ARE YOU A PAY-AS-YOU-GO STATE?
Eyo Toe | December 2, 2021
When you think of the sales tax advantages of leasing, often times you might think it only applies to pay-as-you-go states. But, even if you are not in a pay-as-you-go state, there can be tax advantages based on where you are located. Pay-as-you-go sales tax refers to dealer only paying sales tax on the payments the receive from the customer as opposed to sales tax on the amount financed upfront. This is beneficial on the dealer’s cash flow and allows them to consistently be cash positive from day one of the deal.
If you are not a pay-as-you-go state, there are other ways of remaining cash positive and still receiving some of the sales tax benefits of leasing. Texas is a great example because although the sales tax is paid upfront in a lease, it is only paid once during the lifetime of the vehicle (regardless of whether it is released or sold after the first turn) AND dealers receive a tax credit on the remaining value once the car is liquidated which can be used to pay sales tax on future vehicles.
We encourage you to consult with your attorney to determine what other options are available if you are not in a pay-as-you-go state as each state is unique.