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Leasing and Hybrid Tax Exemption

Discussion in 'Dealers & Pricing' started by SuperGLS, Jul 23, 2014.

  1. SuperGLS

    SuperGLS Member

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    We live in Washington DC and will be leasing a new Prius soon. When purchasing a hybrid vehicle in DC there is an Excise Tax Exemption (Hybrid Vehicle Excise Tax Exemption | dmv). It's part of DC Code 50-2201.03 (j)(3)(J) (DC Code - ยง 50-2201.03. Mayor to make rules; Department of Transportation; Director; Congressional and Council parking; title fees; common carriers; penalties; prosecutions; publication of regulations; excise tax; etc.)
    We've purchased two since living in DC and there was no problem buying from a VA dealership and getting the exemption.

    However, while talking to VA dealers this time around, they suggest that since we won't really be the ones who own the car, it will be Toyota Financial Services, we are subject to paying the sales tax. The DC DMV told us over the phone (on two occasions, in May and again yesterday) that even when leasing we shouldn't have to pay sales tax.

    Anyone have any ideas?

    EDIT:

    I called Toyota Financial Services and they said that there would be a "municipality sales tax" and an "excise tax." Looking at the NCSL's State Hybrid & Electrical vehicle page, it says:

    Doesn't mention buying or leasing specifically.
     
    #1 SuperGLS, Jul 23, 2014
    Last edited: Jul 23, 2014
  2. SuperGLS

    SuperGLS Member

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    After talking to two dealerships they say it's not a sales tax, it's a "Use/user tax" that is "10% of the monthly payments." And that 10% tax is mandated by DC.

    We are going to attempt to get someone who knows something about it from the DC government (tax office, dmv, anyone) on the phone (hah!) and connect them to dealer so we can all have a chat.

    While just talking on the phone with the sales manager at a local dealership, he seemed to be frustrated with us for not just saying "ok, we'll pay it." Of course we are happy to pay for something we are required to pay, but if not, we rather keep our money. Plus these guys have to earn their money, right?

    The way it was broken down at one dealer to "get it laid out like you see on the commercials" with low monthly payments was:

    Prius Three with Solar Roof Package

    $2999 down (like Toyota's current Prius Two lease deal)
    $499 dealer processing fee
    $XXX tax
    $127 tags
    $650 acquisitions fee
    $695 for the added remote start

    This would get me a 24 month, 12K/year monthly payment of $239 (which is near the advertised $199 monthly payment.)

    Apparently, most often if your state has this use/user tax (along with all the other fees from above) is something that is rolled into the monthly payment.
     
  3. wjtracy

    wjtracy Senior Member

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    One thing you might want to consider, Va. is not a CARB state, so Toyota has a rule that the car must be purchased and registered in a CARB state if (at a later date) you want to have the CARB warranty eg; if you ever decide to purchase. Here at PriusChat we are trying to figure out if DC is considered a CARB state...not sure on that yet. MD is full CARB.

    You correct that Wash DC exempts sales (excise) tax on all cars over 40 MPG EPA City, so that includes Prius...But you got me, I do not know if that applies to leases. Let me know.

    UPDATE- From the material you posted it looks the the DC hybrid exemption applies to buyers only. In VA, we have 4% sales tax and don't even ask about our excessive annual local car taxes (which I presume do not factor into a lease). I am not into leases but the taxes and credits (if any) go to the original purchaser (the lease company).

    I am confused why you are considering Va. for the lease (although I like it) but for new Prii buyers many go to MD for lower fees and MD as full CARB attracts CARB state buyers for Toyotas. I suppose if you are leasing, VA only has 4% sales tax vs. MD 6% so maybe lease is advantage for Va.
     
    #3 wjtracy, Jul 23, 2014
    Last edited: Jul 23, 2014
  4. SuperGLS

    SuperGLS Member

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    We won't be buying it after lease, so that's not a concern for us. However, I think I will try one of the MD dealers today to see what they say.

    We did get a guy on the phone from the DMV who confirmed that there should be no excise tax on a hybrid vehicle purchased or leased by DC residents. He had never heard of this "10% DC use tax" that the dealers were talking about so I called the dealer and we were all on the phone together. The DMV guy said the only tax the DMV collects on vehicles is the excise tax, so questioned the dealer, if the DMV isn't collecting this Use Tax, then who was?

    The dealer couldn't adequately explain, but insisted they were correct, the DMV was going to check with someone else this morning and get back to me.

    I called the DC Office of Tax and Revenue and someone there told me "I don't know anything about it, that would have to be a DMV tax."

    So if it's not a DMV tax and not an Office of Tax and Revenue tax, what is it? This is becoming more interesting.
     
  5. wjtracy

    wjtracy Senior Member

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    OK keep us informed...some dealers are more experienced with out-of-state sales, so hopefully you are at a Beltway car dealer. I think DarCars and Fitzgerald have been mentioned as treating out-of-staters as business as usual (no probs).

    I've never leased so I do not know how Va. does that.
     
  6. SuperGLS

    SuperGLS Member

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    Thanks wjtracy.

