Can a third party purchase a leased vehicle without payment of sales and use tax twice?
Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party. In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:
(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;
(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;
(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and
(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.
The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement.
This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.
Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.
Can a third party purchase a leased vehicle without payment of sales and use tax twice?
Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party. In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:
(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;
(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;
(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and
(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.
The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement.
This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.
Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.
Can a third party purchase a leased vehicle without payment of sales and use tax twice?
Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party. In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:
(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;
(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;
(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and
(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.
The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement.
This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.
Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.