When did Florida credit upfront tax paid on an out-of-state motor-vehicle lease?

Subject

Motor Vehicles Leased Outside the State of Florida

Plain-English summary

Florida credited an upfront out-of-state lease tax only under four conditions. The other state had to require upfront payment rather than offer it as an option, lawfully impose the tax on the lessee, provide no credit or refund when the vehicle left, and impose a tax like Florida's under section 212.06(7).

If the other state's rate was lower than Florida's state rate plus applicable county surtax, Florida taxed the difference on monthly lease payments. If legal incidence in the other state fell on the lessor, Florida gave no credit even when the lease required the lessee to reimburse that cost. Florida tax applied to future payments while the vehicle was registered in Florida.

What this means for you

Who legally owed the other state's tax mattered more than who economically paid it. Registration timing, refund rights, and rate comparisons also affected the result.

Common questions

Q: Did every upfront out-of-state tax earn a Florida credit? No.

Q: What if the other state taxed the lessor? Florida denied the credit.

Q: What if the other state's rate was lower? Florida imposed the difference, including applicable county surtax, on monthly payments.

Citations and references

• Fla. Stat. § 212.05(1)(c) — tax on leases and rentals
• Fla. Stat. § 212.06(7), (10) — credit for like tax and Florida registration
• Fla. Stat. § 215.26 — refund claims
• Fla. Admin. Code r. 12A-1.014(7) — motor vehicles brought into Florida
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-060

Original ruling text

SUMMARY

QUESTION: Does Florida allow credit for tax paid on the
lease of a motor vehicle in another state, when the other
state requires the tax to be paid up front on the full term

of the lease?

ANSWER - Based on Facts Below: Where the other state

requires the tax to be paid up-front on the full term of

the lease, Florida will allow a credit only when:

The other state requires the tax to be paid up-front, and

it is not an option;

The other state lawfully imposes the tax on the lessee;

The other state does not allow a credit or a refund of
taxes paid when the vehicle is removed from that state;

and,

The tax imposed by the other state must be a like tax, as

provided in s. 212.06(7), F.S.

If the tax rate of the other state is less than the rate
imposed by Florida, which would include the state tax rate
of 6 percent and the county surtax rate, if applicable, the
monthly lease payments will be subject to the difference of
the tax paid to the other state and the rate imposed by

Florida.

For states where the legal incidence of the tax falls on
the lessor, Florida will not allow a credit even though the
lessee may be contractually obligated to reimburse the

lessor for this expense.

Oct 26, 2000

Re: Technical Assistance Advisement 00A-060

Sales Tax

Motor Vehicles Leased Outside the State of Florida
Section 212.05(1)(c), F.S.

Section 212.06(7), F.S.

Section 212.06(10), F.S.

Section 215.26, F.S.

Rule 12A-1.014(7), F.A.C.

Dear:

This is a response, styled a Technical Assistance Advisement, to
your letter dated May 8, 2000, in which you have asked the
Florida Department of Revenue to provide clarification on how to
handle the imposition of sales tax on leased vehicles. You have
asked several questions, which will be discussed following a
presentation of the applicable Florida tax laws that relate to

your request.

Applicable Authority

In response to your request, the following passages from the
Florida Statutes are pertinent to the questions raised in your

letter. Section 212.05(1)(c)2., F.S., provides in part:

212.05 Sales, storage, use tax.

It is hereby declared to be the legislative intent that

every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at

retail in this state, including the business of making mail
order sales, or who rents of furnishes any of the things or
services taxable under this chapter, or who stores for use

or consumption in this state any item or article of

tangible personal property as defined herein and who leases

or rents such property within the state.
(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and

payable as follows:

(c) At the rate of 6 percent of the gross proceeds derived

from the lease or rental of tangible personal property, as
defined herein; however, the following special provisions

apply to the lease or rental of motor vehicles:

2. Except as provided in subparagraph 3., for the lease or
   rental of a motor vehicle for a period of not less than 12
   months, sales tax is due on the lease or rental payments if
   the vehicle is registered in this state; provided, however,
   that no tax shall be due if the taxpayer documents use of
   the motor vehicle outside this state and tax is being paid

on the lease or rental payments in another state.

Chapter 98-140, Laws of Florida, amended Section 212.05, F.S.,
effective July 1, 1998, by adding special provisions for the

lease of motor vehicles. One of these provisions is the
exemption for long term leases (12 months or more) of motor

vehicles, as stated above.

