Leases and Rentals of Motor Vehicles - Where Does the Sale Take Place?

NOTE: This article replaces the article titled "One-Payment Leases of Automobiles - Where Does the Sale Tax Place?" dated October 31, 2014.

When determining where the lease or rental of a motor vehicle takes place for Wisconsin sales tax purposes, the tax treatment may be different.

The tax treatment above also applies to leases of trailers, semitrailers and aircraft. Exception: For one-payment leases of trailers and semitrailers, the county and stadium taxes are based on where the customer receives the trailer or semitrailer (i.e., generally at the lessor or dealer's business location).

The tax treatment above does not apply to motor vehicles, trailers, semitrailers, and aircraft that are “transportation equipment."  "Transportation equipment" means any of the following:

Information about where a lease of transportation equipment takes place is available in Part XIII.D. of Publication 201, Wisconsin Sales and Use Tax Information.

Exemption for Nonresidents
Wisconsin has a sales and use tax exemption for the sale of a motor vehicle to a nonresident that purchases the motor vehicle in Wisconsin and who will not use the motor vehicle in Wisconsin other than to remove it from Wisconsin. (Section 77.54(5)(a), Wis. Stats. (2011-12))  This exemption also applies to one-payment leases described above, except short-term rentals. Therefore, if a nonresident of Wisconsin enters into a one-payment lease and receives an automobile in Wisconsin AND the nonresident does not use the automobile in Wisconsin other than to remove it from Wisconsin, no Wisconsin sales or use tax is due. Sales or use tax may be due to the person's state of residence or to the state in which the customer uses the automobile.

Retailers should document exemptions from Wisconsin sales or use tax on sales to nonresidents by obtaining an exemption certificate (Form S-211) from the purchaser or completing section “E” of Form e-MV11.

Note: It cannot be assumed that all sales and leases of motor vehicles in Wisconsin to nonresidents of Wisconsin qualify for this exemption. For example, if the customer will have service performed on the automobile in Wisconsin prior to removing it from Wisconsin, the exemption does not apply. Another example of "use" in Wisconsin is when a nonresident of Wisconsin purchases or leases an automobile in Wisconsin for use by the customer's child in Wisconsin for work or school.

December 9, 2014