NY TSB-A-15(50)S Sales Tax 2015-12-11

Is New York sales tax on a car lease due all at once, and can I get a refund if I move the car out of state?

Short answer: The tax is due all at once, and there's no refund. For a motor-vehicle lease of one year or more, New York charges sales tax at the inception of the lease on the total of all lease payments for the entire term (due on the first payment), not month by month. The tax is legally imposed on the lessee (the customer), though the lessor is the party that must collect it and pay it over to the State. The rate is based on the lessee's place of residence when the lease begins -- here, New York. If you later move the car out of state and register it elsewhere, you are not entitled to a refund of the New York tax, because the whole amount was already due at inception and no statute or regulation allows a refund in that situation. (The Department also can't disclose whether a particular dealer remitted the tax, due to the Tax Law's secrecy provisions.)

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

An individual leased a new car while living in New York and was charged New York State and local sales tax on the total of the lease payments. He later moved to Florida, registered the car there, and started paying Florida tax on each monthly payment. He asked whether New York's up-front tax was correct, who it's imposed on, whether he could get a refund, and whether the dealer remitted it.

The Office of Counsel concluded:

The tax was due all at once. For a motor-vehicle lease of one year or more, Tax Law section 1111(i) makes the sales tax due at the inception of the lease on the total of all lease payments for the entire term -- not on each monthly payment.
It's imposed on the lessee (the customer) under section 1132, but the lessor is a "person required to collect tax" (section 1131) who must pay it over to the State.
No refund for moving out of state. The rate is set by the lessee's residence at the start of the lease (sections 1117, 1214) -- New York here. Because the entire tax was due at inception, moving the car to another state and registering it there does not entitle the lessee to a refund; no statute or regulation provides one (Miehle; Moerdler; Torquato).
Remittance can't be disclosed. The Tax Law's secrecy provisions (section 1146) bar the Department from saying whether the dealer remitted the tax on a particular lease.

What this means for you

Anyone leasing a car in New York

Budget for the full sales tax up front -- New York taxes a 1-year-plus lease on all the payments at signing, not monthly. Your local rate is set by where you live when the lease starts.

Moving out of state mid-lease

You won't get a New York refund for the remaining term. The other state may also tax your ongoing payments (as Florida did here) -- that's a question for that state, not a reason New York refunds.

Lessees vs. lessors

The tax is legally yours as the lessee, but the leasing company collects and remits it.

Common questions

Q: Why was I charged tax on the whole lease at once?
A: New York law (section 1111(i)) makes sales tax on a 1-year-or-longer car lease due at inception on the total of all payments.

Q: I moved to another state -- can New York refund the unused portion?
A: No. The full tax was due at inception, and no provision allows a refund when the car is later moved and registered elsewhere.

Q: Who actually owes the tax -- me or the leasing bank?
A: It's imposed on you, the lessee; the leasing company is required to collect it and pay it to the State.

Q: Can the Department tell me whether the dealer sent in my tax?
A: No -- the Tax Law's secrecy provisions prevent disclosure of a dealer's return information.

Citations and references

Tax Law section 1111(i) (sales tax on long-term motor vehicle leases due at inception on total payments)
Tax Law section 1132 (tax imposed on the customer/lessee)
Tax Law section 1131 (lessor is a person required to collect tax)
Tax Law sections 1117 and 1214 (lease tax based on lessee's place of residence)
20 NYCRR 527.15 (special rules for motor vehicle leases)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_50s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(50)S
Sales Tax
December 11, 2015

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S130903A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED (“Petitioner”). Petitioner asks whether: (1) New York State requires sales tax to be
paid at the time of the lease of a car on the total lease payments due under the terms of the lease;
(2) sales tax on a car leased in New York State is legally imposed on the lessee; (3) New York
State allows refunds of sales tax paid at lease inception if the car is removed from the State and
registered in a different state; and (4) the sales tax collected from Petitioner on his lease has been
paid over to New York State.
We conclude that Petitioner was properly charged sales tax on the total amount of lease
payments due at the inception of the lease and he is not entitled to a refund of the New York
State and local sales tax paid on his leased vehicle when he moved out of the state.
Facts
While living in New York State, Petitioner leased a new automobile in May 2011.
According to the terms of the lease, Petitioner was charged New York State and local sales tax
on the total amount of the lease payments of the vehicle. In February 2012, Petitioner relocated
to Florida (where he currently resides) and registered his automobile with the Florida DMV.
Since May 2012, the leasing bank has added Florida State sales tax to each monthly lease
payment.
Analysis
Issue 1 - Is New York State sales tax required to be paid at the time of the lease of a car on the
total lease payments due under the terms of the lease?
Sales tax applies to all receipts due or consideration given or contracted to be given on a
car lease for a term of one year or more at the inception of the lease. The tax is due on the date of
the first payment under the lease. See Tax Law § 1111(i)(A).
Sales and Use Tax Regulations provides:
Section 1111(i) of the Tax Law provides special rules for the payment of sales and
use tax on certain leases of motor vehicles…Rather than the tax being due upon each periodic
lease payment, the Tax Law provides that with respect to the leases described in this section
the tax is due at the inception of the lease on the total amount of the lease payments for the
entire term of the lease; 20 NYCRR § 527.15(a).

Issue 2 - Is sales tax on a car leased in New York State legally imposed on the lessee?

-2-

TSB-A-15(50)S
Sales Tax
December 11, 2015

Yes. New York State and local sales tax is legally imposed on the customer, which in the
case of a vehicle lease, is the lessee. See Tax Law § 1132, 20 NYCRR § 525.2(a)(4). However,
the lessor of the vehicle is a “person required to collect tax” and must pay over the tax to the
State. See Tax Law § 1131; 20 NYCRR § 527.15(c)(3)(i).
Issue 3 - Does New York allow refunds of sales tax paid at lease inception if the car is removed
and registered in a different state?
No. Sales tax on a vehicle lease due at the time of sale is based on the lessee’s place of
residence. See Tax Law §§ 1117 and 1214. Petitioner was a resident of New York State at the
beginning of the lease. If a leased vehicle on which New York State and local sales tax has been
paid is later moved out of the state, the lessee is not entitled to a refund because the entire
amount of tax was due at the inception of the lease. See Matter of Miehle, Tax Appeals Tribunal,
August 24, 2000; Matter of Moerdler, Tax Appeals Tribunal, April 26, 2001. There is no statutory
or regulatory provision that allows a refund if the vehicle is later removed from the State. See,
Matter of Torquato, Tax Appeals Tribunal, October 12, 2000.
Issue 4 - Has the sales tax been paid over to New York State on Petitioner’s lease?
The dealer is responsible for collecting the sales tax due on the lease at the time of receiving
the first lease payment from the lessee and remitting such tax to the Tax Department with its sales tax
return. See Tax Law §§ 1111(i), 1132, and 1137. Due to the secrecy provisions of the Tax Law, the
Department cannot disclose the dealer’s sales tax return information, including whether the dealer
has remitted the sales tax on Petitioner’s lease to the Department. See Tax Law § 1146.

DATED: December 11, 2015

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.