# Moving to Texas, what to do with my lease?



## TXPearl (Apr 16, 2010)

jnmit12 said:


> I do know that Texas (perhaps a recent change?) permits new residents to pay a flat fee ($90) to title their car (owned or leased) when the move into the state. This obviously doesn't apply to current residents assuming an out-of-state lease.
> 
> Does anyone know more about the tax credits BMWFS accumulates? Based on a fuzzy memory, I think it relates to the fact they already have paid taxes on the full value of their in-state lease fleet?


In TX, leasing companies (BMWFS included) accumulate sales tax "credits" on the lease returns (unless the customer gets another car and the trade credit is applied to that transation). Like any other part of a car deal, they'll try to use the credits to their advantage. As I understand it, BMWFS only authorizes use of the credits for certain models - they use them like any other marketing support. In any case, you should ask about them.

On one lease (non-BMW), the dealer finally gave me the lease deal I wanted, but when they wrote it up, the price of the vehicle was higher, and then offset with sales tax credits.


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## lagunadallas (May 22, 2005)

TXPearl said:


> My X5 lease expires in a few months. I want a new 5-series, but for now the lease terms suck. I may look for a 6-12 month lease assumption to tide me over until the terms improve.


Same boat here! My 2007 X5 4.8i lease is up at the end of August. I like the new 5-Series but the residuals/money factors are not adding up to a very good deal on that car. Then again, I'm a little spoiled driving this $70K X5 from California at $727/month with $0 down for the 19 months I'll have it. I'd really like a 2011 740i but those terms aren't any better. Not sure what to do...but it's kind of fun having options.


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## chrischeung (Sep 1, 2002)

rgzimmer said:


> Yes. You will need to pay sales tax on the car to register it. Call BMWFS, assuming that's who you leased through. They may be able to assist.
> 
> Here's this specific question answered on the TX state site, http://www.window.state.tx.us/taxinfo/mtr_veh/faqmoveh.html
> 
> ...


I believe this applies to current TX residents. If you are moving to TX, I belive you are only charged a transfer fee.


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## Amir (Nov 18, 2002)

Does anyone have experience registering a lease assumption vehicle in Harris County Texas? I have been to the DMV 3 times in effort to register a bmw that I assumed an out of state lease on. Each time I have been told that I need to pay sales tax. They seemed to be pretty incompetent, and did not seem to care that there was no actual sale transaction, and that the owner's name on title remained the same. I would very much appreciate any assistance or further insight from anyone who has successfully registered their vehicle in TX.


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## chrischeung (Sep 1, 2002)

I recommend running a search. Some folks have definitely done it, but it may not be your county. Absent of any help, I suggest you look up the TX Comptroller's guide for Motor Vehicles, review the section regarding lease transfers, print that page out, highlight the relevant seciton, that take that to the tax office. Let us know how you make out.


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## Amir (Nov 18, 2002)

Chris,

Thank you for your suggestion. The irony is that I have gone through this process before and in the past only had to pay the new resident taxes. I did review the Texas Comptroller information and printed and highlighted the relevant portion of the text. If my reading of the rules is correct, there should be no use tax, and only a $90 new resident tax + registration fees. We'll see how it goes during round 4, armed with this information. I think I may also try to go to a different office this time.


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## chrischeung (Sep 1, 2002)

The issue may be grey. From what it sounds like you're doing 2 things at once - assuming a lease, and moving to TX. I agree even in this scenario, you shouldn't be paying sales tax.

However, from my experience, the process of the tax office is unless there is an indisputable directly listed scenario that says you don't pay tax, they're going to charge you. And even where there is direct evidence, they're going to call their supervisor/central office to verify first.


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## TXPearl (Apr 16, 2010)

Amir, print this and bring it with you to the tax office....

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=70


(in particular, section 'e')

Also, click on "Next Rule" (371) for definition of "new resident".

Good luck


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## specialk79 (Oct 8, 2012)

*I finally got the 411*

I may be very very late to this thread but I do have some concrete information from Colin county tax office and confirmed it with them several times.

