Can a car leasing company charge sales tax on your excess mileage

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Request for Question Clarification by mvguy-ga on 28 Jul 2003 10:03 PDT

It depends on the jurisdiction (which country and state and/or
province). Please let us know which jurisdiction applies.  Thank you.

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Request for Question Clarification by mvguy-ga on 28 Jul 2003 10:04 PDT

Sorry. I just read the title of the question. I'll assume this took
place in California.

Yes, sales tax still applies.

The California sales tax law can be found here:

California Revenue and Taxation Code
Sections 6001-6024
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=41256425718+9+0+0&WAISaction=retrieve

The relevant portions are as follows:

6006.  "Sale" means and includes:
...
   (g) Any lease of tangible personal property in any manner or by
any means whatsoever, for a consideration, ...

6010.  "Purchase" means and includes:
...
   (e) Any lease of tangible personal property in any manner or by
any means whatsoever...

6011.  (a) "Sales price" means the total amount for which tangible
personal property is sold or leased or rented, as the case may be,
valued in money, whether paid in money or otherwise...

6012.  (a) "Gross receipts" mean the total amount of the sale or
lease or rental price, as the case may be, of the retail sales of
retailers, valued in money, whether received in money or otherwise,
without any deduction on account of any of the following:
...   (b) The total amount of the sale or lease or rental price
includes
all of the following:
   (1) Any services that are a part of the sale....

Basically, the law says that the _total_ cost of the lease is taxable.
 If it's a cost of the lease, it's taxable.  It makes no difference
whether a company charges $X for a lease and $Y for excess mileage or
whether it charges $(X+Y) for the lease and charges for no excess
mileage, it's the total lease cost that matters.

What Respree-ga says below is also accurate. The company that sold you
the lease is who hands over the tax money to the state, and what it
hands over is based on its gross revenue.  Again, it doesn't matter if
that revenue comes from a regular lease payment or from an "excess
mileage charge," it's still taxable revenue.

I hope this helps, even if it might not be the news you were looking
for.

Mvguy-ga





Search strategy:
I went to http://www.findlaw.com and followed links to find the
California tax statuetes.

Hello:

I am not a tax expert, but have 20 years of accounting experience and
own a company based in California (which means I file a California
sales tax return).

Te California sales tax that a company is required to pay is based on
revenue.  To the company, the fee that they charged you on excess
mileage is revenue.  I'm looking at the sales tax form right now. 
There are certain 'exclusions' from revenue, which means the company
does not have to pay sales tax.

Among them (list too long to mention), are:

- interstate sales
- sales to other retails for purposes of resale
- non taxable food
- sales to the US government
- bad debts losses
- returned merchandise
- cash discounts

and so forth.

Sales resulting from excess mileage from car rental companies is 'not'
among these exclusions.

I would say, "yes," the company was justified in charging you a sales
tax.

Hope this helps.