Mass.gov® is a registered service mark of the Commonwealth of Massachusetts. In many motor vehicle leasing transactions, the retail customer negotiates the terms and executes the lease contract with a dealer. The buyer must pay part of the Massachusetts use tax: If the state or territory it was bought in allows a corresponding exemption/credit for sales/use taxes paid to Massachusetts and the rate of tax paid to that state or territory is less than the Massachusetts use tax rate. If a retail customer trades in a motor vehicle to a dealer and receives credit on a motor vehicle lease, is the amount of the credit attributable to the trade‑in part of the sales price subject to tax and, if so, who is responsible for collecting and remitting the tax? The dealership is telling me that I will need to pay sales tax on the original price, $22,880, not the residual value of $14,020. Every buyer who is required to register or title the vehicle in Massachusetts, must file Form RMV-1, Application for Title and Registration within 10 days of buying, transferring, or using the vehicle within Massachusetts and pay any applicable tax to the RMV.

The sales tax varies by state. What are the sales tax consequences of a lessor applying a security deposit to past due lease payments, charges on termination of a lease, and legal or other costs incurred in connection with repossession following the lessee's default? All rights reserved. Sales/USE tax in Massachusetts is not calculated on the whole value of the vehicle, but is calculated using your monthly payment. Mitchell Adams Do not include sensitive information, such as Social Security or bank account numbers. c. 64H, § 26 and 830 CMR 64H.25.1(5)(c). A salvage vehicle is any vehicle that an insurance company: If the RMV has titled a motor vehicle titled to the seller as a "salvage vehicle," the sales/use tax is based on on the actual amount the buyer paid. Are charges for such expenses subject to tax when recovered from the lessee? Would you like to provide additional feedback to help improve Mass.gov? If you believe that you have paid sales or use tax on an incorrect book value, visit Request a motor vehicle sales or use tax abatement.

G.L. In sales of motor vehicles involving a trade‑in of another vehicle, the sales tax is computed on the sales price reduced by any amount credited towards the sales price by reason of a trade‑in if the sale is being made by a Massachusetts dealer in the regular course of business and the purchaser either previously paid a tax on the vehicle traded‑in or was exempt from tax on the vehicle traded‑in. The sales tax for car-lease payments is based on the sales tax of the state where the car is leased at the time of the lease. The amount of the monthly payment attributable to a separately stated charge in the lease is the total cost for that item as stated in the lease contract divided by the total number of months in the term of the lease. In Massachusetts, the taxable price of your new vehicle will be considered to be $5,000, as the value of your trade-in is not subject to sales tax. We will use this information to improve the site. But using the above example, say the sales tax … Your feedback will not receive a response. In Massachusetts, a rebate from a motor vehicle manufacturer to a motor vehicle dealer or to the lessee of the vehicle which is used as a Capitalized Cost Reduction or otherwise applied to payments due under the lease is part of the sales price subject to tax in accordance with the provisions of Directive 97‑4. You're entitled to a refund of the sales/use tax you paid if you're a buyer who: To claim this refund, file and submit to the DOR, all together: A buyer of a motor vehicle, trailer, or other vehicle who wants to dispute the amount of tax or interest and penalties assessed must file an abatement of tax. This form only gathers feedback about the website. "Separately Stated" Charges.

However, when an out‑of‑state dealer leases a vehicle for use, storage or consumption in Massachusetts, and the lessee takes possession of the vehicle out‑of‑state, the dealer must collect and remit use tax to Massachusetts [1] on Capitalized Cost Reductions to the extent that the use tax exemption for tax paid under the laws of another state does not apply. A retail customer who leases a motor vehicle from an out‑of‑state dealer and takes possession of the vehicle outside of Massachusetts generally must pay sales tax as required by the jurisdiction where the sale takes place. Where applicable, the excise is imposed at the rate of five percent of the sales price of the property or services sold. For a charge to be considered "separately stated," must the separate statement be in the lease contract or on the monthly payment coupon or both? When a manufacturer's rebate is paid on a leased vehicle, is the amount of the rebate subject to tax and, if so, who is responsible for collecting and remitting the tax? Massachusetts law does not limit the amount of doc fees a dealer can charge. Massachusetts taxes vehicle purchases after rebates or incentives are applied to the price, which means that the buyer in this scenario will only pay taxes on the vehicle as if it cost $9,000. No reduction in taxable sales price is allowed as a result of a trade-in. (4) the vehicle traded‑in was titled to the lessee. Cf. If a vendor sells tangible personal property to a retail purchaser who will receive a rebate from the manufacturer, the sales price subject to tax is the full purchase price of the property and is not reduced by the amount of the rebate. If you would like to continue helping us improve Mass.gov, join our user panel to test new features for the site.

