When a company leases a group of motor vehicles, a clause called TRAC (Terminal Rental Adjustment Clause) can be added to the contract. This clause allows for an adjustment to be made when the lease expires. At the end of the lease the true market value of each vehicle is calculated and compared to the projected value set in the lease. If it is determined a refund needs to be made by the lessor to the lessee, the refund should be made and the lessor’s gross receipts should be reduced to reflect this adjustment. However, if it is determined another payment needs to be made by the lessee to the lessor it is considered part of the lease. As a result, this final payment is taxable and the lessor’s gross receipts should be adjusted upward. (Department of Revenue Directive 02-08, Motor vehicles — TRAC Leases, August 1, 2002_