Did Florida tax payments on a 1995 New York vehicle lease after the lessee moved and registered the vehicle in Florida in 1996?

Subject

Motor Vehicle Leased in New York

Plain-English summary

Florida sales tax applied to the monthly payments after the lessee moved the vehicle to Florida and registered it there. The lease began in New York in May 1995, and the vehicle was registered in Florida in July 1996. The long-term-lease provision allowing relief when another state taxed the payments did not take effect until July 1, 1998 and was not retroactive.

The entire $711.20 monthly contract payment was taxable even though part reimbursed the lessor for New York sales tax paid at lease inception. The invoices did not separately state rent and that reimbursement, so the reimbursement lost its identity as sales tax and remained in the Florida tax base.

What this means for you

The ruling turned on the pre-July-1998 transaction date and invoice presentation. A bundled out-of-state tax reimbursement was treated as part of rent.

Common questions

Q: Did New York tax paid at lease inception eliminate Florida tax? No, under the law applicable to this 1995 lease.

Q: Did the 1998 long-term-lease rule apply retroactively? No.

Q: Why was the reimbursement taxed? The invoice combined it with rent as one contract payment instead of stating it separately.

Citations and references

• Fla. Stat. § 212.06(8)(a) — leased property used or stored in Florida
• Fla. Stat. § 212.06(7) — credit for like tax paid elsewhere
• Fla. Stat. § 212.05(1)(c)2. — long-term motor-vehicle lease rule effective July 1, 1998
• Fla. Admin. Code r. 12A-1.007(2)(a) — aircraft, boats, mobile homes, and motor vehicles
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-063

Original ruling text

SUMMARY

QUESTION: Whether Florida sales tax should be applied to
the monthly lease payment for a vehicle that was leased and
registered in New York prior to being removed and
registered in Florida before the law change in July 1998.
Alternatively, if it is proper to impose Florida sales tax
on these monthly lease payments, whether Florida sales tax
should be "pyramided" on New York sales tax that is
included in the base monthly rent payment.

ANSWER - Based on Facts Below: Section 212.05(1)(c)2.,
F.S., provides for an exemption from Florida sales tax if
the taxpayer can document use of the motor vehicle outside
of Florida and that tax is being paid on the lease or
rental payments in another state. It is important to note,
however, that this provision did not go into effect until
July 1, 1998. There is no retroactive application of the
credit provided for in Section 212.05(1)(c)2., F.S. Thus,
there is no application of the credit for transactions that
occurred before July 1, 1998.

Taxpayer entered into the lease agreement in May 1995, well
before the law change. Therefore, Lessor was correct to
apply Florida sales tax to Taxpayer's monthly lease payment
upon registration of the vehicle in Florida.

Regarding Taxpayer's alternative argument, the monthly
invoices from Lessor did not separately state the amount to
be paid for rent and the amount to be paid for New York
sales tax. Instead, it was included in one lump sum shown
on the invoice as "contract payment." The failure to
separate the charges on the invoices caused the amount that
Taxpayer paid to Lessor as a reimbursement for New York
sales tax to lose its identity as sales tax. Thus, the
entire amount was subject to Florida sales tax.

Oct 04, 2001

Re: Technical Assistance Advisement 01A-063
Sales and Use Tax
Motor Vehicle Leased in New York
Section 212.06(8)(a), F.S.
Section 212.06(7), F.S.
Section 212.05(1)(c)2., F.S.
Rule 12A-1.007(2)(a), F.A.C.
XXX ("Taxpayer")
XXX ("Lessor")

Dear :

This is a response to your letter of August 29, 2001, requesting
a Technical Assistance Advisement (TAA) regarding the abovereferenced matter. This response to your request constitutes a
TAA under Chapter 12-11, Florida Administrative Code (F.A.C.),
and is issued to you under the authority of Section 213.22,
Florida Statutes (F.S.).

