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Old 09-19-2016, 02:41 PM
6 posts, read 30,595 times
Reputation: 15


Quick question on vehicle sales tax, I've reviewed the MS sales tax code and can't find an answer.

I am considering 'turning in' a leased vehicle, by selling it to a dealer for the buyout price, and purchasing a new one. One dealer claims that the value of the leased vehicle can be deducted from the new car value to determine the sales tax.

Is this correct? This makes sense for owner financed trade ins, it makes little sense to me for trading in a leased vehicle. Some states specifically exclude leased trade ins, but I don't see where Mississippi specifies.. I just don't want to get to closing, and have the dealer say 'oh yeah, we messed up on our sales tax estimate, its actually $1K higher."

If anyone has experience with this situation, I'd appreciate a confirmation one way or the other.
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Old 09-19-2016, 04:34 PM
6 posts, read 30,595 times
Reputation: 15
I meant to say I'm trading in the leased car in the title, not turning it in.
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Old 09-20-2016, 08:06 AM
Location: Chattanooga, TN
2,791 posts, read 3,879,966 times
Reputation: 4296
So if I understand correctly, you are leasing a vehicle that is near the end of term. You have the option to "buy" it after that you've been paying on it for a few years (has it sunk in yet that leasing a car is a horribly bad deal?). You don't want to buy it, but a dealer has offered to buy it from you at your cost.

So you would buy it off lease, then immediately sell it to a dealer for that same price as partial payment on a new vehicle.

First, the dealer is correct on the end trade that the sales tax is on the net value (sales price minus trade-in value). Sales Tax Frequently Asked Questions

You would own your formerly leased vehicle at the time of the final transaction, so that would apply. But in order to get to that point you have to buy out the lease first.

The real question is whether or not you would owe sales tax on the buyout. You do have to pay sales tax on a lease of personal property (Sales Tax Frequently Asked Questions), so technically you've already paid sales taxes on your vehicle... but did you pay taxes on the full value of the car, or only on the lease payment amounts? If you only paid taxes on the lease payment value, then technically you should still owe sales taxes on the remainder if you buy-out.

Someone on this forum may know the answer, but honestly you should contact someone who knows for sure (internet advice is worth what you pay for it). Or try a different sub-forum, like the Automotive sub-forum. Personally I'd call the state tax commision and ask. At a minimum you could ask the dealer, and make it clear that if you find out you suddenly owe a few thousand extra in sales taxes that the deal's off.

Second, and possibly more important, make sure you're getting a good deal on the trade-in. Check the value of your vehicle (age, mileage). You may be able to get more for the lease than the buyout price.
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