When an auto-leasing finance company sells 60% of its vehicle lease portfolio (with the leases already assigned and the leased vehicles already taxed) to a related finance company, is that bulk transfer of vehicles a tax-exempt resale, and who owes tax going forward?

Plain-English summary

Mercedes Benz Credit Corporation buys motor vehicles from dealers and takes assignment of the dealers' long-term retail leases, becoming the lessor. It planned to sell about 60% of its retail lease portfolio — vehicles and their associated leases — to a related finance company, DaimlerChrysler Financial Services (DCFS), at fair market value. After the sale, DCFS would simply step into Petitioner's shoes as lessor: same lease terms, no interruption, and DCFS wouldn't use the vehicles itself except to keep leasing them out. Petitioner asked three things: whether the bulk transfer is a tax-exempt resale, what filing requirements result, and whether the transfer creates any new sales/use tax exposure on the underlying leases.

On the resale question, the Department said yes — because DCFS will use the vehicles exclusively to re-lease them (not for its own use), Petitioner's sale of the vehicles to DCFS qualifies for the resale exclusion and isn't subject to sales tax. To lock in that exempt treatment, DCFS has to give Petitioner a completed resale certificate (Form ST-120) within 90 days of the sale — since this covers many vehicles at once, a single blanket certificate covering the whole batch works instead of one per vehicle.

On filing requirements, DCFS becomes a New York vendor once it starts making taxable lease receipts here and must register (Form DTF-17) before doing so. Because roughly 60% of Petitioner's lease portfolio — a major part of its business assets — is changing hands outside the ordinary course of business, the transaction also counts as a bulk sale under Tax Law § 1141(c). That triggers its own separate paperwork: Petitioner must give DCFS the standard notice about DCFS's own bulk-sale filing duties (Form TP-153), and DCFS, as the purchaser, must notify the Department by registered mail at least 10 days before taking possession or paying (Form AU-196.10). Skipping this can make DCFS personally liable for any of Petitioner's unpaid sales tax, up to the purchase price of the assets.

On ongoing tax exposure, New York taxes long-term motor vehicle leases all at once, up front, based on the full stream of lease payments — not month by month. Since tax was already properly collected on these leases when they began (either by the dealer or by Petitioner), simply assigning the leases to DCFS as the new lessor doesn't create a new tax bill on the payments already covered. DCFS only has to start collecting tax on new events after the transfer — like an unplanned lease extension, a lessee later buying the vehicle at lease-end, or (in a cross-border wrinkle) a formerly out-of-state lessee who moves to New York and brings the leased vehicle along, which triggers use tax on the remaining lease payments from that point forward.

What this means for you

Auto-leasing and finance companies buying or selling lease portfolios

A bulk sale of leased vehicles to another finance company that will simply continue leasing them out qualifies as an exempt resale — get a properly completed (blanket, if appropriate) resale certificate to avoid paying tax at closing. Separately, if a meaningful chunk of your lease book changes hands outside the ordinary course of business, budget time for the bulk-sale notice process on both sides; missing it exposes the buyer to the seller's unpaid tax liability.

The new lessor after a portfolio acquisition

You don't inherit a fresh sales tax bill on leases where tax was already properly paid up front at lease inception. Your obligations kick in only for tax events that happen after you take over — lease extensions, end-of-lease vehicle purchases, or use tax if a lessee later relocates to New York with the vehicle.

Accountants and tax professionals

This ruling nicely separates three independent compliance tracks that a lease-portfolio sale can trigger simultaneously: (1) the resale-exclusion/certificate mechanics on the vehicle sale itself, (2) vendor registration for the buyer, and (3) the bulk-sale notification regime because of the scale of the transfer — each with its own form and deadline.

Common questions

Q: If I sell a batch of leased vehicles to another leasing company that will keep leasing them out, do I owe sales tax on that sale?
A: No, that's a sale for resale, exempt from sales tax, as long as the buyer gives you a properly completed resale certificate (a single blanket certificate is fine for multiple vehicles of the same kind).

