# Lease Payoff/CA Sales Tax



## namelessman (Dec 23, 2004)

ard said:


> Its not the DMV. The DMV collects tax as a courtesy, it is BOE (IIRC) that levies the tax. Also, I beleive BMWFS will do an electronci title release, so Mr Pedo receive a title in his name. He simply signs it as if he is selling it. Puts in the new buyer on the back, etc etc.


This is a 11-year old thread of a Nissan third party sale that says title took 2 months to arrive. 🤨

Interestingly, this anecdotal story implies that DMV registration of 3rd party can occur even without signed pink slip, go figure. 

Of equal interest is how many people think 3rd party buyout sale is easy, and end up paying double sales tax.

_"With these assurances in mind, I bought the car from the Nissan dealership and paid for the tax, title and license fees. I then picked up my buyer and we drove together to the nearest AAA office to register the car in her name. (In California, most DMV transactions can be done at the Auto Club without being subjected to a horrendously long wait.) For a moment it seemed that everything would go smoothly. But after a lot of haggling and repeated calls to the DMV, I was told that even though we had paid $1,348 in sales tax to the dealer, the buyer would have to pay the sales tax again to get the car registered. This, despite the fact that the two transactions were separated by only an hour.

Reflecting on this situation I realized that I was caught between three impenetrable entities: California DMV, Nissan North America and NMAC. Each player has rules and regulations that are so complicated even they didn't fully understand them. Furthermore, the rules of these separate entities weren't compatible.

Still, all I wanted to do was buy a car and sell a car. *Why was that so hard*?

The next step was to get the title so we could sign it over to the new owner. It took more than two months for the title to arrive. The delay was caused by the dealership's inability to fill out the paperwork properly. The DMV had to return the documents to the dealer for correction._"









Lease Buyout Beware! | Edmunds


Buying out your leased car, and selling it to a private party, can be profitable. But watch out! The red tape might drive you crazy.



www.edmunds.com


----------



## ard (Jul 1, 2009)

So once you pay off the lease, it is terminated. What date this occurs on is somewhat out of your control AND is established based on the date BMWFS transfers title.

Could be the same day as the end of the lease OR could be a few days before or even after.

The 'usage' part is squishy- CA rules should be consulted. Parking the car until the buyer picks up the car is likely NOT considered 'usage' and would not create a tax liability for the leasee in this window..

If you are arguing that simply the act of owning and possessing a car in Californai- thats all, not driving it, not touching it, nothing- is a 'usage' then this whole law is moot. You would need to sell it the same day the title is signed over. A ridiculous proposition


----------



## ard (Jul 1, 2009)

namelessman said:


> This is a 11-year old thread of a Nissan third party sale that says title took 2 months to arrive. ?
> 
> Interestingly, this anecdotal story implies that DMV registration of 3rd party can occur even without signed pink slip, go figure.
> 
> ...


Yes, this outlines the old problem where dealers and BMWFS would insist on taking the tax.

This is PRECISELY why BMWFS stopped pulling tax in CA a year or two ago (as I recall)> Their policy was incongruent with state law.

I would like to get more info on the whole 'electronic title' thing...this was new to me. Ive never had a lease. Apparently BMWFS does this electronically w DMV. BMWFS simply eneters the release in the system and a title is spit out of DMV to Leasee.

Whats interesting is the leasee will have a clean title in their name, and when they tranfer it to the new buyer it looks like any otehr taxable transfer. There is nothign on that title that looks like a taxable transfer from BMWFS to Leasee. HAVING SAID THAT, I expect that DMV will look at the screen, see "oh, here is the day BMWFS released it". I expect if you are prompt this is a non-issue. (Remember, DMV is involved collecting tax as a courtesy form BOE. DMV isnt going to say 'wait a minute, you need to pay tax on the transfer BEFORE this title'. Would DMV even flag this? Again, think like bureaucrats. If it is only days later, DMV does nothing. and again, there is no way for them to collect tax from the buyer in front of them...)

One of these years someone will report back....


----------



## namelessman (Dec 23, 2004)

ard said:


> If you are arguing that simply the act of owning and possessing a car in Californai- thats all, not driving it, not touching it, nothing- is a 'usage' then this whole law is moot. You would need to sell it the *same day* the title is signed over. A ridiculous proposition


Same day sale is not needed, it just needs to be within 10-day window. 

And the comment of parking the car being sufficient or not may be a technicality.

Let's say BMWFS demands buyout payment before expiration date, and lessee technically owns the car right after expiration date.

If BMWFS does not transfer title electronically at that exact date, then there will be a window of neither-here-nor-there .... Normally that is non-issue for non-3rd party buyout, it would be good if festers with 3rd party buyout experience to share their wisdom. 

