Friday, July 23, 2010

NY State and local sales and use taxes on long-term motor vehicle leases!

Sales and use taxes are commonly referred to as sales tax. It also includes any lease for a period of less than one year that includes one or more options to renew or contains similar contract provisions which, if exercised, would make the total period of the lease one year ormore. Motor vehicle means a motor vehicle as defined in section 125 of the Vehicle and Traffic Law, with a gross vehicle weight of 10,000 pounds or less. The term motor vehicle includes any motorized vehicle operated or driven on a public highway. Cars, light trucks, vans, motorcycles, and motorbikes are examples of motor vehicles.

The following vehicles are not considered motor vehicles:

  • Electrically-driven mobility assistance devices operated or drivenby a person with a disability;
  • Snowmobiles;
  • All terrain vehicles (ATVs);
  • Fire and police vehicles (other than ambulances);
  • Farm tractors and other farm equipment used exclusively for agricultural purposes or for snow plowing; and
  • Self-propelled caterpillar or crawler-type equipment while operated on a construction site.

General Section 1111(i) of the Tax Law provides special rules for computing and paying State and local sales and use taxes on long-term motor vehicle leases. In general, all receipts due or consideration given, or contracted to be given, for the leased motor vehicle for the entire period of the lease (including any option to renew or similar provision) are subject to sales tax at the inception of the lease, even if the payments are not required to be made at that time. The total sales tax due must be paid by and collected from the lessee on the date the first lease payment is due or the date the vehicle is registered with the New York State Department of Motor Vehicles (DMV), whichever is earlier.

Certain long-term motor vehicle leases by nonresidents not subject to tax:

New York State and local sales taxes do not apply to the long-term lease of a motor vehicle, even if the lessee enters into the lease and takes physical possession of the vehicle in New York State, if at the time of taking delivery, all of the following conditions are met:

  • The lessee is a nonresident of New York State;
  • The lessee has no permanent place of abode in New York State;
  • The lessee is not engaged in carrying on in New York State any employment, trade, business, or profession in which the vehicle will be used in this state;
  • The dealer does not issue to the lessee a New York State temporary or other similar certificate of registration as provided in section 420 or 420-a of the New York Vehicle and Traffic Law;
  • The lessee does not register the vehicle in New York State prior to registering the vehicle in another state or jurisdiction; and
  • Prior to the time the lessee takes delivery of the vehicle, the lessee gives the dealer a properly completed Form DTF-820, Certificate of Nonresidency of New York State and/or Local Taxing Jurisdiction. A dealer who obtains Form DTF-820 from the lessee prior to the time the vehicle is delivered to the lessee, and who retains Form DTF-820 and makes it available for inspection by the Tax Department, will not be liable for failing to collect sales tax on the lease transaction, provided the dealer does not know that the document issued by the lessee is false.
  • To Read More: NY State and local sales and use taxes on long-term motor vehicle leases!

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