Is a vehicle lessor's flat fee for handling registration paperwork and getting license plates subject to New York sales tax?

Plain-English summary

A company that leases cars and trucks charged its customers a flat fee — the same regardless of the vehicle's value, paid by a separate check — to prepare the paperwork needed to register a leased vehicle and to go to the Motor Vehicle Department to pick up the plates. Customers had the option to do this themselves. The company asked whether that fee is subject to sales tax.

New York's sales tax applies to sales and leases of tangible personal property and to certain specifically listed services, and motor-vehicle leases have their own receipt-computation rules under Tax Law § 1111(i). A charge for a "documentary service" — preparing the application for registration or transfer, the temporary certificate of registration, and the certificate of sale — is not one of the services on which sales tax is imposed, as long as it is separately stated on the customer's bill of sale or contract.

Applying that, the Department concluded the lessor's registration-paperwork fee is not subject to sales tax under § 1105 and § 1111(i), provided two conditions are met: the charge is separately stated on the customer's lease or contract, and the customer has the option to prepare the forms and make the DMV trip themselves (and thereby avoid the fee). In other words, it is a genuinely optional, separately-billed administrative convenience, not part of the taxable lease receipts.

What this means for you

Vehicle lessors and dealers

A fee for handling registration paperwork and plates can be kept out of the taxable lease receipts, but only if you (1) separately state it on the lease or contract and (2) actually leave the customer free to do the paperwork and DMV trip themselves. If the charge is buried in the lease price or is effectively mandatory, that protection is at risk and it can be pulled into the taxable base.

Customers leasing vehicles

A separately-stated, optional documentary or registration-service fee is not itself a taxable service. It is distinct from the tax due on the lease of the vehicle, which is computed under the special motor-vehicle rules.

Accountants and tax professionals

The result rests on the documentary-service treatment (Information Booklet No. 5, ST-215) and the § 1111(i) lease rules: registration-preparation services are not enumerated taxable services, so a separately-stated, optional fee escapes tax. The separate statement and genuine customer option are the load-bearing conditions.

Common questions

Q: Is the registration-paperwork fee taxable?
A: No, provided it is separately stated on the customer's lease or contract and the customer had the option to prepare the forms and go to the DMV themselves.

Q: Why isn't it taxable?
A: Preparing the registration application, temporary certificate of registration, and certificate of sale is a "documentary service," which is not one of the services on which New York imposes sales tax.

Q: What if the fee is not separately stated?
A: The Department's conclusion depends on separate statement (and the customer's option to avoid the fee). Without those conditions, the charge is not protected by this analysis and could be treated as part of the taxable transaction.

Q: Does this affect the tax on the vehicle lease itself?
A: No. The lease of the vehicle remains taxable under the special motor-vehicle receipt rules in § 1111(i); only the separately-stated, optional documentary fee is outside the tax.

Q: Can another leasing company rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described. It shows the Department's reasoning, but your facts may differ.

Citations and references

Statutes and authorities:

• Tax Law § 1105 (imposition of sales tax on tangible personal property and enumerated services)
• Tax Law § 1111(i) (special rules for computing receipts on motor vehicle leases)
• New York State and Local Sales Tax Information Booklet No. 5, ST-215 (9/73) (documentary service charges)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_17s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-93 (17)S
Sales Tax
March 3, 1993

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920904A

On September 4, 1992, a Petition for Advisory Opinion was received from Vanco Leasing
Inc., 2257 Jericho Turnpike, Garden City, New York 11040.
The issue raised by Petitioner, Vanco Leasing Inc. is whether a fee charged by it to a
customer for the preparation of paper work necessary to register a car or truck and for registration
in connection with the lease of a car or truck is subject to sales tax.
Petitioner is a company that leases cars, light weight trucks and heavy trucks to its customers.
Petitioner charges a flat fee to all customers, regardless of the value of the vehicle, to prepare all the
necessary paper work for the various leasing companies and to register and get plates for the vehicle.
The flat fee is not based on the value of the vehicle, and is paid with a separate check. The fee is to
reimburse Petitioner for having someone to prepare the forms needed to register the car or truck and
go to the Motor Vehicle Department to pick up the plates. The customer has the option to prepare
the forms and go to the Motor Vehicle Department to pick up the plates.
Section 1105 of the Tax Law imposes a sales tax on the sale or lease of all tangible personal
property unless otherwise exempt, and on certain specified services. Leases of motor vehicles are
subject to special rules for computing receipts and consideration as set forth in Section 1111(i) of
the Tax Law.
The charge by a motor vehicle dealer for "Documentary Service" which represents
preparation of the purchasers' application for registration or transfer of registration, the temporary
certificate of registration, and the certificate of sale is not one of the services upon which sales tax
is imposed provided it is separately stated on the customer's bill of sale or contract. New York State
and Local Sales Tax Information Booklet No. 5, ST-215 (9/73).
It therefore follows that the fees charged by Petitioner to a customer for the preparation of
paper work necessary to register a car or truck and for registration in connection with the lease of
a car or truck is not subject to the sales tax imposed by Sections 1105 and 1111(i) of the Tax Law
provided the charge for said services is separately stated on the customer's lease or contract and that
the customer has the option to prepare the forms and go to the Motor Vehicle Department himself
and thus avoid paying the administration fees.

DATED: March 3, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.