For any lease transfers, where you are not buying out the lease you do not have to pay additional tax when registering it other than the $90 fee, for new or current residents its the same.

Only when you buy out the lease at the end of the term do you pay additional taxes on that ****out amount.

let me know if you have any questions on this.


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## Slave2Miles (Jun 1, 2011)

I have moved from Colorado to Texas two times now both with lease in tow (first time an S4 and this time an M3). With both BMW and Audi I changed my address in the system and they mailed out the paperwork I would need to give the DMV. My tax part of my lease payment went away and the State of Texas did not ask for any Tax from me. It was explained to me by the DMV that since I had already paid state tax once and the owner of the vehicle (Audi/BMW) stayed the same that they could not collect taxes again. So it is a loophole (if you want to call it that) but I have had no issues with this. 

Good luck and sorry your have to move to Texas! (I miss CO!)


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## EC7 (Apr 30, 2012)

I'm in a similar situation now. Moving to TX in a few months and I still have roughly 11 months on my lease. The currently has a CA title. Will the BMW dealership in TX charge for registration related fees when I turn the car in at the end of the lease? 

Thanks in advance. 

E


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## chrischeung (Sep 1, 2002)

EC7 said:


> Will the BMW dealership in TX charge for registration related fees when I turn the car in at the end of the lease?


Why would you expect that? Do you not plan on registering your car in Texas? They will charge you disposition.

Personal recommendation - start a new lease a few months before you move. Texas doesn't have income tax, but they tax car leases heavily. You only pay $40 or so as a transfer lease tax when moving into Texas, plus registration. It should all be around $200, and CA tax will drop from your lease payment.


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## EC7 (Apr 30, 2012)

chrischeung said:


> Why would you expect that? Do you not plan on registering your car in Texas? They will charge you disposition.


I kind of thought that the dealership might give me a hard time for returning a leased vehicle with a CA title.

I just renewed the registration in CA and it is good for one year. I don't plan on registering it in TX since i will still have a residence in CA, and a CA DL. Does that make sense?



chrischeung said:


> Personal recommendation - start a new lease a few months before you move. Texas doesn't have income tax, but they tax car leases heavily. You only pay $40 or so as a transfer lease tax when moving into Texas, plus registration. It should all be around $200, and CA tax will drop from your lease payment.


that's a smart thing to do. I can probably do this in 2015.


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## chrischeung (Sep 1, 2002)

I think you need to be very careful. As an out of state driver, you may be targeted for easy tickets. Plus if there is any disparity between where you report income, pay property taxes, register your car, then you may get yourself into trouble. Personal experience - TX tax office tends to want to tax first if there is any doubt. If they find the slightest hint that you are a current Texas resident, you will be asked to pay tax on the full current value of the car, even if leased and used.


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## EC7 (Apr 30, 2012)

chrischeung said:


> I think you need to be very careful. As an out of state driver, you may be targeted for easy tickets. Plus if there is any disparity between where you report income, pay property taxes, register your car, then you may get yourself into trouble. Personal experience - TX tax office tends to want to tax first if there is any doubt. If they find the slightest hint that you are a current Texas resident, you will be asked to pay tax on the full current value of the car, even if leased and used.


Wasn't aware of that. good thing you told me. I guess I'll have to register my car when i get there, and apply for a DL as well.


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## [email protected] BMW (Aug 2, 2010)

hmmm....why not just leave car alone w/ Colorado address............? it's 8 months why deal w/ drama of switching.


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## chrischeung (Sep 1, 2002)

[email protected] BMW said:


> hmmm....why not just leave car alone w/ Colorado address............? it's 8 months why deal w/ drama of switching.


That is an option. Just run through all the "what if" scenarios that apply. The cost to transfer registration if $187.25, and CA lease tax will drop off the lease payment. Personally I made sure to start a new lease prior to moving to TX, more than 30 days prior to moving, in order to take advantage of the favorable CA tax regulations.

Also the DMV in TX is particularly recalcitrant. You think CA is bad - in TX, you need to go to DPS for your driver's license, then to the Tax office to register your car. So you get to deal with the "DMV" twice! My recommendation - bring a book.