Q: Does selling a large portion of a lease portfolio trigger anything beyond the sale itself?
A: Yes — if it's a major part of your business assets sold outside the ordinary course of business, it's a "bulk sale," which requires the seller to notify the buyer of the buyer's own filing duties and the buyer to notify the Department by registered mail before taking possession or paying, or risk becoming liable for the seller's unpaid tax.

Q: Does the new lessor owe tax again on leases where tax was already collected at signing?
A: No, not on the already-taxed portion. New York taxes long-term vehicle leases up front on the full lease term; taking over as lessor doesn't restart that. New tax only applies to new events after the transfer, like a lease extension or an end-of-lease purchase.

Q: What if a lessee moves to New York from another state during the lease?
A: The new lessor must collect use tax on the remaining lease payments from the point the lessee becomes a New York resident and brings the vehicle into the state, treating it as if the lease had started fresh in New York at that point.

Q: Can another leasing company rely on this exact outcome?
A: No. This advisory opinion binds the Department only for the petitioner on the facts described, though it applies the Department's general resale, bulk-sale, and long-term-lease rules, and follows the same result the Department reached in its own earlier Mercedes-Benz Credit and GE Capital Auto Lease opinions.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (definition of "retail sale"; resale exclusion)
• Tax Law § 1101(b)(5) (definition of "sale, selling or purchase"; includes leases)
• Tax Law § 1101(b)(8)(i) (definition of "vendor")
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1110(a) (compensating use tax)
• Tax Law § 1111(i) (special rules for long-term motor vehicle leases)
• Tax Law § 1134 (certificate of registration)
• Tax Law § 1136(a) (filing frequency thresholds)
• Tax Law § 1141(c) (bulk sale notification requirement)
• 20 NYCRR § 526.6(c) (resale exclusion; resale certificate)
• 20 NYCRR § 526.7(a)(2) (leases included in "sale")
• 20 NYCRR § 527.15 (motor vehicle lease tax mechanics)
• 20 NYCRR Part 537 (bulk sale rules)

Prior rulings referenced:

• Mercedes-Benz Credit Corp., Adv Op Comm T&F, March 22, 1996, TSB-A-96(19)S
• General Electric Capital Auto Lease, Inc., Adv Op Comm T&F, Sept. 15, 1995, TSB-A-95(37)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_48s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(48)S
Sales Tax
November 20, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001017A

On October 17, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Mercedes Benz Credit Corporation, 27777 Franklin Road, Southfield,
Michigan 48034.
The issues raised by Petitioner, Mercedes Benz Credit Corporation, are:
(1) In the transaction described below, whether the bulk transfer of motor vehicles that are
part of Petitioner’s retail automobile lease portfolio constitutes a sale for resale that is not subject
to sales or compensating use tax.
(2) What are the filing requirements under Article 28 of the Tax Law resulting from such
transaction.
(3) Whether there will be any sales and use tax consequences with respect to the underlying
leases of such vehicles to the lessees under such leases as a result of such bulk transfer.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
In a typical motor vehicle lease transaction for a year or more, a motor vehicle dealer
(“Dealer”) purchases a vehicle from a manufacturer. The Dealer owns the vehicle and leases it to
a retail customer in a “true lease” (not an installment sale). When the lease is signed, the Dealer is
listed on the lease as the lessor and the retail customer is listed as the lessee. As the lessor, the
Dealer is the owner of the vehicle and is entitled to receive the lease payments from the lessee.
Because the Dealer prefers to receive the value of the vehicle lease currently, rather than
receive monthly lease payments, the Dealer will often seek to sell the vehicle to a financing company
and assign the lease to the financing company. If the terms of the lease are found to be acceptable,
the financing company accepts the assignment, purchases the vehicle, and then it becomes the lessor
of the vehicle, taking over the responsibility of collecting any sales or use tax payments due.
Petitioner and DaimlerChrysler Financial Services, LLC (“DCFS”) are related financing
companies within the DaimlerChrysler organization. Petitioner purchases motor vehicles and
accepts lease assignments from various car dealerships as described above. Effective December 31,
2000, DCFS plans to purchase a portion of the motor vehicles and the associated leases from
Petitioner. DCFS will be receiving the right to the lease income and have title to the vehicles at the
conclusion of the leases. At this time, DCFS does not plan to sell or otherwise transfer the right to