FACTS

On May 13, 1995, Taxpayer, a New York resident at the time,
entered into a 36 month lease of a 1995 Range Rover Discovery in
the state of New York. At the inception of the lease, New York
sales tax was paid on the full term of the lease as required by
New York tax law. In July 1996, Taxpayer relocated to Florida
and registered the vehicle in Florida at that time.
Subsequently, Lessor began adding Florida sales tax to
Taxpayer's monthly payment in the amount of $42.68. After
Taxpayer refused to pay the additional Florida sales tax
included in his monthly lease payment, Lessor repossessed the
vehicle. Taxpayer and Lessor are currently involved in
litigation over the issue at hand.

REQUESTED ADVISEMENT

Taxpayer requests advice on the application of Florida sales tax
to the monthly lease payment for a vehicle that is leased and
registered in New York prior to being removed and registered in
Florida.

APPLICABLE LAW, ANALYSIS, AND DETERMINATION

Taxpayer has raised two arguments to support his position that
Florida sales tax should not have been imposed on the monthly
lease payments for the vehicle that he removed from New York and
registered in Florida. In a September 17, 2001, telephone
conference between Taxpayer and the Department, Taxpayer noted
that in previous correspondence between the Department and
himself, the Department relied on Section 212.06(8), F.S., to
support its position that Florida sales tax was correctly
imposed on the monthly lease payment once the vehicle was
removed to Florida. Section 212.06(8)(a), F.S., provides:

Use tax will apply and be due on tangible personal property
imported or caused to be imported into this state for use,
consumption, distribution, or storage to be used or
consumed in this state; provided, however, that, except as
provided in paragraph (b), it shall be presumed that
tangible personal property used in another state, territory
of the United States, or the District of Columbia for 6
months or longer before being imported into this state was
not purchased for use in this state. The rental or lease
of tangible personal property which is used or stored in
this state shall be taxable without regard to its prior use
or tax paid on purchases outside this state. (emphasis
supplied)

Taxpayer stated that the application of Section 212.06(7), F.S.,
to his situation creates a different result than does the
application of Section 212.06(8), F.S. Section 212.06(7), F.S.,
provides in part:

The provisions of this chapter do not apply in respect to
the use or consumption of tangible personal property or
services, or distribution or storage of tangible personal
property for use or consumption in this state, upon which a
like tax equal to or greater than the amount imposed by
this chapter has been lawfully imposed and paid in another
state, territory of the United States, or the District of
Columbia....

Taxpayer stated that at the inception of the lease, New York
sales tax of 8 1/2% was imposed and collected on the total value
of the lease. Taxpayer contends that this was a "like tax,"
paid to another state and that pursuant to Section 212.06(7),
F.S., he should be given credit for the tax paid. Taxpayer
argues that the result from the application of Section
212.06(7), F.S., conflicts with the result from the application
of Section 212.06(8), F.S., and based on these inconsistent
results, the Department should not have the authority to choose
one result over another and impose sales tax on the monthly
lease payments.

It is a cardinal rule of statutory construction that the entire
statute under consideration must be considered in determining
legislative intent, and effect must be given to every part of
the provision under construction and every part of the statute
as a whole. State v. Gale Distributors, 349 So.2d 150 (Fla.
1977). It is the Department's position that the most reasonable
interpretation of Section 212.06(7) and (8) F.S., when read
together, is that the credits set forth in these subsections
extend to certain transactions but not to the rental and lease
of tangible personal property which is used or stored in this
state. Thus, the Department was correct in relying on Section
212.06(8), F.S., in its previous rulings.

Secondly, Taxpayer refers to the Department's TAA 00A-060, dated
October 26, 2000, in support of his position that it was
improper for Lessor to charge Florida sales tax since he was
entitled to a credit for the New York sales tax previously paid
to New York. Specifically, Taxpayer refers to the Department's
response to questions "1(a)," "1(i)," and "1(j)" set forth in
TAA 00A-060. The questions and responses are as follows:

Question 1(a):

If a leased vehicle, originally purchased for use outside
the [S]tate of Florida, transfers into the [S]tate of
Florida, must the lessor collect sales tax on the monthly

lease payments for the period that the vehicle remains in
Florida?