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## EC7 (Apr 30, 2012)

chrischeung said:


> That is an option. Just run through all the "what if" scenarios that apply. The cost to transfer registration if $187.25, and CA lease tax will drop off the lease payment. Personally I made sure to start a new lease prior to moving to TX, more than 30 days prior to moving, in order to take advantage of the favorable CA tax regulations.
> 
> Also the DMV in TX is particularly recalcitrant. You think CA is bad - in TX, you need to go to DPS for your driver's license, then to the Tax office to register your car. So you get to deal with the "DMV" twice! My recommendation - bring a book.


I called TX DMV and here is what they said:

#1. I have a current lease that originated out of state and would like to bring it into TX. I will become a new resident

==> pay the following: $30 application fee, $60 registration fee, $90 new resident fee.

the only thing that sucks is I just recently paid CA registration

#2. if in the future, I originate another lease in CA (since I still own a home in CA), then decide to bring the leased vehicle into TX.

==> pay the same set of fees listed above.


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## chrischeung (Sep 1, 2002)

EC7 said:


> #2. if in the future, I originate another lease in CA (since I still own a home in CA), then decide to bring the leased vehicle into TX.
> 
> ==> pay the same set of fees listed above.


I would be careful about trusting that. Just be prepared to pay the taxes as a Texas resident.

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=71

"(a) A "resident" within the meaning of the Texas Tax Code, §152.022, shall mean any person who lives in the state, and any firm, corporation, or association which is physically located in the state. A person who is temporarily living in the state, and retains a permanent home in another state, is nevertheless a resident of Texas for purposes of the Texas Tax Code, §152.022. A person, firm, corporation, or association may be a resident of more than one state at a time."

and

"(2) A new resident may also be a resident of other states. However, once residence is established in Texas, a person, firm, corporation, or association may not subsequently become a new resident within the meaning of the Texas Tax Code, §152.023, without a showing that the residence formerly established in Texas was abandoned."

I personally considered "flip flopping" between one state and the other, but it seems that it is prohibitive to do so. I would have had to justify why each time I was a "new resident". The last thing I would want is the Texas Tax Office auditing me. My interpretation of the spirit of the "new resident" tax is that they give you one chance to move all your cars into TX without paying tax on them. It's not meant to be a loophole to continually bring cars into the state tax free. The 6.25% tax is noted as a "sales and use tax", so you also can't say that you acquired car after it was first sold - it's charged also as "use", which can be post sale.

There also was in the past a loophole where you could have a friend start a lease, then transfer that lease to you in TX, assuming an existing lease, and not pay the tax. They closed that loophole.

http://www.window.state.tx.us/taxinfo/mtr_veh/faqmoveh.html

"When a vehicle is leased in another state and the lessee brings it to Texas for public highway use, the lessee (as the operator) owes motor vehicle use tax based on the price the lessor paid for the vehicle. The standard tax rate is 6 1/4%. Credit will be given for any tax the lessor or the lessee paid to another state. See motor vehicle sales tax rule 3.70 for additional information."

If you can get things to work, please report back how you got it done. I think that would be useful for others to know.


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## miamiboyca (Jun 19, 2012)

EC7 said:


> I called TX DMV and here is what they said:
> 
> #1. I have a current lease that originated out of state and would like to bring it into TX. I will become a new resident
> 
> ...


NOOOOOOOOO don't do it. 



chrischeung said:


> "When a vehicle is leased in another state and the lessee brings it to Texas for public highway use, the lessee (as the operator) owes motor vehicle use tax based on the price the lessor paid for the vehicle. The standard tax rate is 6 1/4%. Credit will be given for any tax the lessor or the lessee paid to another state. See motor vehicle sales tax rule 3.70 for additional information."


Chris is right - that is what i was told at the DMV too and then I got screwed.

Texas believes that you should have paid taxes on the entire value of the car, and since you didn't do it - they do it for you. They stick with you (or your leasing company) with the bill of entire amount of taxes that would have been due when you took delivery minus what you have already paid through payments to the state of CA.