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the lease income. The portion of the portfolio that will be sold is comprised of motor vehicles
subject to retail leases. The assets to be transferred include no trucks or company cars (i.e., cars
owned by DaimlerChrysler or any of its subsidiaries for use in the context of its business). The
purchase price will be at fair market value. DCFS is expected to purchase approximately 60% of
Petitioner’s portfolio.
Once the purchase has been completed, DCFS will become the lessor. The transfer of assets
will not affect the lease terms (i.e., DCFS will continue to lease the vehicles without interruption).
Further, DCFS does not intend to use the vehicles, except to lease them.
Either the Dealer or Petitioner has remitted the New York sales tax on each of the leased
vehicles at the commencement of the lease. It is assumed for purposes of this Advisory Opinion that
all of the leases are long-term leases (i.e., leases of one year or more).
Applicable Law and Regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes imposed by
subdivisions (a), (b), (c) and (d) of section eleven hundred five and by section eleven
hundred ten, the following terms shall mean:
*

*

*

(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such. . . .
(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume . . . conditional or
otherwise, in any manner or by any means whatsoever for a consideration, or any
agreement therefor. . . .
*

*

*

(8) Vendor. (i) The term “vendor” includes:
(A) A person making sales of tangible personal property or services, the
receipts from which are taxed by this article. . . .
Section 1105(a) of the Tax Law imposes sales tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided.

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Section 1110(a) of the Tax Law provides, in part:
Except to the extent that property or services have already been or will be
subject to the sales tax under this article, there is hereby imposed on every person a
use tax for the use within this state . . .except as otherwise exempted under this
article, (A) of any tangible personal property purchased at retail. . . .
Section 1111(i) of the Tax Law provides, in part:
(A) . . . with respect to any lease for a term of one year or more of (1) a motor
vehicle, as defined in section one hundred twenty-five of the vehicle and traffic law,
with a gross vehicle weight of ten thousand pounds or less . . . or an option to renew
such a lease or a similar contractual provision, all receipts due or consideration given
or contracted to be given for such property under and for the entire period of such
lease, option to renew or similar provision, or combination of them, shall be deemed
to have been paid or given and shall be subject to tax, and any such tax due shall be
collected, as of the date of first payment under such lease, option to renew or similar
provision, or combination of them, or as of the date of registration of such property
with the commissioner of motor vehicles, whichever is earlier. . . .[F]or purposes of
such a lease, option to renew or similar provision originally entered into outside this
state, by a lessee (1) who was a resident of this state, and leased such property for use
outside the state and who subsequently brings such property into this state for use
here or (2) who was a nonresident and subsequently becomes a resident and brings
the property into this state for use here, any remaining receipts due or consideration
to be given after such lessee brings such property into this state shall be subject to tax
as if the lessee had entered into or exercised such lease, option to renew or similar
provision, or combination thereof, for the first time in this state. . . .
Section 1134 of the Tax Law provides, in part:
(a)(1) (i) Every person required to collect any tax imposed by this article . . .
commencing business or opening a new place of business, (ii) every person
purchasing or selling tangible personal property for resale commencing business or
opening a new place of business . . . (iv) every person described in this subdivision
who takes possession of or pays for business assets under circumstances requiring
notification by such person to the commissioner pursuant to subdivision (c) of section
eleven hundred forty-one of this chapter . . . shall file with the commissioner a
certificate of registration, in a form prescribed by the commissioner, at least twenty
days prior to commencing business or opening a new place of business or such
purchasing, selling or taking of possession or payment, whichever comes first. . . .