2. This Directive clarifies the application of the sales and use tax statutes, G.L. If the charges for the optional extended warranty/service contract or "roadside assistance" contract are included in the lease payments and not separately stated in the motor vehicle lease, then the lease payment is subject to tax in accordance with the provisions of 830 CMR 64H.25.1(9). Cash down payments, trade‑ins of other vehicles, and manufacturer's rebates paid to the dealer at the time the lease is signed are often referred to as "Capitalized Cost Reductions," as they decrease the amount of the monthly payments due from the lessee during the term of the lease. The assessment of interest is not discretionary and the Department of Revenue does not have the authority to abate interest accrued on unpaid or late paid tax. It is not designed to address all questions which may arise nor to address complex issues in detail. This form only gathers feedback about the website. For example, if a lease on a Mercedes-Benz E-Class has a monthly price of $699 before tax, and your sales tax rate is 6%, the monthly lease tax is $41.94 in addition to the $699 base payment. However, the Supreme Judicial Court has ruled that G.L. Other Charges Included in Vehicle Lease Payments: Extended Warranty/Service Contracts and Life, Accident or Health Insurance. (This protects people who lease from having a spike in how much they owe if state sales taxes are increased.) Usage is subject to our Terms and Privacy Policy. The definition of sale includes any transfer of title or possession, or both, for a consideration including leases or rentals of tangible personal property.

If you would like to continue helping us improve Mass.gov, join our user panel to test new features for the site. Value adjustments based on the mechanical or structural condition of the motor vehicle are not considered under current sales/use tax law. c. 64H, § 1. Legal expenses or other costs incurred by a motor vehicle lessor in connection with repossession following the lessee's default are not lease or rental charges subject to tax when they are recovered from the lessee. If the sales or use tax is not paid on time, the buyer will have to pay interest and penalties.

Massachusetts imposes an excise upon all retail sales of tangible personal property and telecommunications services in Massachusetts by a vendor unless otherwise exempt. Our partner TaxJar can manage your sales tax calculations, returns and filing for you so you don't need to worry about mistakes or deadlines. Massachusetts has a sales and use tax on buying or transferring motor vehicles. s. 368(a)(1)), For forming a partnership or corporate trust, or for organizing a corporation, solely in exchange for ownership interest in the enterprise, or, To an owner of a business entity solely in exchange for the owner's interest on completely closing a partnership or corporate trust, or on the complete liquidation of a corporation, The vehicle's buyer paid a sales tax to the state or territory they bought it in, This tax was legally due to that state or territory, The vehicle's buyer has not received and has no right to receive a tax refund from the state or territory they bought it in, and, The state the tax was paid to allows a corresponding exemption for motor vehicle sales tax paid to Massachusetts. Multiply the base monthly payment by your local tax rate. How much do you agree with the following statements in the scale of 1, Strongly Disagree, to 5, Strongly Agree?

See TIR 91‑7. Massachusetts collects a 6.25% state sales tax rate on the purchase of all vehicles. If the cost of the policy is included in the lease payments and not separately stated in the motor vehicle lease, then the lease payment is subject to tax in accordance with the provisions of 830 CMR 64H.25.1(9). c. 64H, § 33. Gifts (Form MVU-24) – As long as the donor paid any Massachusetts sales or use tax before, transferring the complete ownership of a motor vehicle, trailer, or other vehicle by a donor to a recipient (and intended on the donor's part as a gift) is tax-exempt. Commissioner of Revenue. /s/Mitchell Adams See G.L. SalesTaxHandbook is a free public resource site, and is not affiliated with the United States government or any Government agency, Sales Tax Handbooks By State | Charges paid by the lessee at termination of a motor vehicle lease for excess mileage, excess wear and tear, reconditioning, early termination of the lease, or other similar charges are included in the sales price upon which tax is calculated for that period. Continental‑Hyannis Furniture Company, Inc. v. State Tax Commission, 318 N.E. Would you like to provide additional feedback to help improve Mass.gov?

This guide provides general information about Massachusetts tax laws and Department of Revenue policies and procedures. For example, if you purchased a motor vehicle in New Hampshire on January 1st and brought it into Massachusetts on June 30, a use tax would be due by July 20th. Generally, the Department will consider charges for an item "separately stated" if the total cost for that individual item is stated in the lease contract as a distinct component of the total lease charges.

To learn more visit, 830 CMR 64H.25.1: Motor Vehicles. Average DMV fees in Massachusetts on a new-car purchase add up to $801, which includes the title, registration, and plate fees shown above. 1 - Average DMV and Documentation Fees for Massachusetts calculated by Edmunds.com. The average doc fee in Massachusetts is $3401, and Cancelled sales ("rescissions of sale") - A completed and signed Form MV-AB2, Rescission of Sale of a Motor Vehicle Affidavit. SalesTaxHandbook visitors qualify for a free month by signing up via our partner program here. [1] Subject to any applicable constitutional limitations. These fees are separate from the taxes and DMV fees listed above. A rescission of sale is a cancelled sale.

c. 64H, §§ 1,2. However, if the motor vehicle or trailer was bought outside Massachusetts and brought into Massachusetts within 6 months of the purchase date, 1 of the following scenarios applies: The buyer doesn't have to pay Massachusetts use tax: If the state or territory it was bought in has a reciprocal agreement with Massachusetts (allows a corresponding exemption/credit for sales/use taxes paid to Massachusetts), and. However, if a motor vehicle dealer sells a motor vehicle to a customer who will receive a rebate after the sale, the sales tax is based on the full purchase price. If all of the above criteria are not met, the amount of a trade‑in credit is part of the sales price subject to tax in accordance with the provisions of 830 CMR 64H.25.1 and Directive 97‑4.