Taxes and Leases must work together or you will pay too much tax on every equipment lease.
What your lease contract states, in case you didn’t the Read the Fine Print is as follows:
- The customer (Lessee) is responsible for all taxes on leased equipment. The three most common applicable taxes are sales, use and property.
- Leasing companies (Lessors) remit the tax monthly to the proper taxing authority. Lessors invoice the Lessee for the taxes. For property taxes, the Lessor may add a fee for tax collection and filing services.
- Some Lessors assess 1/12th of the property tax each month and include the tax in the monthly invoice. Other Lessors surprise the customer with an invoice for the full tax amount plus a fee at the beginning of the new year.
What Could Possibly Go Wrong? Help customers and clients or you may lose them.
Advise your customer that taxes will be added to their lease payment. It’s better to be proactive than to have a customer find a “surprise” on their first lease invoice. They may blame you for not telling them the whole storyIn some states, Lessees may pay the sales or use tax at lease commencement in one lump sum. Know the applicable tax provisions in your state. Let customers decide which works best for their business cash flow.
- In some states, Lessees may pay the sales or use tax at lease commencement in one lump sum. Know the applicable tax provisions in your state. Let customers decide which works best for their business cash flow.
- Each equipment dealer should know if the equipment they sell is tax exempt. Offer your customer a tremendous service and save them money when you know and share this information.
- Recently a Michigan printer received a $2,000 use tax refund on a digital copier lease. Neither their equipment dealer nor the printer’s accountant knew that digital copiers were tax exempt for Michigan printers. After some tax research, the leasing company received the correct refund support information and remitted the tax refund to the printer immediately.
- If tax is applicable, know the correct tax rates for your customers. One Texas company was billed too much sales and property tax. Their business location had been identified by the dealer in an incorrect county and school district. This error triggered extra taxes. Neither the dealer nor the leasing company took responsibility for this error.
Go the extra distance for customers. In 2013, this is what the guys who say they offer “Great Service” will do. They just Do It!