One-Payment Leases of Automobiles Effective March 3, 2016 - Where Does The Sale Take Place?

​​​​NOTE: This article provides the tax treatment of one-payment leases, effective March 3, 2016, pursuant to 2015 Wis. Act 216. The tax treatment prior to March 3, 2016 is provided in the article titled "One-Payment Leases of Automobiles - Where Does the Sale Take Place?"

When determining where the lease of an automobile takes place for Wisconsin sales tax purposes, the tax treatment of a one-payment lease and a multiple-payment lease may be different.

  • One-payment lease - If there is only one lease payment, the lease takes place where the customer receives the automobile.  This is generally the lessor or dealer's location.
  • Multiple-payment lease - If there is more than one lease payment, the tax should be based on where the automobile will be customarily kept.  This is the primary location of the vehicle based on the address provided by the lessee to the lessor and is available in the lessor's business records.

The tax treatment above also applies to leases of other motor vehicles, trailers, semitrailers and aircraft that are not "transportation equipment." "Transportation equipment" means any of the following:

  1. Locomotives and railcars that are used to carry persons or property in interstate commerce.
  2. Trucks and truck tractors that have a gross vehicle weight rating of 10,001 pounds or greater, trailers, semitrailers, and passenger buses, if such vehicles are registered under the international registration plan under sec. 341.405, Wis. Stats., and operated under the authority of a carrier that is authorized by the federal government to carry persons or property in interstate commerce.
  3. Aircraft that are operated by air carriers that are authorized by the federal government or a foreign authority to carry persons or property in interstate or foreign commerce.
  4. Containers that are designed for use on the vehicles described in 1. to 3. and component parts attached to or secured on such vehicles.

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 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.  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 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.

March 3, 2016