So if you can (and no its not legal) keep your registration in CA until your lease expires - otherwise you will have to come with a few thousand dollars in a tax bill. This is what I do now and even renew is CA (yes its actually cheaper)


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## chrischeung (Sep 1, 2002)

miamiboyca said:


> So if you can (and no its not legal) keep your registration in CA until your lease expires - otherwise you will have to come with a few thousand dollars in a tax bill. This is what I do now and even renew is CA (yes its actually cheaper)


It actually is pretty close. CA has relatively high registration fees that offset the sales tax that TX charges. Work it out over a 3 years lease.


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## bayoucity (Jun 11, 2010)

chrischeung said:


> It actually is pretty close. CA has relatively high registration fees that offset the sales tax that TX charges. Work it out over 3 years per a lease. Plus if you make CA home your primary residence, you will lose out on the TX homestead exemption on your home as the primary residence. This is just my interpretation - best to talk to an accountant.


:thumbup:

If you make CA home your place of domicile & that basically imply you are subjected to CA state income tax . It really matter if you live and work in state such as TX where there is no state income taxation. Just 2 cents.


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## miamiboyca (Jun 19, 2012)

chrischeung said:


> It actually is pretty close. CA has relatively high registration fees that offset the sales tax that TX charges. Work it out over a 3 years lease.


That all depends on at what point in the lease you are in and your residual value. With a residual value of 61% on a 100,000 car.

In Ca you pay taxes on $39,000 x .0925 = 3607.5

In Tx you pay taxes on $100,000 x .0625 - $6,250

Although I am not sure if you pay tax on the "rent charge" in a lease. Need to check on that one.



bayoucity said:


> :thumbup:
> 
> If you make CA home your place of domicile & that basically imply you are subjected to CA state income tax . It really matter if you live and work in state such as TX where there is no state income taxation. Just 2 cents.


It is fairly easy to show the state of CA that you live somewhere else and simply did not re-register your tag.

Again - not following the letter of the law.


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## chrischeung (Sep 1, 2002)

miamiboyca said:


> That all depends on at what point in the lease you are in and your residual value. With a residual value of 61% on a 100,000 car.
> 
> In Ca you pay taxes on $39,000 x .0925 = 3607.5
> 
> In Tx you pay taxes on $100,000 x .0625 - $6,250


CA also taxes interest (they tax the entire lease payment). So you only calculate 0.0925 x your monthly lease payments x 36. You also need to add VLF each year. That is 0.65% (was 1.15%) each year on the value of the car. I ran the calculation a few years ago. Difference came out to be about $1K with the higher VLF. 2% on a $50K car. Not worth the risk and trouble.

In addition, you can deduct the sales tax paid on the car. Check with your accountant on that one.


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## TXPearl (Apr 16, 2010)

EC7 said:


> I called TX DMV and here is what they said:
> 
> #1. I have a current lease that originated out of state and would like to bring it into TX. I will become a new resident
> 
> ...


Did you speak with a county tax (DMV) office? If so, which county? Thanks.


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## chrischeung (Sep 1, 2002)

If you also decide to go down the route of a "grey" approach, I recommend getting the Tax Office stance in writing. TX DMV - http://www.txdmv.gov/contact-us. Also some counties have email contact. For example - http://tcweb.tarrantcounty.com/eTax/site/default.asp


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## bayoucity (Jun 11, 2010)

TXPearl said:


> Did you speak with a county tax (DMV) office? If so, which county? Thanks.


Charles, I don't believe county matters much. They all have uniform rules across TX.


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## EC7 (Apr 30, 2012)

TXPearl said:


> Did you speak with a county tax (DMV) office? If so, which county? Thanks.


Dallas county.


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## bayoucity (Jun 11, 2010)

miamiboyca said:


> ...
> 
> It is fairly easy to show the state of CA that you live somewhere else and simply did not re-register your tag.
> 
> Again - not following the letter of the law.


Hey miami, I follow what you said. The only part I am confused is when you said " simply did not re-register your tag " .