    Upon talking to the DC DMV guy again this morning he says they don't know about the usage tax but that it's not paid to the DMV. Basically they are of no help.

    Called two MD dealerships. I first eased into the conversations with the starting point of the ongoing national Toyota Prius Two lease deal ($2999 down, $199 monthly payment for 24 months and 12K/year.) I thought this way I could ask "what other fees are there?" and have a baseline. Then I asked about getting a Prius Three with Solar Roof Package instead and what would change if that was the case.

    First dealer says there is a $300 processing fee, and "about $300" for tags/registration. Said there is "no sales tax because you are in DC and it's a hybrid." Said there were no other fees at time of signing the lease and also no fees at the end of the lease. Going to a Prius Three with Solar Package would move the monthly payment "around $25 for each $1000 more on the sales price of the car."

    Second dealer says there is a $300 processing fee, $312 tags/registration/inspection sticker fee, and a $434.16 usage tax for DC. $350 disposition fee from Toyota at the end of the lease if you turn in the car and walk away (same that the VA dealers told me.) Going to a Prius Three with Solar Package would move my monthly payment from $199 to $240.

    Every dealership seems to have a different answer. Guessing the first dealer doesn't really know about this supposed use/usage tax or doesn't want to mention it (because he obviously didn't want to mention the $350 disposition fee at lease end.)

    The MD dealers didn't mention any Acquisitions fee which leads me to believe it's wrapped up in the $2999 down?
     
  7. wjtracy

    wjtracy Senior Member

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    ...generally the "fees" added on by the dealer are maybe ~$300 less in MD ... so that's why some Va. folks go to MD to get a lower OTD cost on buying. But the lower Va. sales tax (4 vs 6% MD) may help keep Va. even in the lease case.

    I feel that Va. could jazz up car sales (and the local economy) by moderating our vision of cars as a big taxation opportunity. The Va. state sales tax is low, but then we have higher dealer fees then MD and a whopper local car tax in NoVA.
     
    #7 wjtracy, Jul 24, 2014
    Last edited: Jul 24, 2014
  8. SuperGLS

    SuperGLS Member

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    After visiting MD dealer yesterday, they were about $1200 cheaper overall with the same monthly payment. A lot of fees that the VA dealers were trying to add in (like the acquisitions fee) were already included in the $2999 down portion.

    They still had this mystical 10% DC Usage Tax though.

    I lived in Fairfax County for most of my life, so I understand the pain of the car tax. Still a much better place to live as compared to anywhere in MD!
     
  9. wjtracy

    wjtracy Senior Member

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    ....and you can rejoice in the fact the DC is now the only "state" to still give a tax credit to a plain old Prius hybrid.
     
  10. SuperGLS

    SuperGLS Member

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    Just wanted to complete this thread saying that we went with Jim Coleman Toyota in Bethesda. The price we agreed to on the phone was exactly what we ended up paying, they didn't try to tack on anything or do other stuff that dealers do.

    wjtracy, thanks for the thoughts in this thread.
     
  11. hybridbear

    hybridbear Member

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    How does that matter? You pay sales tax based on where the car is registered not where the selling dealer is. Right?
     
  12. wjtracy

    wjtracy Senior Member

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    Correct but I am a novice re: Leasing. How does sales tax work in lease case? I assume the buyer is the lease company so wouldn't they pay the sales tax (in the state of the purchase)?
     
  13. hybridbear

    hybridbear Member

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    In our experience with leasing the sales tax is determined by the state where the driver resides. The leasing company is the "owner" but they must be registered in your state in order to lease vehicles in your state. This means they have a Sales Tax # for your jurisdiction. Each state has different rules for sales tax on leases. Some charge sales tax on the full price of the car, others on the payments, others on the total amount of depreciation in the lease.
     
  14. wjtracy

    wjtracy Senior Member

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    OK that makes sense...that's why Dianne Whitmire (before the RAV4 EV shortage) was able to lease RAV4 EV to NJ residents who then got the NJ $4000 sales tax incentive.

    I now see that both Va. and Md. are the less common case where the state takes the full sales tax up front in a lease. OP was in DC so they may be allowed to spread out sales tax (which is excluded on a Prius in DC anyways).

    I am still unclear on DC status as CARB state...I reviewed many 2014 hybrid warranties (Toy, GM, FORD, Nissan, Honda, Hyundai) and nobody lists DC as one of the 13 CARB states. Yet many other references say DC is a CARB state.
     
  15. SuperGLS

    SuperGLS Member

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    Well we didn't pay any sales tax but did pay this seemingly made up usage tax. We chose to pay it up front, but dealerships indicated that they could roll any or all fees into the monthly payment had we wanted.

    When I bought my 2013 I also looked into the hybrid warranties because I wanted to find out if I could buy the car in MD and get the extended battery warranty. I couldn't find anything that clarified it, same as you.

    Meanwhile Jim Coleman is screwing up our good feelings towards them by moving very slowly on contacting the bank concerning the 2012 we sold to them. Will update later.