Do note this comment from the Nissan 3rd party thread:

"_Reflecting on this situation I realized that I was caught between three impenetrable entities: California DMV, Nissan North America and NMAC._ "

Also note that the "_i__ntent of legislation_" can be well meaning, but the day-to-day operation at local DMVs may not be as friendly and straightforward.


----------



## namelessman (Dec 23, 2004)

ard said:


> One of these years someone will report back....


Copy that.


----------



## bzcat (Sep 23, 2009)

When I paid off my Audi early last time (purchased with 60 months loan, not lease), it took nearly 3 weeks for VWFS to send me the title by FedEx as I requested. That was not a lease so no tax consequence and I wasn't going to immediately resale the car so I didn't mind that it took awhile for the pink slip to arrive. I'm not saying BMWFS is the same but I would be concerned if I was going to resale the car and avoid sales tax and knowing this process can take more than a week to execute.

I suspect the reason why there is hardly anyone posting a how-to or their experience buying off lease and then resale the car is simply that it is almost impossible to execute without you getting stuck with the sales tax.


----------



## ard (Jul 1, 2009)

bzcat said:


> When I paid off my Audi early last time (purchased with 60 months loan, not lease), it took nearly 3 weeks for VWFS to send me the title by FedEx as I requested. That was not a lease so no tax consequence and I wasn't going to immediately resale the car so I didn't mind that it took awhile for the pink slip to arrive. I'm not saying BMWFS is the same but I would be concerned if I was going to resale the car and avoid sales tax and knowing this process can take more than a week to execute.
> 
> I suspect the reason why there is hardly anyone posting a how-to or their experience buying off lease and then resale the car is simply that it is almost impossible to execute without you getting stuck with the sales tax.


Really?

It doesnt matter how long it takes to send the title. You have 10 days from when you receive it.

The reason we dont see it is two fold: there is a persistent rumor mill around the whole 'double tax' thing, where people keep repeating it in some half-assed 'I dont know but I hear' kind of way....

and

Usually the lease end buyout price sucks, and it makes little sense to buy it out. COVID has changed this.


----------



## namelessman (Dec 23, 2004)

bzcat said:


> I suspect the reason why there is hardly anyone posting a how-to or their experience buying off lease and then resale the car is simply that it is almost impossible to execute without you getting stuck with the sales tax.


That's why Ard's comments asserting this is easy solicit great interest, since most (anecdotal ) accounts of 3rd party sales without dealer assistance(and possibly with a fee) do not seem to end well.

Also there is no official confirmation/press about BMWFS doing electronic title transfer, which surely can help a lot with this 3rd party maneuver.


----------



## ard (Jul 1, 2009)

namelessman said:


> That's why Ard's comments asserting this is easy solicit great interest, since most (anecdotal ) accounts of 3rd party sales without dealer assistance(and possibly with a fee) do not seem to end well.


There isnt a single anecdote that people have been double taxed since BMW stopped withholding taxes.

All 'stories' are (1) not BMW and (2) when dealers withhold the tax.



namelessman said:


> Also there is no official confirmation/press about BMWFS doing electronic title transfer, which surely can help a lot with this 3rd party maneuver.


Its a google away. Give it a shot


----------



## namelessman (Dec 23, 2004)

bzcat said:


> I suspect the reason why there is hardly anyone posting a how-to or their experience buying off lease and then resale the car is simply that it is almost impossible to execute without you getting stuck with the sales tax.


Most buyouts probably are refinanced too, so the bank gets the signed title, and lessee(who turns new owner) will not see the title details until car is paid off, right?


----------



## Peda330i (Oct 26, 2005)

Thanks guys- lotta informative stuff. I've decided to buy out the car and avoid any 3rd party sale. My sister wants to drive it and with only like 14K mi on it, not a bad car to keep. The discounted payoff is lower than what Carvana is offering today.


----------



## namelessman (Dec 23, 2004)

Peda330i said:


> Thanks guys- lotta informative stuff. I've decided to buy out the car and avoid any 3rd party sale. My sister wants to drive it and with only like 14K mi on it, not a bad car to keep. The discounted payoff is lower than what Carvana is offering today.


Congrats on flipping to buy-and-hold. 

Please do let us know how the process works, e.g.:

Does BMWFS collect sales tax on your buyout?
Is title transferred to u/ur bank(if financed) electronically?
How long does it take to get the title? What date is put on the signed title?
Is it possible to pull off a 3rd party sale within CA's 10-day window?


----------



## ard (Jul 1, 2009)

Peda330i said:


> Thanks guys- lotta informative stuff. I've decided to buy out the car and avoid any 3rd party sale. My sister wants to drive it and with only like 14K mi on it, not a bad car to keep. The discounted payoff is lower than what Carvana is offering today.


