96-171
Response November 27, 1996
Request
XXXXX
Utah State Sales Tax Commission
210 North 1960 West
Salt Lake City, Utah 84134
Dear Ms Reese:
XXXXX gave us your name and suggested we write you
for an Advisory Opinion on a tax question we have. We are a Vehicle Leasing
Company actively leasing all types of new and used vehicles in the State of
Utah Many of our lessees after signing their leases move or are transferred out
of the State of Utah. According to Utah State Tax Bulletin 14-87 regarding Utah
Sales and Use Taxes On Rentals and Leases it states that "if the lease
originates in Utah, Utah sales tax is due on the total lease, even if the item(s)
are moved out of state..."(See attached copy of bulletin.)
This is becoming a major problem for us as the Utah
population becomes more mobile more of our lessees are moving out of Utah into
other states and taking our leased vehicles with them. In order to re-licence
the vehicles in the new state, our lease company must then start paying
use/sales tax to the new state. To ensure this is being done, many of the
western states in the past year have sent auditors to request a list of our
lessees and addresses and requiring that monthly use tax payments be sent to
their respective states for the number of months our lessees have resided
there. These other states have been willing to give the customer credit for
taxes paid in Utah while they lived here, however expect tax payments while the
customer is living in their state.
We are now being told there is no reciprocal
agreement on Utah's part and Utah continues to expect sales tax payments on all
leases originating here even though the lessee has left the state per the
bulletin referred to above. The exceptions are if the Lessor and Lessee enter
into a new lease contract or sign a special form the vehicle will be taken and
used out of state at the time the lease is closed. Neither of these exceptions
work in this case. It is not feasible since these leases are all assigned out
to various lenders under a financing arrangement and it is not possible to redo
them. An example of the problem is if
our lessee moves to XXXXX half way through his lease, both XXXXX and XXXXX
expect sales tax on the remaining payments.
The lessee certainly is not going to pay it twice
and the lessor can not afford to do it and we have a blatant case of double taxation.
If a lessee moves into Utah from another state in the middle of his lease, Utah
expects taxes from the time of Utah residence like the other states.
We would like this matter addressed and see what can
be done to avoid double taxation in these situations. Also why is there no
reciprocal agreement with other states to avoid taxation in two places. We
request an Advisory Opinion on this matter.
Your timely response is appreciated.
Sincerely,
XXXXX
XXXXX
Advisory opinion - collection of sales tax after
leased vehicle leaves Utah
Dear XXXXX,
We
have received your request for tax guidance pertaining to collection of sales
tax on lease payments after the leased vehicle leaves the state. We offer the following:
Under
section 59-12-103 (1) (k), a vendor must collect and remit sales tax on lease
payments if the lease originates in Utah and the leased vehicle will be used in
Utah over all or a portion of the lease.
We recognize an exception when the lease originates in Utah, but the
vehicle is immediately taken out of Utah and used exclusively outside
the state.
Many
states have a reciprocity provision that allows a credit for tax that is first
due and properly paid in another state.
From a Utah perspective when a lease originates outside of Utah and
sales tax is due on the lease payments in the state of origination, Utah will
allow a sales tax credit (up to the Utah rate) for tax paid to the other
state. Normally, a copy of the lease
agreement and documentation of tax paid to the other state is sufficient to
substantiate the payment at the time of registration. If the lease originates in Utah and the vehicle is used in Utah
for some period of the lease, the sales tax is first properly due in Utah. In that case, it is the other state that
should be granting a credit for sales tax paid in Utah. Contact the taxing authorities in those
states for information about their procedures for claiming the credit.
Please
let us know if you have other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner