Which automobile-lease fees were taxable rent, and which disposal, repair, late-payment, and DMV amounts were excluded?

Plain-English summary

An assistant vice president of a redacted automobile leasing company listed ten fee categories in an absent December 29, 1986 letter. The February 5, 1987 opinion classified the descriptions but included no lease, price schedule, invoice, vehicle, payment or tax record. Counsel asked the company to include representative lease provisions if it wrote again.

Five charges were taxable required lease payments not otherwise excluded: excess mileage above a predetermined standard; a flat documentation fee when signing a new lease on the same vehicle; a processing fee at lease signing; a fee when the lessee assigned the lease; and a fee for a short extension without a new agreement.

Two kinds of “late charge” had opposite results. A charge for paying monthly rent late was not taxable under Regulation 1660(c)(1)(E). A charge for failing to return the vehicle on time paid for continued vehicle use and was taxable.

A collection charge also was taxable when a lessee failed to return the vehicle to the location specified by the lessor and reimbursed the vehicle-moving cost. The opinion treated it as a lease-required payment and cited Annotation 330.3180's drop-off rule.

Other results depended on stated assumptions. A termination or disposition fee was not taxable if it represented the lessor's disposal cost at early or scheduled termination. An excess-wear-and-tear fee was not taxable if it paid for repair or refurbishment after lessee default or for disposal cost at termination. The opinion does not establish that either condition actually existed.

Reimbursement for DMV fees and taxes the lessor actually paid when selling a vehicle after lease termination was not taxable under section 6011(c)(8). Penalties directly related to those fees and taxes were excluded too. No DMV invoice, payment or penalty record appears.

Live Annotation 330.3194 publishes only the excess-mileage, renegotiation, documentation, assumption, deferral and late-return taxable branches. It omits termination/disposition, wear and tear, late monthly payment, wrong-location collection charge, DMV reimbursement, every cited source and all conditional assumptions. No completed assessment, return, payment, refund, appeal or later result appears.

The opinion cites Annotation 330.3425 as June 13, 1979 for the nontaxable late-payment rule. The current live 330.3425 entry instead says May 1, 1974, and its linked supporting PDF is unavailable through both direct fetch and Sofya. The separate blocker records the recovery attempts; without that opinion, this page does not choose whether the difference is a revision, miscitation or separate record.

Common questions

Were excess-mileage and assumption fees taxable?

Yes, along with renegotiation, lease-processing documentation and short-extension deferral fees, because the opinion characterized them as required lease payments.

Were all late charges treated the same?

No. A late-monthly-payment charge was not taxable, but a late-return charge paid for continued vehicle use and was taxable.

When were wear-and-tear and termination charges excluded?

The termination fee had to represent vehicle-disposal cost. Wear and tear had to represent post-default repair or refurbishment or termination-disposal cost. The source supplies no records proving those assumptions.

Were DMV reimbursements taxable?

No, for actual fees and taxes paid by the lessor and penalties directly related to them.

Was the cost of moving a wrongly returned vehicle taxable?

Yes. When the lessee failed to return it to the lessor's specified place, the reimbursement was treated as a required lease payment.

Does the live annotation publish all ten answers?

No. It keeps six taxable categories and omits all nontaxable branches, the wrong-location collection charge and the opinion's record limits.

Did the opinion review the leases themselves?

No lease provisions are included. Counsel asked for representative provisions if the company submitted further questions.

Citations and references

• Cal. Code Regs., tit. 18, reg. 1660(c)(1)(B), (D), and (E) — default/repair, disposal, and late-payment exclusions
• Cal. Code Regs., tit. 18, reg. 1660(c)(1) — required lease payments and continued-use charges
• BTLG Annotation 330.3425 — late-payment rule, cited here as June 13, 1979 but live as May 1, 1974; underlying opinion unavailable
• BTLG Annotation 330.3180 — taxable wrong-return-location charge
• Cal. Rev. & Tax. Code § 6011(c)(8) and BTLG Annotation 330.3600 — actual DMV fee and tax reimbursements
• Live Annotation 330.3194 — six taxable categories only; nontaxable and collection-charge branches omitted
• Request, lease provisions and every fee, repair, disposal, DMV, tax and outcome record — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.3194
• Original supporting opinion: 330.3194 PDF

Original ruling text

330.3194

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

February 5, 1987

M--- W--- N--Assistant Vice President
Corporate Tax Department
W--- Company
XXX --- Street
--- ---, CA XXXXX
Re:

Taxation of various charges under leases
SZ -- XX-XXXXXX

Dear Ms. N---:
Your letter dated December 29, 1986 to Assistant Chief Counsel Gary Jugum has been referred to me for response. You list several charges made in connection with your leases of automobiles and ask whether those charges are subject to tax. Your descriptions of the charges and my conclusions are set forth below. "A. Termination/Disposition fee – assessed upon termination of the lease whether terminated early or upon schedule.” Assuming that this fee is related to the cost incurred in disposing of the leased vehicle upon termination of the lease, as specified by subdivision (c)(1)(D) of Regulation 1660, amounts paid under this provision are not subject to tax. "B. Excess Mileage Fee – assessed for excess miles driven by lessee over a predetermined standard. "E. Renegotiation Fee – assessed at the time the lessee signs a new lease agreement covering the same vehicle under a prior agreement. This is a flat rate documentation fee. "G. Documentation Fee – assessed at the time the lease is signed as a fee for processing the lease. "H. Assumption Fee – assessed if lease is assigned by the lessee to another party.

W--- Company

-2-

February 5, 1987
330.3194

"I.
Deferral Fee – assessed if lessee wishes to extend the lease for a short period of time without signing a new lease agreement.” These are all payments required by the lease which are not otherwise excludable from taxation. Therefore, all these charges are subject to tax. (Reg. 1660(c)(1).) "C. Excess Wear and Tear Fee – assessed for costs required to return the automobile to good operating order and condition.” Assuming this fee is required to repair or refurbish the vehicle after a default by your lessee, or is a cost incurred in disposing the vehicle upon termination of the lease, the fee is not subject to tax. (Reg. 1660(c)((1)(B) & (D).) "D. Late Charges – assessed for late payment of the monthly lease payment or for failure to return the vehicle timely upon termination of the lease.” A payment made by your lessee for failing to pay his rental payment when due is not subject to tax. (Reg. 1660(c)(1)(E), Business Taxes Law Guide (“BTLG”) Anno. 330.3425 (6/13/79).) A payment made by your lessee for failing to return the vehicle to you when due is a charge for use of the vehicle and is subject to tax. (Reg. 1660(c)(1).) "F. Collection Charges – Upon termination of the lease, the lessee is to return the vehicle to the place specified by the lessor. If the vehicle is not so returned, the lessee reimburses the lessor for the costs of moving the vehicle to that place.” A charge for your lessee’s failure to return the vehicle to the location you specify is subject to tax as part of the payments required by the lease. (BTLG Anno. 330.3180 (1/10/68).) "J. “DMV Fees and Penalties – reimbursement to lessor for fees charged by DMV upon sale of the vehicle after lease termination.” Reimbursement you receive from your lessee for fees and taxes you actually pay to the DMV are not subject to tax. (Rev. & Tax. Code § 6011(c)(8), BTLG Anno. 330.3600 (8/26/69).) Reimbursement for penalties directly related to these taxes and fees are also not subject to tax. If you have further questions, feel free to write us again. If you do so, please included representative lease provisions related to your questions. Sincerely,

David H. Levine
Tax Counsel
DHL:ss