when you bring the car in from another state. It’s safe to presume, though, that you will have to pay tax on the monthly payments.
You should contact Michigan Dept of Treasury and search for a form called something like “credit for taxes paid in another state”. States have reciprocal agreements with other states, either full or partial.
Great tip! My MI research, so far, is vague.
I am analyzing the potential deal as if I would have to pay tax each month.
Thanks. It’s been tough to pin down details, so far.
Also, your posts have been very informative helpful as I have explored my lease transfer.
Well I found this in their FAQ, but don’t see a form associated with it. Worth pursuing.
Maybe. Michigan allows a credit of up to 6% on sales or use tax properly paid to another state or local unit of that state. If the other state or local unit of state charged you less than 6%, you would owe the difference to the State of Michigan in the form of use tax.
Michigan does not have a provision for credit of purchases delivered or brought into Michigan from foreign countries or U.S. Territories. Therefore, 6% Michigan use tax would be due on the purchase price (including delivery charges).
This may be true, but think about the term “you.” If the transferee did pay the tax, which he or she obviously didn’t, he or she would not be entitled to a refund. That provision is more for someone who bought a car in another state and then later moves to Michigan.
Yeah, I read that as the person who paid it. It is really vague though! Still, if the net is no additional tax due, that would be just fine.
New York form DTF-804 has “Purchased From” section. I would assume there is a similar form in Michigan, especially since Michigan has a reciprocal agreement with NY and allows full rate.
It doesn’t matter. The transferee is NOT the one who paid the tax.
I have someone interested in taking over my lease - I am in NY and he is in NJ. Will he have to pay taxes in NJ? He says he has done a NY to NJ transfer before and did not have to pay any taxes.
I just have to say that I have had both Toyota Financial and the NYS Dept of Taxation give me incorrect information regarding NY to NY transfers - I was initially told that there would not be additional tax for the person who assumes the lease. It was a broker who alerted me to the fact that this was incorrect. Pretty sad that the people who should know the answers don’t!
Yes, he will pay NJ tax on the remaining months and there are no refunds for the unused portion in NY.
thank you. I assumed that was the case but I was confused since he said he didn’t in the past
Apologies for bumping an older thread, but wanted to get clarity on the discussion as it pertains to a potential lease assumption. I live in NY and looking at taking over a Jeep Wrangler lease, which has 20 months at $485 per month. I’ve yet to submit my information to the credit union, so looking to better understand the transaction before moving forward. If I understand correctly, I’ll be paying $485 x 20 = $9700. When I register the vehicle, NYDMV will tax the leasing company for the remaining months. So, roughly 9% of $9700 and roll that into the new payment? So I should add $873 over 20 months to my costs?
Is there anything else I should consider before moving forward? The potential deal is for a 2018 Jeep Sahara Unlimited with 7500 miles. There are over 20k miles available on the lease, which is more than sufficient for our needs.
Thanks in advance for any tips and information.
I guess it depends on who the lessor/bank is but there’s a possibility they will just send you the paperwork to register it yourself at the DMV, where you will then pay the tax in a lump sum out of pocket.
Hi everyone. Thanks for the advice above. I am still trying to figure out how it applies in my situation, where the tax has been paid in advance by the original lessee. This is for an in-state lease transfer in New York. That is,
(1) The leasing company paid the tax on three years of payments in advance to NY state as required for registration.
(2) They then sent the original lessee a bill for these three years of tax payments (that is, 36 x 0.08 x (monthly payment)), which he paid to the leasing company in full up front.
(3) I am planning to take over the lease after two years.
Do I still owe sales tax on the final 12 months of payments, or does the leasing company’s original tax payment cover my payment period as well? If it is not covered, is anyone entitled to a refund?
I understand that there will be sales tax on the lease transfer fee (so be it) but I’m not clear whether the lease payments get double-taxed.
Thanks in advance for any replies.
Think about a parallel situation…
You buy the vehicle for $50k and pay $4k in taxes. After a year you sell it to someone for $40k. The buyer pays $3200 in taxes for the purchase, no discount for the taxes you paid. Each transaction gets taxed on the value of the item at the time of sale.
Same deal with a lease, at least in NY
With one crucual difference. When you buy a car, you are paying sales tax on an expenditure that you have already made. When you lease, on the other hand, you are paying sales tax in advance on monthly payments that you expect to make but haven’t made yet. When you transfer the lease, you never make those payments. But you have still already paid the tax for them in advance. So my question is whether the tax payments are transferrable to the person who picks up the lease, or refuntable, or if they effectively get double taxed.
And the answer to that is a big no. Uncle Cuomo ALWAYS gets paid. Just the way it is.