Illinois Discusses Taxability of Final Lease Payments

The final payment of a lease-to-own transaction of tangible personal property was not subject to Illinois sales tax because the lease agreement constituted a true lease. In Illinois, sales tax is due on lease transactions that are deemed conditional sales where the lessor is guaranteed a sale of the leased property to the lessee by a nominal or one dollar purchase option at the end of the lease term. In this case, the lease did not guarantee a sale of the property at the inception of the contract. Title to the leased property was transferred to the lessee after the final payment was made and there was no nominal or one dollar option to purchase at the end of the lease. The lease agreement also allowed the lessee to walk away at the end of the lease term without further obligation or penalty. (Private Letter Ruling, ST 15-0013-PLR, Illinois Department of Revenue, October 15, 2015)

Posted on December 9, 2015