Quote:
Originally Posted by BCA
It varies by state but I think you generally always have to pay sales tax on the residual if you are buying at lease-end. This is because you are buying the car from BMWFS (lessor), which is a taxable event because it results in a name change on the title. In most states, that doesn't really equate to double taxation because during the lease term, you've only paid sales tax on your payments, not the residual.
If you are unlucky enough to live in Illinois or Texas (like me), you pay FULL sales tax at lease initiation AND pay tax on the residual again if you buy the car at lease-end. That's why they offer Owner's Choice financing here, which I just did for the first time on my current M3. It's basically just a way to avoid that double taxation by structuring it as a purchase from the beginning so that purchasing at end of term is not a taxable event (because my name is already on the title).
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The variation is wide. Typically the plate associated with the registration on the car is not yours but that of the leasing company-still has your name associated with it. You pay it off get the title and now must register the car in your name. This process is very specific by state and depends also on how the leasing company handles the transaction. Some collect it at payoff, some do not. In PA I have dealt with a company that paid the tax and one that did not. If you are buying it from BMW you do have a small window to defer the tax payment - until the current registration is due (PA only) - while not advised you do have the title and the fee is technically paid until the renewal date. The tax is due at the time of purchase.