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Section 1136(a) of the Tax Law provides, in part:
(1) Every person required to register with the commissioner as provided in
section eleven hundred thirty-four whose taxable receipts, amusement charges and
rents total less than three hundred thousand dollars . . . in every quarter of the
preceding four quarters, shall only file a return quarterly with the commissioner.
(2) Every person required to register with the commissioner as provided in
section eleven hundred thirty-four whose taxable receipts, amusement charges and
rents total three hundred thousand dollars or more . . . in any quarter of the preceding
four quarters, shall, in addition to filing a quarterly return described in paragraph one
of this subdivision . . . file either a long-form part-quarterly return monthly with the
commissioner.
Section 1141(c) of the Tax Law provides, in part:
Whenever a person required to collect tax shall make a sale, transfer, or
assignment in bulk of any part or the whole of his business assets, otherwise than in
the ordinary course of business, the purchaser, transferee or assignee shall at least ten
days before taking possession of the subject of said sale, transfer or assignment, or
paying therefor, notify the tax commission by registered mail of the proposed sale
and of the price, terms and conditions thereof whether or not the seller, transferrer or
assignor, has represented to, or informed the purchaser, transferee or assignee that he
owes any tax pursuant to this article, and whether or not the purchaser, transferee, or
assignee has knowledge that such taxes are owing, and whether any such taxes are
in fact owing. . . .
Section 526.6(c) of the Sales and Use Tax Regulations provides, in part:
Resale exclusion. (1) Where a person, in the course of his business
operations, purchases tangible personal property or services which he intends to sell,
either in the form in which purchased, or as a component part of other property or
services, the property or services which he has purchased will be considered as
purchased for resale, and therefore not subject to tax until he has transferred the
property to his customer. . . .
(2) A sale for resale will be recognized only if the vendor receives a properly
completed resale certificate. . . .

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Section526.7(a)(2) of the Sales and Use Tax Regulations provides:
Among the transactions included in the words sale, selling or purchase are
. . . rentals, leases or licenses to use or consume tangible personal property.
Section 527.15 of the Sales and Use Tax Regulations provides, in part:
(a) Section 1111(i) of the Tax Law provides special rules for the payment of
sales and use tax on certain leases of motor vehicles, vessels and noncommercial
aircraft. Rather than the tax being due upon each periodic lease payment, the Tax
Law provides that with respect to the leases described in this section the tax is due
at the inception of the lease on the total amount of the lease payments for the entire
term of the lease.
*

*

*

(c)(3)(i) Where an agreement to lease a motor vehicle for a term of one year
or more is entered into, the lessor must collect the tax at the inception of the lease,
based on the rate of tax in effect for the local jurisdiction in which the vehicle is
regularly garaged or stored. . . .
*

*

*

(d)(1) Use tax. With respect to the lease of a motor vehicle . . . for a period
of one year or more, where the lease is entered into outside New York State but the
property is subsequently brought by the lessee into New York State, any remaining
receipts due or consideration to be given attributable to the use of the property in
New York will be subject to tax as if the lease had been entered into for the first time
within New York State if:
(i) at the time of entering into the lease, the lessee was a resident of New York
State and leased the property for use outside the State but subsequently brings the
property into the State for use here; or
(ii) at the time of entering into the lease, the lessee was not a resident of New
York State but subsequently becomes a resident and brings the property into the State
for use in the State. . . .
Section 537 of the Sales and Use Tax Regulations provides, in part:
*

*

*

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(b) Filing Requirements. (1) A person who purchases in bulk the whole or
any part of the business assets of a person required to collect tax must, at least 10
days before taking possession of such assets or paying for the same, whichever comes
first, file with the Department of Taxation and Finance a notice of bulk sale. A form
for this purpose may be obtained from the Taxpayer Assistance Bureau, Department
of Taxation and Finance, State Campus, Albany, NY 12227, or from the Taxpayer
Assistance Bureau at any district office of the Department of Taxation and Finance.
*

