Tax Due on Residual Value of Leased Vehicle when Option to Buy is exercised in Idaho

A taxpayer who totaled his leased vehicle, exercised his option to purchase the vehicle for the residual value of $18,738, and then sold the damaged vehicle to a salvage yard for $5,580 was not entitled to a refund of Idaho sales tax paid on the difference between the purchase price and the salvage value of the vehicle. Idaho tax law specifies that if a lessee exercises an option to buy, the lessor must collect sales tax on the full remaining purchase price when the option is exercised. The second transaction – the sale of the damaged vehicle to the salvage yard – did not affect the taxability of the first transaction.Idaho tax law does not allow for a reduction in tax when the amount paid exceeds the value of the tangible personal property purchased.(Decision No. 26111, Idaho State Tax Commission, August 1, 2014, released December 2014)

Posted on May 13, 2015