Now, TX doesn't impose state level income taxation. When you don't re-register your CA tag, you are telling CA that your place of domicile has been changed to TX, right? So, isn't it like catch-22 ? You are avoiding CA state income tax, but you will have to pay the sales tax in TX to register your leased vehicle in Dallas or Terrance county? :dunno:

I'm a little lost , maybe someone who has gone through the process can shine some light on this issue.


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## chrischeung (Sep 1, 2002)

EC7 said:


> Dallas county.


Dallas county - I think you're also up for an annual property tax on motor vehicles? I can't recall the details. Memory says a few hundred $$$ a year? Do I have this wrong?


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## EC7 (Apr 30, 2012)

chrischeung said:


> Dallas county - I think you're also up for an annual property tax on motor vehicles? I can't recall the details. Memory says a few hundred $$$ a year? Do I have this wrong?


Does this mean that, other than registration renewal, tax is also levied on the value of the vehicle annually? like property tax on a home?

By the way thanks for mentioning that thing about homestead in TX.


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## bayoucity (Jun 11, 2010)

chrischeung said:


> Dallas county - I think you're also up for an annual property tax on motor vehicles? I can't recall the details. Memory says a few hundred $$$ a year? Do I have this wrong?


Chris, I hope Dallas County doesn't set a dangerous precedent for the rest assuming what you mentioned has become law. I currently only pay annual reg fees less than $60 regardless of the vehicle value. There's no annual property tax on private vehicles registered in Houston and surrounding cities.


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## chrischeung (Sep 1, 2002)

bayoucity said:


> Chris, I hope Dallas County doesn't set a dangerous precedent for the rest assuming what you mentioned has become law. I currently only pay annual reg fees less than $60 regardless of the vehicle value. There's no annual property tax on private vehicles registered in Houston and surrounding cities.


OK - it seems like they used to do it, but dropped it in the late '90s. So that's one less thing.


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## bayoucity (Jun 11, 2010)

chrischeung said:


> OK - it seems like they used to do it, but dropped it in the late '90s. So that's one less thing.


Chris, I'm relieved those knuckle heads aren't going back to old way. The residential property tax in TX is bad enough.


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## 171960 (Oct 30, 2009)

I moved to TX recently and just registered my leased X1 today. I paid the same as I did for my non-leased 135i. The only sales tax paid was the new-resident fee of $90. Total for each vehicle was $185.75 once all other fees were added. This was in Montgomery County. Staff at the tax office in The Woodlands was very helpful.

Agreed on the residential property tax. Ouch! And don't get me started on MUDs!


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## EC7 (Apr 30, 2012)

I'm now in TX and will be registering my leased vehicle soon. One of the requirements is proof of insurance, which i have (through Wawanesa). Aside from the minimum coverage requirements, does TX have restrictions on the who your current provided is?

Thanks, 
E


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## EC7 (Apr 30, 2012)

johnsock said:


> I moved to TX recently and just registered my leased X1 today. I paid the same as I did for my non-leased 135i. The only sales tax paid was the new-resident fee of $90. Total for each vehicle was $185.75 once all other fees were added. This was in Montgomery County. Staff at the tax office in The Woodlands was very helpful.
> 
> Agreed on the residential property tax. Ouch! And don't get me started on MUDs!


is the vehicle inspection fee included in $185.75


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## chrischeung (Sep 1, 2002)

EC7 said:


> Aside from the minimum coverage requirements, does TX have restrictions on the who your current provided is?


I expect that the requirement is that the insurance company is able to provide coverage in Texas. I don't think Wawanesa does. Call Wawanesa customer service.

Rates in TX should generally be less than California. I would recommend trying to bundle your auto and home policies together.


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## chrischeung (Sep 1, 2002)

EC7 said:


> is the vehicle inspection fee included in $185.75


No. But it's cheap ($40 or so). You can get it done even at a BMW dealership.


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## EC7 (Apr 30, 2012)

chrischeung said:


> No. But it's cheap ($40 or so). You can get it done even at a BMW dealership.


good to know. perfect timing because I'm taking my car in for service next week to Classic BMW in Plano.

I called a few shops, around $40.


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