When someone assumes another person's existing long-term car lease in New York, is sales tax due again, and on what amount?

Plain-English summary

A motor vehicle lessor asked what happens, for sales tax, when a New York customer assumes (takes over) another customer's existing long-term car lease — does tax apply again, how is it figured, and does it matter that only a few payments remain?

The Office of Counsel concluded that a lease assumption is a new, separate, and distinct taxable sale. Sales tax is due at the inception of the assumption on the total of the remaining monthly payments, plus any down payment and acquisition/assumption fees the assignee pays. For a long-term motor vehicle lease (term of 12 months or more), tax on all lease receipts is due up front — at the earlier of the first payment's due date or when the assignee registers the vehicle — at the combined State and local rate where the assignee lives.

Two points the petitioner raised don't change the result:
- No credit for the original lessee's tax. The original lessee already paid (or financed) the full tax on the original lease, but because the assumption is a separate sale, the assignee gets no credit for that and owes tax on the whole remaining balance. New York's rules give no refund/credit even when lease receipts aren't actually paid (e.g., early termination).
- "Long-term" is set by the original term. If the original lease was for 12 months or more, the assumed lease remains a long-term lease subject to § 1111(i) even if fewer than 12 payments remain.

What this means for you

Drivers taking over (or handing off) a lease

Expect to pay sales tax again on the remaining payments when you assume someone's lease — the prior driver's tax doesn't carry over. Budget for tax on the remaining payments plus any down payment and assumption fee, at your home rate.

Leasing companies and dealers

Treat each lease assumption as a fresh taxable sale: collect tax up front on the remaining receipts plus fees at the assignee's local rate, and don't credit the assignor's prior tax.

Accountants and tax professionals

The mechanics are § 1111(i)(A) up-front taxation of all long-term-lease receipts, rate by §§ 1117/1214, and the 20 NYCRR 527.15(e) no-credit/no-refund rule (Greenfield; Moerdler; Miehle).

Common questions

Q: The original driver already paid the tax — why do I pay again?
A: Your assumption is a separate sale, so you owe tax on the remaining payments and get no credit for the tax the original lessee paid.

Q: What amount is taxed?
A: The total of the remaining monthly payments, plus any down payment and acquisition/assumption fees you pay, at the rate where you live.

Q: Only six payments are left — is it still a "long-term" lease?
A: Yes. If the original term was 12 months or more, it stays a long-term lease no matter how few payments remain.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law § 1105 (sales tax on retail sales of tangible personal property)
• Tax Law § 1101(b)(5) (definition of 'sale' includes a lease)
• Tax Law § 1111(i)(A) (long-term motor vehicle lease: tax due up front on all lease receipts)
• Tax Law §§ 1117, 1214 (rate at assignee's locality of residence)
• 20 NYCRR 525.2; 527.15(a), (e) (no refund/credit for prior lessee's tax)
• Matter of Greenfield (TAT 2019); Matter of Moerdler (TAT 2001); Matter of Miehle (TAT 2000)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-44s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(44)S
Sales Tax
October 20, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance (“the Department”) received a Petition for an
Advisory Opinion from [ REDACTED ] (“Petitioner”). Petitioner asks whether sales tax is due
where a New York customer assumes an existing long-term lease of a motor vehicle from another
New York customer and, if so, how such amounts are calculated and whether the number of
remaining payments due under the existing lease affects the taxability.
We conclude that sales tax is due at the inception of the assumption of the lease on the total
amount of the monthly payments due for the remainder of the lease, plus any down payment and
acquisition fees paid by the assignee as part of the lease assumption. Further, the duration of lease
term when it was first entered into by the original lessee dictates whether it is a long-term lease, not
the number of months remaining in the lease term when the lease is assumed.
Facts
Petitioner states that, in some instances, a New York customer who entered into a long-term
motor vehicle lease agreement with Petitioner seeks to assign that lease to another person. In these
situations, the assignee does not execute a new lease agreement with the Petitioner, and instead
assumes responsibility for paying the remaining lease payments due under the long-term lease
agreement. The assignee is required to register the vehicle in his or her name, but title to the vehicle
remains with Petitioner. At the time the assignment takes place, the number of payments/months
left on the lease in certain circumstances could be less than one year or 12 monthly payments. The
assignee usually is charged a one-time assumption fee and is responsible for the remaining monthly
lease payments. The entire amount of sales tax due on the original lease was paid by the original
lessee at the outset of the long-term lease and/or was financed as part of the lease agreement.
Analysis
New York State and local sales tax is imposed on receipts from the retail sale of tangible
personal property. See Tax Law § 1105. Tax Law § 1101(b)(5) explicitly defines “sale” to include
the transfer of title or possession or both, including a rental or lease, in any manner or by any means
whatsoever for a consideration, or any agreement therefor. With respect to any lease of a motor
vehicle for a term of 12 months or more (“long-term lease”), sales tax is due on all receipts due or
consideration given or contracted to be given for a leased vehicle for the entire period of the lease on
the date the first lease payment is due, or at the time the vehicle is registered with the Commissioner
of Motor Vehicles, whichever is earlier. See Tax Law § 1111(i)(A).
When an existing long-term lease agreement is assumed by an assignee, the transfer of
possession of the vehicle, in consideration for the assumption by the assignee of the remaining lease
payments, creates a new, separate and distinct taxable sale. See Tax Law § 1101(b)(5); 20 NYCRR §
525.2. Accordingly, sales tax is due upon the assumption of the lease on the entire amount of

-2-

TSB-A-20(44)S
Sales Tax
October 20, 2020

remaining payments due under the lease, plus any down payment and acquisition fees paid by the
assignee as part of the lease assumption, unless an exception applies. The applicable rate of tax is the
combined State and local tax rate in effect in the locality of the assignee’s residence. See Tax Law
§§ 1117 and 1214.
While the Petitioner points out that the entire amount of sales tax due on the original longterm lease was paid by the assignor at the outset of the lease term and/or financed as part of the lease
agreement, that has no effect on the tax owed by the assignee. See Tax Law § 1111 (i) (A) and 20
NYCRR § 527.15(a). Because the assignment of the lease is a separate sale, the assignee of a longterm lease must pay tax on the entire balance of remaining lease payments, plus any additional
amounts charged by the lessor. The assignee is not entitled to any credit for tax paid by another
person on a separate sale.
The Sales and Use Tax Regulations specifically provide that no refund or credit shall be
allowed for tax paid on a long-term lease based upon the fact that receipts are not actually paid, as in
the case of early termination of a lease. A party assuming a lease is not entitled to credit for the tax
paid by the original lessor. See 20 NYCRR § 527.15(e); Matter of Michael Greenfield, Tax Appeals
Tribunal, June 6, 2019; Matter of Moerdler, Tax Appeals Tribunal, April 26, 2001; Matter of
Miehle, Tax Appeals Tribunal, August 24, 2000.
Petitioner also asks if an assumed lease would be considered a long-term lease if the
remaining lease term is less than 12 months. If the original lease was for a term of 12 months or
more, the assumed lease is a long-term lease subject to the provisions of Tax Law § 1111 (i), and
tax is due on all receipts or consideration given for the assigned lease at the earlier of the due date of
the first payment or the date the vehicle is registered, regardless of the term remaining on the lease.
See 20 NYCRR § 527.15.
DATED: October 20, 2020

/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

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.