Response to Question 1(a):

In situations where the other state requires tax to be paid
on each monthly lease payment, Florida will not allow a
credit. Sales tax should be collected and remitted on each
monthly lease payment when the vehicle is registered and
used in Florida.

Where the other state requires the tax to be paid up-front
on the full term of the lease, Florida will allow a credit
only when:

1. The other state requires the tax to be paid up-front,
   and it is not an option;

2. The other state lawfully imposes the tax on the
   lessee;

3. The other state does not allow a credit or a refund of
   taxes paid when the vehicle is removed from that
   state; and,

4. The tax imposed by the other state must be a like tax,
   as provided in s. 212.06(7), F.S.

If the tax rate of the other state is less than the rate
imposed by Florida, which would include the state tax rate
of 6 percent and the county surtax rate if applicable, the
monthly lease payments will be subject to the difference of
the tax paid to the other state and the rate imposed by
Florida. You may visit our web site at
http://sun6.dms.state.fl.us/dor/ for county surtax rates.

For states where the legal incidence of the tax falls on
the lessor, Florida will not allow a credit even though the
lessee may be contractually obligated to reimburse the
lessor for this expense.

Question 1(i):

Here are states where the taxes may be paid upfront:

Arkansas

Maryland

Oklahoma

Illinois

New Jersey

South Dakota

Iowa

New York

Texas

Kentucky

North Carolina

Vermont

Maine

North Dakota

South Carolina

Does Florida recognize taxes paid upfront in any state? If
not, what states are reciprocal? What happens if the
upfront sales tax rate was less than 6% - would this affect
the sales tax rate in Florida?

Response to Question 1(i):

In response to the first two parts of this question, as of
the date of this response and according to the records we
have searched, New York is the only state listed above
where Florida will recognize taxes paid upfront. Regarding
the third part of this question, please refer to the answer
provided for Question 1.a.

Question 1(j):

If it is deemed that Florida is now reciprocal to taxes
paid in another state then what date does this become
effective and is this retroactive?

Response to Question 1(j):

Please refer to the answer provided for Question 1.a.
Also, the effective date would be the date the original
state changed its taxing statutes to impose the tax on the
lessee and not the lessor. There would be no retroactive
application of the credit. (emphasis supplied)

Prior to July 1, 1998, Florida law provided that a lease or

rental of tangible personal property used or stored in the State
of Florida was taxable irrespective of its prior use or prior
taxable status in another state. Section 212.06(8)(a), F.S., is
the statutory reference in this regard and provides that the
purchases of aircraft, boats, mobile homes, motor vehicles, and
other vehicles outside the State of Florida are granted an
exemption from Florida use tax when such purchases were made six
(6) months or more prior to the time the property was brought
into the State of Florida. However, this exemption does not
apply to the rental or lease of such property. In addition to
the cited statutory language provided above, Rule 12A1.007(2)(a), F.A.C., provides:

(2) Purchases Outside Florida.

(a) There shall be a presumption that any aircraft, boat,
mobile home, motor vehicle, or other vehicle purchased in
another state, territory of the United States, or the
District of Columbia but titled, registered, or licensed in
this state is taxable except as otherwise provided in
subsection (26) of this rule. This presumption may be
rebutted only by documentary evidence that the person
owning the aircraft, boat, mobile home, or motor vehicle
purchased the aircraft, boat, mobile home, or motor vehicle
in another state, territory of the United States, or the
District of Columbia six (6) months or more prior to the
time it is brought into this state. In order for such
property to be presumed exempt as purchased for use outside
Florida, the person owning the aircraft, boat, mobile home,
motor vehicle, or other vehicle must provide documentary
proof that such property was used in other states,
territories of the United States, or the District of
Columbia for six months or longer under conditions which
would lawfully give rise to the taxing jurisdiction of
another state, territory of the United States, or the
District of Columbia and any lawfully imposed tax was paid
to such state, territory of the United States, or the
District of Columbia before being imported into this
states. However, the rental or lease of any aircraft, boat,
mobile home, or motor vehicle which is used or stored in
this state is taxable without regard to its prior use or

tax paid on the purchase outside this state. (emphasis
supplied)