SO you'll be the owner of record and she will just drive it?

Nameless keeps insisting there is something to "pull off" like it is hard to sell a car within 10 days of getting the title.

- You get the title in the mail, you sign the back of it over to the new owner, dating it that day. Hand the new owner that title, plus a dated bill of sale. He gives you a check, cash or wire transfer.

Your have 9 days to spare.

Legally what I have outlined is the sale.

Some people think that getting the car retitled into a new owners name is - for some reason- "the sale". It isnt.


----------



## namelessman (Dec 23, 2004)

ard said:


> Nameless keeps insisting there is something to "pull off" like it is hard to sell a car within 10 days of getting the title.


"Trust, but verify". 

As festers(including yourself) attested that details are scarce on this topic, it won't hurt to hear the whole story


----------



## Peda330i (Oct 26, 2005)

namelessman said:


> Congrats on flipping to buy-and-hold.
> 
> Please do let us know how the process works, e.g.:
> 
> ...


Still in the process- waiting to get the title. BMWFS does not collect sales tax - I'll pay that when I get the title (they mail it) and get it registered on my name. Will update the time frame once the process is complete.


----------



## Peda330i (Oct 26, 2005)

ard said:


> *SO you'll be the owner of record and she will just drive it?*
> 
> Nameless keeps insisting there is something to "pull off" like it is hard to sell a car within 10 days of getting the title.
> 
> ...


Yes!


----------



## namelessman (Dec 23, 2004)

Peda330i said:


> Still in the process- waiting to get the title. BMWFS does not collect sales tax - I'll pay that when I get the title (they mail it) and get it registered on my name. Will update the time frame once the process is complete.


Thanks for the updates! So it looks like electronic title transfer is not available to lessees then.


----------



## ard (Jul 1, 2009)

namelessman said:


> Thanks for the updates! So it looks like electronic title transfer is not available to lessees then.


The 'electronic' part is that the state holds it electronically. Once BMWFS releases it, the paper is generated and sent to the (new) owner.

Unless the new owner has an account w DMV (ie another loan company, a car dealer) the title moves to paper automatically

How do you think it works?


----------



## namelessman (Dec 23, 2004)

Peda330i's experience is that _BMWFS mailed the signed title to lessee_.

_If your assertion of "BMWFS simply eneters the release in the system and a title is spit out of DMV to Leasee" is correct, then the title should have been mailed by DMV directly._

Since that is not the case, my thinking is that BMWFS actually holds the paper copy of the title until lease buyout is paid off.

And obviously CA DMV has electronic ledger entries of all the titles, but sales transfer(n lessee buyout) appears to rely on the paper copy rather than DMV's electronics ledger entries.



ard said:


> I would like to get more info on the whole 'electronic title' thing...this was new to me. Ive never had a lease. Apparently BMWFS does this electronically w DMV. BMWFS simply eneters the release in the system and *a title is spit out of DMV to Leasee.*





ard said:


> The 'electronic' part is that the state holds it electronically. Once BMWFS releases it, the paper is generated and sent to the (new) owner.
> 
> Unless the new owner has an account w DMV (ie another loan company, a car dealer) the title moves to paper automatically
> 
> How do you think it works?


----------



## Peda330i (Oct 26, 2005)

Hey guys, just wanted to update - I was finally able to register the car in my name. 


Timeline:
Monday: Mailed payoff docs by 2-day Priority Mail to BMWFS office in Chicago. 
Wednesday: Expected delivery but USPS sat on the envelope at their Chicago distribution center for 3 days. The delays are real.
Saturday: Delivered
Monday: BMW deposited the check
Tuesday: Got an email confirming the payment and closure of the account. Since I had sent a check I was told they would hold the title for up to 15 business days and I'd get an email with the FedEx tracking once they mail it out. If time is of the essence, make sure to send a certified cashier's check. (3-4 business days)
Thursday: Credit file reported closure of lease account and paid in full status.

14 BUSINESS days later I got the FedEx tracking number. The documents sent were the title, bill of sale and a letter confirming the lease account was closed.

Paid the taxes at DMV and they gave me the new registration in my name. The new title takes 4 weeks to process.


----------



## PenelopeEllison (Jan 11, 2021)

The income statement, as far as I'm aware, must contain all taxes as well as the amount you got from each business. Perhaps there is a way to change it, but I'm not sure. Your best bet is to consult a paystub maker who specializes in this area. I'm confident they'll be able to provide you with more specific information about this. They aided me in reducing my tax liability. Nonetheless, getting in touch with someone who works in this industry is a good idea. You don't want to breach the law, and it's better to be upfront about such things.


----------