*

*

(d)(3) A seller shall give each prospective bulk purchaser of the business
assets a copy of the notice to prospective purchasers relating to the purchaser’s bulk
sale notice requirements. Copies of such notice may be obtained from the Taxpayer
Assistance Bureau, Department of Taxation and Finance, State Campus, Albany, NY
12227, or from the Taxpayer Assistance Bureau at any district office of the
Department of Taxation and Finance.
Section 537.1 of the Sales and Use Tax Regulations provides, in part:
(a) Bulk sale. (1) The term bulk sale as used in this Part means any sale,
transfer or assignment in bulk of any part or the whole of business assets, other than
in the ordinary course of business, by a person required to collect tax and pay the
same over to the Department of Taxation and Finance. . . .
(2) The fact that a sale is or is not a retail sale does not determine whether
such sale is a bulk sale.
*
Example 3:

*

*

Corporation A, a person required to collect tax, sells its entire
inventory which is purchased by corporation B for resale.
The sale by A is a bulk sale.
*

*

*

(d) Ordinary course of business. (1) The phrase ordinary course of business
as used in this Part means any function, operation or transaction which is done
ordinarily or customarily in the course of business. . . .
(2) Where a major part of the business assets are sold, such sale is clearly not
in the ordinary course of business and is a bulk sale. Where fungible items are sold

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in bulk or all the items of a specific kind are sold, such sales would usually not be in
the ordinary course of business.
Opinion
Petitioner is a financing company that purchases motor vehicles and their associated long­
term leases from various car dealerships. Typically, the leases are initially negotiated and executed
by the dealers. The motor vehicles are subsequently sold to Petitioner and the leases are assigned
to Petitioner. Petitioner then becomes the lessor and title holder of the motor vehicles. Petitioner
plans to sell approximately 60% of its retail automobiles and their associated lease portfolio to a
related financing company, DCFS. The portfolio that will be sold to DCFS is solely comprised of
motor vehicles subject to a retail lease.
With respect to Issue (1), sales tax is imposed on the receipts from every retail sale of
tangible personal property unless otherwise excluded or exempted. See Section 1105(a) of the Tax
Law. Leases of tangible personal property are considered “sales” for sales and use tax purposes. See
Section 1101(b)(5) of the Tax Law. The transfer of possession of a motor vehicle from a lessor to
a lessee for the lessee’s own use, for a consideration, constitutes the lease of tangible personal
property. The lessor’s purchases of such vehicles which will be used exclusively for this purpose
fall within the resale exclusion contained in Section 1101(b)(4)(i)(A) of the Tax Law. Therefore,
the lessor’s purchases of motor vehicles which it will lease are not subject to State or local sales or
compensating use tax.
Petitioner, the current lessor, will sell its motor vehicles to DCFS and assign the associated
leases. DCFS will continue to lease the vehicles under the same lease terms, as the new lessor,
without interruption. Therefore, Petitioner’s sales of motor vehicles to DCFS that will be used by
DCFS exclusively for rental or sale are considered to be sales for resale, and are therefore exempt
from sales tax. To avoid paying sales tax at the time of purchase, DCFS must furnish Petitioner with
a properly completed Form ST-120, Resale Certificate, no later than 90 days after the sale. Since
DCFS is making multiple purchases of the same kind, DCFS may furnish, and Petitioner may accept,
a blanket Resale Certificate, rather than individual certificates for each vehicle. See Section
532.4(d)(4) of the Sales and Use Tax Regulations.
Concerning Issue (2), DCFS will be a vendor with respect to the vehicles located in New
York, since it will be making sales of tangible personal property, the receipts from which are subject
to tax. Since the various dealers were the original lessors of these long-term leases, they were
required under Section 1111(i) of the Tax Law to collect tax due at the inception of the leases. But
DCFS would be required to collect tax in certain instances, for example, on receipts from any
additional extension of the lease period not provided for by the original lease agreement and on the
purchase price if a lessee purchases the vehicle at the end of the lease. See Section 1111(i) of the
Tax Law and Section 527.15 of the Sales and Use Tax Regulations. As a vendor of these vehicles,