During the 1998 legislative session, the Florida Legislature
amended Section 212.05, F.S., to remove from the imposition of
sales and use tax, certain non-commercial motor vehicle leases
in excess of twelve (12) months. Chapter 98-140, Laws of
Florida, effective July 1, 1998, added Section 212.05(1)(c)2.,
F.S., which provides:

Except as provided in subparagraph 3., for the lease or
rental of a motor vehicle for a period of not less than 12
months, sales tax is due on the lease or rental payments if
the vehicle is registered in this state; provided, however,
that no tax shall be due if the taxpayer documents use of
the motor vehicle outside this state and tax is being paid
on the lease or rental payments in another state.

Section 212.05(1)(c)2., F.S., provides for an exemption from
Florida sales tax if the taxpayer can document use of the motor
vehicle outside of Florida and that tax is being paid on the
lease or rental payments in another state. It is important to
note, however, that this provision did not go into effect until
July 1, 1998. The Department referenced this law change in its
discussion and analysis of the questions posed in TAA 00A-060,
which is relied upon by Taxpayer in support of his position. As
explained in the answer to question 1(j), there is no
retroactive application of the credit provided for in Section
212.05(1)(c)2., F.S. Thus, there is no application of the
credit for transactions that occurred before July 1, 1998.

In the instant case, Taxpayer entered into the lease agreement
in May 1995, well before the law change. Therefore, Lessor was
correct to apply Florida sales tax to Taxpayer's monthly lease
payment upon registration of the vehicle in Florida.

Taxpayer also argues that it was improper for Lessor to
"pyramid" the Florida sales tax on the New York sales tax,
because New York sales tax is not a taxable item under Florida
law. The State of New York requires that sales tax on long-term
leases of motor vehicles be paid at the inception of the lease.

From the lease documents submitted by Taxpayer, it appears that
Lessor calculated New York sales tax on the total value of the
lease, and then added this amount, $2155.20, to the total value
of the lease before dividing the sum into 36 equal monthly
payments of $711.20. In the instant case, Lessor actually
remitted the sales tax for Taxpayer at the lease inception and
was to be reimbursed that amount by Taxpayer over the following
36 months.

The result of Taxpayer and Lessor using this method to remit
sales tax on the lease is that the amount paid every month to
Lessor for the sales tax reimbursement loses its identity as
sales tax. This is shown very clearly in the monthly invoices
from Lessor to Taxpayer. Taxpayer submitted two such invoices
from Lessor. The first is the June 1996 invoice when Taxpayer
was still a New York resident and the second is the July 1996
invoice when Taxpayer was a Florida resident. The June 1996
invoice shows a contract payment amount of $711.20, no amount
shown for sales tax (even though a column for sales/use tax
amount was present), and a total amount of $711.20. The July
1996 invoice, after Taxpayer moved to Florida, shows a contract
payment amount of $711.20, a sales/use tax amount of $42.67, and
a total amount of $753.87.

Unlike the July 1996 invoice, the June 1996 invoice does not
separately state the amount to be paid for rent and the amount
to be paid for sales tax. The failure to separate the charges
on the invoices causes the amount that Taxpayer pays to Lessor
as a reimbursement for sales tax to lose its identity as sales
tax. Thus, the entire amount, $711.20, becomes subject to
Florida sales tax.

In conclusion, Lessor correctly applied Florida sales tax to
Taxpayer's monthly lease payments for the vehicle that was
leased and registered in New York prior to being removed and
registered in Florida.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the requests
for this advice, as specified in Section 213.22, F.S. Our

response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules, upon which this advice is based, may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

M. Chris Lyon, Attorney
Technical Assistance & Dispute Resolution

Control #: 46622
MCL/