Section 212.06(7), F.S., provides:

The provisions of this chapter do not apply in respect to
the use or consumption of tangible personal property or
services, or distribution or storage of tangible personal
property for use or consumption in this state, upon which a
like tax equal to or greater than the amount imposed by
this chapter has been lawfully imposed and paid in another
state, territory of the United States, or the District of
Columbia. The proof of payment of such tax shall be made
according to rules and regulations of the department. If
the amount of tax paid in another state, territory of the
United States, or the District of Columbia is not equal to

or greater than the amount of tax imposed by this chapter,
then the dealer shall pay to the department an amount
sufficient to make the tax paid in the other state,

territory of the United States, or the District of Columbia
and in this state equal to the amount imposed by this

chapter.

Section 212.06(10), F.S., provides:

No title certificate may be issued on any boat, mobile

home, motor vehicle, or other vehicle, or, if no title is

required by law, no license or registration may be issued

any boat, mobile home, motor vehicle, or other vehicle,
unless there is filed with such application for title

certificate or license or registration certificate a

receipt, issued by an authorized dealer or a designated
agent of the Department of Revenue, evidencing the payment
of the tax imposed by this chapter where the same is
payable. A presumption of sales and use tax applicability

is created if the motor vehicle is registered in this

state. For the purpose of enforcing this provision, all

county tax collectors and all persons or firms authorized

to sell or issue boat, mobile home, and motor vehicle
licenses are hereby designated agents of the department and
are required to perform such duty in the same manner and
under the same conditions prescribed for their other duties
by the constitution or any statute of this state. All

transfers of title to boats, mobile homes, motor vehicles,

and other vehicles are taxable transactions, unless

expressly exempt under this chapter.

As mentioned above, s. 212.06(7), F.S., provides a credit for
taxes paid on tangible personal property purchased in another
state and brought into Florida for use in this state.

Therefore, our interpretation of s. 212.05(1)(c)2., F.S., when
read in conjunction with the provisions of s. 212.06(7), F.S.,

is that the Department will recognize and give credit for the
tax paid on a long-term lease of a motor vehicle in another
state, where that state requires the tax to be paid up-front,

the tax is imposed on the lessee, and the motor vehicle is
subsequently brought into and registered for use in Florida.
However, where the other state's tax rate is less than the rate
imposed by Florida, inclusive of any local surtax if applicable,
the Department will assess the difference on the monthly lease
payments while the vehicle is registered and used in this state.
Additionally, if the other state allows a refund of previously
paid tax on the remainder of the lease once the vehicle is
removed from that state, the lease payments made while the
vehicle is registered and used in Florida will be subject to

tax.

It has come to the attention of the Florida Department of
Revenue that some states treat long-term leases differently than
rentals for sales and use tax purposes. In these states, the
lessor is considered to be the end user of the leased property
and the one who is responsible for paying use tax when the
property is leased. The lessor is not required to collect sales
tax from the lessee. We have also learned that in some states
laws, nothing prohibits a lessor from increasing the lessee's
monthly payment to recover this tax expense. Therefore, in
these cases, tax is lawfully imposed on the lessor and not on
the lessee (even though the lessee may be contractually
obligated to reimburse the lessor) and credit cannot be allowed

as provided ins. 212.06(7), F.S.

In states where sales tax is imposed up front on the lessee at a
rate equal to or greater than the rate imposed by Florida, and a
refund of previously paid taxes is not allowed, the Department
would allow a refund of Florida taxes paid on the lease payments
while the vehicle is registered and used in Florida, provided

applicable requirements for receiving a refund are met.

Section 215.26, F.S., provides the requisite statutory authority
for a repayment of funds paid into State Treasury through error

as follows:

(1) The Comptroller of the state may refund to the person
who paid same, or his or her heirs, personal
representatives, or assigns, any moneys paid into the State

Treasury which constitute:

(a) An overpayment of any tax, license, or account due;

(b) A payment where no tax, license, or account is due; and
(c) Any payment made into the State Treasury in error;

and if any such payment has been credited to an
appropriation, such appropriation shall at the time of
making any such refund, be charged therewith. There are

appropriated from the proper respective funds from time to

time such sums as may be necessary for such refunds.

