STATE OF FLORIDA DEPARTMENT OF REVENUE IN RE: THE PETITION OF LEONARD BERNSTEIN / Case No. DOR 03-1-DS DECLARATORY STATEMENT Petitioner, Leonard Bernstein, has petitioned the Department of Revenue for a declaratory statement. The Petitioner asks whether statutes exempting certain transactions from tax are applicable to a motor vehicle lease, when the vehicle originally was leased in New Jersey and later brought into, and registered in, Florida. JURISDICTION The Florida Department of Revenue has jurisdiction to render a declaratory statement as provided in section 120.565, F.S. Filing of the Petition was duly noticed in the Florida Administrative Weekly. ISSUE The specific question presented is substantially as follows: Whether Petitioner, who originally was a resident of New Jersey and who had leased an automobile in that state, is required to pay Florida sales tax on lease payments made after the Petitioner relocated to Florida and registered the leased vehicle in Florida, where New Jersey had imposed tax on the lessor of the vehicle as the end user of such vehicle, and did not require tax to be paid by Petitioner on the monthly lease payments. FACTS Petitioner, Leonard Bernstein originally was a resident of
New Jersey, and leased an automobile in that state. Under New Jersey law, the lessor was considered the end user of the leased vehicle, and was required to remit use tax with respect to the lease. No tax was required to be collected from Petitioner on the monthly lease payments, but the lessor was not prohibited from increasing such payments to cover the lessor's use tax expense. Petitioner relocated to Florida and registered the leased vehicle in Florida. Once registration occurred, the lessor began to charge the Petitioner Florida sales tax on the monthly lease payments PETITIONER'S POSITION Petitioner believes that the Petitioner was inappropriately charged tax twice on the lease of a motor vehicle. Under New Jersey law, the lessor of a vehicle is required to pay the use tax when the property is leased. The tax base is either the purchase price of the vehicle, or the total lease payments required to be made, less certain deductions. The Petitioner contends that when its lessor remitted the use tax to New Jersey, taxes were paid with respect to the lease between Petitioner and the dealer. Petitioner contends that he was indirectly required to pay the tax, since his lease payments were increased by the lessor to cover the lessor's tax burden. Section 212.06(7), F.S., provides that tax does not apply if a like tax equal to or greater than Florida tax has been lawfully imposed and paid in another state. The Petitioner contends that since the section of the Florida statute is silent regarding the entity paying the tax in the other jurisdiction, the Petitioner believes that the tax paid by the lessor at the time of entering into the lease with Petitioner should fulfill the requirements of this statute. Petitioner believes that requiring Florida taxes from him should be considered "double taxation" and not compatible with the intent of the Florida statutes. RELEVANT STATUTES Section 212.05(1)(c)2., F.S., provides: It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, including the business of making mail order sales, or who rents of furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state. (1) For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:... (c) At the rate of 6 percent of the gross proceeds derived from the lease or rental of tangible personal property, as defined herein; however, the following special provisions apply to the lease or rental of motor vehicles:... 2. 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 212.06(7), F.S., provides: 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. The proof of payment of such tax shall be made according to rules and regulations of the department. If the amount of tax paid in another state, territory of the United States, or the District of Columbia is not equal to or greater than the amount of tax imposed by this chapter, then the dealer shall pay to the department an amount
sufficient to make the tax paid in the other state, territory of the United States, or the District of Columbia and in this state equal to the amount imposed by this chapter. Section 212.06(10), F.S., provides: No title certificate may be issued on any boat, mobile home, motor vehicle, or other vehicle, or, if no title is required by law, no license or registration may be issued for any boat, mobile home, motor vehicle, or other vehicle, unless there is filed with such application for title certificate or license or registration certificate a receipt, issued by an authorized dealer or a designated agent of the Department of Revenue, evidencing the payment of the tax imposed by this chapter where the same is payable. A presumption of sales and use tax applicability is created if the motor vehicle is registered in this state. For the purpose of enforcing this provision, all county tax collectors and all persons or firms authorized to sell or issue boat, mobile home, and motor vehicle licenses are hereby