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and thus a person required to collect tax, DCFS must register for sales and use tax purposes at least
20 days prior to commencing business in New York State. See Section 1134 of the Tax Law. In
order to register, DCFS must file Form DTF-17, Application for Registration as a Sales Tax Vendor.
Also, DCFS must keep required records and file returns and remit any tax due.
If Petitioner is a dealer for N.Y.S. Department of Motor Vehicles (DMV) purposes, it would
be required to file a Form MV-50, Retail Certificate of Sale, for each vehicle in which title is to be
transferred to DCFS. If this is the case, the properly completed MV-50 would provide a statement
to the DMV that tax has been collected on a particular vehicle or that no tax is due because, for
example, the sale is for resale. If it is determined by DMV that Petitioner should not use Form
MV-50, Petitioner should use Form DTF-805, Schedule of Multiple Transactions - Casual Sale of
Motor Vehicle. Form DTF-805 allows for the transfer of a number of vehicles at the same time, and
it provides a check box which states that the motor vehicles listed will be used exclusively for rental
to customers.
In addition to the above described filing requirements, if Petitioner is a person required to
collect New York sales tax, the transfer of 60% of Petitioner’s lease portfolio will constitute a bulk
sale within the meaning of Section 1141(c) of the Tax Law and Section 537.1 of the Sales and Use
Tax Regulations. In that case, Petitioner must provide DCFS with a copy of Form TP-153, Notice
to Prospective Purchasers of Business and Business Assets, relating to DCFS’s bulk sale notification
requirements. DCFS, as bulk purchaser, is then required to notify the Department of Taxation and
Finance of the impending purchase by filing, by registered mail, Form AU-196.10, Notification of
Sale, Transfer or Assignment in Bulk, at least ten days before taking possession of, or paying for the
motor vehicles, whichever comes first. See Part 537 of the Sales and Use Tax Regulations. Failure
by DCFS to follow all of the bulk sale requirements would result in DCFS becoming liable for any
sales and use tax liability owed by Petitioner, up to the amount of the purchase price or fair market
value of the assets sold, whichever is higher. (For more information on bulk sales see Publication
750, A Guide to Sales Tax in New York State).
Concerning Issue (3), Section 1111(i) of the Tax Law contains special rules for computing
the sales tax on long-term motor vehicle leases. These rules require that the sales tax be computed
on the total amount to be paid to the lessor over the term of the lease; and that the tax be collected
from the lessee on the date of the first payment under the lease or at the time the vehicle is registered
with the Department of Motor Vehicles, whichever is earlier. Even though the lease payments are
made over the course of the lease term, the tax is due and payable in full on the total lease payments
at the start of the lease. Petitioner states that in this case, consistent with these requirements, an up­
front payment of tax on the motor vehicle leases has been collected and remitted either by itself or
the dealer involved.
If all taxes have been properly collected on the leases in accordance with Section 1111(i) of
the Tax Law, the subsequent assignment of the leases by Petitioner to DCFS, who will then be the

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lessor of the vehicles, will not make DCFS liable for the collection of sales tax on such lease
payments (see Mercedes-Benz Credit Corp., Adv Op Comm T&F, March 22, 1996, TSB-A-96(19)S;
General Electric Capital Auto Lease, Inc., Adv Op Comm T&F, September 15, 1995,
TSB-A-95(37)S). However, DCFS will be responsible for collecting any sales and compensating
use taxes which arise and are incurred after its purchase of the lease portfolio. If DCFS acquires
vehicles which were originally leased outside New York State to lessees who are non-residents of
New York, and such lessees then move to New York and bring such vehicles into New York, DCFS
would be required to collect compensating use tax on those lease payments required to be paid after
the lessee becomes a resident. See Section 1111(i) of the Tax Law and Section 527.15(d)(1) of the
Sales and Use Tax Regulations.

DATED: November 20, 2000

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.