(2) Application for refunds as provided by this section

must be filed with the Comptroller, except as otherwise
provided in this subsection, within 3 years after the right

to the refund has accrued or else the right is barred.
Except as provided in chapter 198 and s. 220.23, an
application for a refund of a tax enumerated ins. 72.011,
which tax was paid after September 30, 1994, and before
July 1, 1999, must be filed with the Comptroller within 5
years after the date the tax is paid, and within 3 years

after the date the tax was paid for taxes paid on or after
July 1, 1999. The Comptroller may delegate the authority to
accept an application for refund to any state agency, or
the judicial branch, vested by law with the responsibility

for the collection of any tax, license, or account due. The
application for refund must be on a form approved by the
Comptroller and must be supplemented with additional proof
the Comptroller deems necessary to establish the claim;
provided, the claim is not otherwise barred under the laws
of this state. Upon receipt of an application for refund,

the judicial branch or the state agency to which the funds
were paid shall make a determination of the amount due. If
an application for refund is denied, in whole or in part,

the judicial branch or such state agency shall notify the
applicant stating the reasons therefor. Upon approval of an
application for refund, the judicial branch or such state
agency shall furnish the Comptroller with a properly

executed voucher authorizing payment.

In order to obtain a refund of taxes, Rule 12A-1.014(7), F.A.C.,

provides:

A taxpayer who has overpaid tax to a dealer, or who has
paid tax to a dealer when no tax is due, must secure a
refund of the tax from the dealer and not from the

Department of Revenue.

Based on this cited rule, it would be necessary for taxpayers to
request their refunds directly from the leasing company in order
to exempt the applicable lease payments from Florida sales tax.

The lessor may subsequently apply to the Department for a

corresponding refund.

Using the information provided above, the Department can address

each of your questions.

Question 1:

a. lf aleased vehicle, originally purchased for use
outside the [S]tate of Florida, transfers into the
[S]tate of Florida, must the lessor collect sales tax
on the monthly lease payments for the period that the

vehicle remains in Florida?

Answer: In situations where the other state requires tax to
be paid on each monthly lease payment, Florida will not
allow a credit. Sales tax should be collected and remitted
on each monthly lease payment when the vehicle is

registered and used in Florida.

Where the other state requires the tax to be paid up-front
on the full term of the lease, Florida will allow a credit

only when:

1. The other state requires the tax to be paid up-
   front, and it is not an option;

2. The other state lawfully imposes the tax on the
   lessee;

3. The other state does not allow a credit or a refund
   of taxes paid when the vehicle is removed from that
   state; and,

4. The tax imposed by the other state must be a like

tax, as provided in s. 212.06(7), F.S.

If the tax rate of the other state is less than the

rate imposed by Florida, which would include the state
tax rate of 6 percent and the county surtax rate if
applicable, the monthly lease payments will be subject
to the difference of the tax paid to the other state

and the rate imposed by Florida. You may visit our
web site at http://sun6.dms.state.fl.us/dor/ for

county surtax rates.

For states where the legal incidence of the tax falls
on the lessor, Florida will not allow a credit even
though the lessee may be contractually obligated to

reimburse the lessor for this expense.

b. If the answer to the above question is "no", under
what circumstances is the lessor relieved from
collecting Florida tax on the monthly lease payments?

What documentation is necessary?

Answer: Please refer to the answer provided in Question
1.a. for the first part of your inquiry. Regarding the
necessary documentation, a copy of the lessee's original
lease agreement and letter of determination from the
Department of Revenue of the lessee's state of residence
should be sufficient to establish the facts of a specific

situation.

c. Does it matter whether the tax paid in the previous

state is imposed on the lessor or the lessee?

Answer: Yes. Please refer to the answer provided in

Question 1.a.

d. What if the tax paid in the previous state was

collected on the monthly lease payment?

Answer: Given the fact that tax was not paid up front on

the full term of the lease, a tax liability is created when

the motor vehicle is registered in the State of Florida.

The monthly lease payments should include Florida sales tax

and the additional county surtax if applicable.

e. What if the tax paid in the previous state was imposed

on the lessor based upon the purchase price?

Answer: Please refer to the answer provided in Question

1.a.

f. What if the tax paid in the previous state is imposed

on the lessor based upon the sum of the lease

payments?

Answer: Please refer to the answer provided in Question
1.a. Florida recognizes and will give credit for tax paid

in another state by the party who is responsible for the
tax. In this case, since the responsible party is the
lessor, Florida cannot grant credit regardless of the

method used to calculate the amount of tax due.

g. What if no tax was due in the original state on the

previous lease transaction?

Answer: Florida recognizes and will give credit for tax

paid in another state by the party who is responsible for

the tax. In this case, since no tax was paid, there is no

credit available for recognition by the State of Florida.
Therefore, tax would be due on each monthly lease payment

when the motor vehicle is registered in Florida.

h. If acredit is allowed for tax paid in the original
state, does it include amounts paid to local

jurisdictions?