designated agents of the department and are required to perform such duty in the same manner and under the same conditions prescribed for their other duties by the constitution or any statute of this state. All transfers of title to boats, mobile homes, motor vehicles, and other vehicles are taxable transactions, unless expressly exempt under this chapter. DISCUSSION New Jersey sales and use tax law differentiates between "leases" of motor vehicles and rentals of motor vehicles. A lease is an agreement for the use and possession of a motor vehicle for a period in excess of 28 days. Section 54:32B- 2(aa), NJ Rev. Stat.; NJ Division of Taxation & NJ Coalition of Automobile Dealers, NJ Sales and Use Tax Guide for Automobile Dealers, (Revised May 2001). If a motor vehicle is leased, rather than rented, in New Jersey, no tax is charged to the customer by the lessor with respect to the lease payments. Instead, the lessor is treated as the ultimate consumer of the
vehicle purchased for lease. The lessor itself is responsible for paying a use tax with respect to the leased vehicles. Sections 54:32B-2(e)(3), 54:32B-3(a), NJ Rev. Stat. The use tax to be paid by the dealer may be imposed either on the purchase price of the vehicle (less transportation charges to the dealer's place of business), or the total of the lease payments attributable to the property (less certain interest service charges and customer's trade deficit). Section 54:32B-2(bb), NJ Rev. Stat.; Section 18:24-1.4(p), NJ Admin. Code. It is the case that a dealer is not prohibited by New Jersey law from factoring into the required lease payments the tax paid with respect to the leased vehicle. However, the dealer is not required to do so, and may elect to increase the lease payments by an amount equal to only a portion of the lessor's tax burden with respect to the vehicle, or none of such tax burden. If the lessor does elect to pass on all or part of the tax burden to the lessee, the lessor may not separately state the tax on the lease agreement and collect it from the customer. The statutes impose the tax on the lessor, and the lessee is not liable to the state for the tax, absent fraud. Thus, while the tax paid by the lessor can be recouped as a cost of the lease, such as any other cost of doing business incurred by the lessor, the lessor cannot invoice such amounts as "sales tax" to the lessee. Sections 54:32B-6, 54:32B-7, NJ Rev. Stat.; NJ Division of Taxation & NJ Coalition of Automobile Dealers, NJ Sales and Use Tax Guide for Automobile Dealers, (Revised May 2001). The tax imposed in New Jersey was not imposed on the lease payments made by the lessee. Instead, the tax paid to New Jersey was for the lessor's use of the leased automobile. In Florida, Petitioner is being charged tax on a completely different transaction. That is, the Petitioner is being taxed directly on the lease payments made by Petitioner to its lessor. Because the New Jersey tax was not paid on the lease of the motor vehicle, such tax is not considered as being a "like tax", for purposes of the exemption provided under section 212.06(7), F.S. Also, since tax paid to New Jersey was not paid on the lease payments made by Petitioner, the exemption provided under Section 212.05(1)(c)2., F.S. also is not available. Under Section 212.06(10), F.S., there is a presumption of
the applicability of Florida sales and use tax to transactions involving a motor vehicle if such motor vehicle is registered in Florida. As such, Florida sales tax is due on the monthly lease payments from the time the vehicle was brought into Florida. CONCLUSION Petitioner is required to pay tax on the monthly lease payments made to its lessor from the date the leased vehicle was registered in Florida. DONE AND ORDERED this 3rd day of June 2003. STATE OF FLORIDA DEPARTMENT OF REVENUE JIM ZINGALE Executive Director APPEAL RIGHTS Any party whose substantial interests are determined by this Declaratory Statement has the right to seek judicial review of the Declaratory Statement as provided in Section 120.68,F.S., by filing a Notice of Appeal as provided by Rule 9.110, Florida Rules of Appellate Procedures, with the Agency Clerk, Florida Department of Revenue, Office of the General Counsel, Post Office Box 6668, Tallahassee, FL 32314-6668, and by filing a copy of the Notice of Appeal, accompanied by the applicable filing fees, with the appropriate District Court of Appeal. The Notice of Appeal must be filed within 30 days from the date this Declaratory Statement is filed with the Agency Clerk of the Department of Revenue. CERTIFICATE OF FILING I HEREBY CERTIFY that a true and correct copy of this DECLARATORY STATEMENT has been filed in the official records of the Florida Department of Revenue this 3rd day of June 2003.
JUDY LANGSTON Agency Clerk, Department of Revenue State of Florida CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this DECLARATORY STATEMENT has been furnished by U.S. Mail to Leonard Bernstein, 8275 Marsala Way, Boynton Beach, Florida 33437, on this 3rd day of June 2003. JUDY LANGSTON Agency Clerk, Department of Revenue State of Florida