Could a vehicle trade-in allowance reduce the taxable sales price under a one-pay motor-vehicle lease?

Plain-English summary

The Department allowed a $30,000 trade-in allowance to reduce the sales price of a vehicle under a 36-month one-pay lease before sales tax was calculated.

Florida's definition of a sale includes a lease, so a used vehicle can be accepted as a trade on a new vehicle lease. The Department verified that the lessees owned the traded vehicle at the time of the transaction.

What this means for you

The ownership and title-transfer facts matter. The person leasing the new vehicle must own the trade-in, or the trade-in's owner must be present to transfer title directly to the lessor for the lessee's benefit.

Common questions

Did the allowance reduce the taxable lease price? Yes.

Did one-pay treatment prevent the credit? No.

What ownership condition applied? The lessee had to own the trade-in or arrange a direct title transfer from its owner to the lessor for the lessee's benefit.

Citations and references

• Fla. Stat. §§ 212.02(15)(a) and 212.09(1), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-041

Original ruling text

SUMMARY
QUESTION: Is a tax credit allowed for the trade of a motor vehicle under a one pay lease?
ANSWER: Yes. A trade in allowance should be deducted from the sales price of the leased
vehicle before applying sales tax.

August 19, 2009
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 09A-041
Sales and Use Tax
Motor Vehicle – Lease - Trade-In

Dear XXX:
This response is in reply to your letter dated July 9, 2009, requesting the Department’s issuance of a
Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 1211, F.A.C., regarding the Department’s position on the issue described below. An examination of
your letter has established that you have complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting your request for issuance of a
TAA.
Facts
The one pay lease agreement you provided to us indicates that XXX (purchasers) leased a 2008
Lexus LS460L from XXX (dealer) on December 20, 2007 for 36 months. The lease agreement
provides that the amount due at lease signing was $38,535.57. This amount includes a Total Lease
Payment of $35,350.92 (36 months multiplied by 981.97), $175.00 in Registration Fees, $62.00 in
Florida Fees, $599.95 in Dealer Services, $6.50 in Tire and Battery Fees, and $2341.20 in Taxes.
The lease agreement does not indicate that the purchasers traded a vehicle. However, the lease order
that you provided to us indicates that a 2005 Lexus LS430 was traded in under the lease. The lease
order indicates that the dealer allowed $30,000.00 for the trade. The Department has verified that
the vehicle traded was owned by the purchasers at the time of trade.
Requested Advisement
Your letter to us asks if there is a tax credit for a trade-in on a standard lease and/or one pay lease.
During our telephone conversation on August 10, 2009, you revised your question to us. You ask if
a tax credit is allowed for the trade of the purchasers' vehicle under their one pay lease.

Discussion
Florida law provides that a used article accepted as a trade on the sale of a new article, and that used
article is intended to be resold, is considered a credit or partial payment on the sales price of the new
article being purchased. Thus, any tax due is levied after the used article is deducted from the sales
price of the new article. See Section 212.09(1), F.S. The term "sale" includes leases of tangible
personal property. See Section 212.02(15)(a), F.S. Therefore, a used article can be accepted as a
trade on the lease of a new article. However, when a person trades-in a motor vehicle on the lease of
a new motor vehicle, the person that is leasing the new vehicle must "hold title to" (own) the motor
vehicle that is being traded, or the owner of the vehicle being traded must be present to transfer the
title directly to the lessor for the benefit of the lessee.
Conclusion
The purchasers' trade in allowance of $30,000.00 should be deducted from the sales price of the
lease vehicle before applying sales tax.
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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850)414-6107.
Respectfully,

Kimberly McCorvey
Technical Assistance & Dispute Resolution
Record ID: 67850