Answer: The tax credit allowed by Florida would include
amounts paid to local jurisdictions providing the original
tax assessed at the inception of the lease is a like tax,

as provided in s. 212.06(7), F.S.

i. Here are states where the taxes may be paid upfront:

Arkansas Maryland Oklahoma
Illinois New Jersey South Dakota
lowa New York Texas

Kentucky North Carolina) Vermont

Maine North Dakota South Carolina

Does Florida recognize taxes paid upfront in any state? If
not, what states are reciprocal? What happens if the
upfront sales tax rate was less than 6% - would this affect

the sales tax rate in Florida?

Answer: In response to the first two parts of this
question, as of the date of this response and according to
the records we have searched, New York is the only state
listed above where Florida will recognize taxes paid
upfront. Regarding the third part of this question, please

refer to the answer provided for Question 1.a.

j. If it is deemed that Florida is now reciprocal to
taxes paid in another state then what date does this

become effective and is this retroactive?

Answer: Please refer to the answer provided for Question
1.a. Also, the effective date would be the date the

original state changed its taxing statutes to impose the
tax on the lessee and not the lessor. There would be no

retroactive application for the credit.

Question 2:

A 36-month lease is originated in the [S]tate of Illinois.

Use tax is imposed on the lessor at 8.25% (6.25% State, 1%
County and 1% City) based upon the purchase price of the
vehicle. The lessee moves the vehicle to Florida in month

19 of the lease.

a. Should the lessor collect tax on future rental

payments due while the vehicle remains in Florida?

Answer: Florida does not allow credit for tax paid in
Illinois because the tax is imposed on the lessor. The
lessor should collect tax on future lease payments while

the vehicle is registered in Florida.

b. Would your answer be different if the vehicle moved in

month 12?

Answer: The only variable that applies to this question is
the date the motor vehicle is registered in Florida. If
the motor vehicle was registered in Florida in month 12 of

the lease, then a presumption of sales and use tax

applicability is created at that time and Florida sales tax

should be imposed on each successive monthly lease payment.

c. Would your answer be different if the tax is imposed

on the lessee?

Answer: Yes. Please refer to the answer provided for

Question 1.a.

Question 3:

A 36-month lease originated in lowa. Motor Vehicle Lease
Tax (5%) is imposed on the lessor and paid upfront based
upon the sum of the lease payments. The lessee moves the

vehicle to Florida in month 19 of the lease.

a. Should the lessor collect tax on future rental

payments due while the vehicle remains in Florida?

Answer: Florida does not allow credit for tax paid in lowa
because the tax is imposed on the lessor. The lessor
should collect tax on future lease payments while the

vehicle is registered in Florida.

b. Would your answer be different if the vehicle moved in

month 12?

Answer: Please refer to the answer provided for Question
2.b.

Question 4:

A 36-month lease originated in South Carolina. Use tax is
imposed on the lessor at 5%, however, there is a cap of
$300.00 tax that can be collected. Lessee moves to Florida

in month 19 of the lease.

a. Should the lessor collect tax on future rental

payments due while the vehicle remains in Florida?

Answer: Florida does not allow credit for tax paid in South

Carolina because the tax is imposed on the lessor. The
lessor should collect tax on future lease payments while

the vehicle is registered in Florida.

b. Would your answer be different if the vehicle moved in

month 12?

Answer: Please refer to the answer provided for Question
2.b.

Question 5:

A 36-month lease originated in North Carolina. Use tax is
imposed on the lessor at 3% with a cap limit of up to
$1,500.00. Lessee moves to Florida in month 19 of the

lease.

a. Should the lessor collect tax on future rental

payments due while the vehicle remains in Florida?

Answer: Florida does not allow credit for tax paid in North
Carolina because the tax is imposed on the lessor. The
lessor should collect tax on future lease payments while

the vehicle is registered in Florida.

b. Would your answer be different if the vehicle moved in

month 12?

Answer: Please refer to the answer provided for Question
2.b.

Question 6:

A 36-month lease originated in Oregon. No tax is imposed

on the transaction.

a. Should the lessor collect tax on future rental

payments due while the vehicle remains in Florida?

Answer: Please refer to the answer provided for Question

1.g.

b. Would your answer be different if the vehicle moved in

month 12?

Answer: Please refer to the answer provided for Question

2.b.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than

expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department

within 15 days of the date of this letter.

If you have any further questions with regard to this matter and
wish to discuss them, you may contact me directly at (850)922-
4729.

Sincerely,

Gary L. Gray

Tax Law Specialist

Technical Assistance & Dispute Resolution

GLG\

Control No: 41720