# Cap reduction tax?



## Peda330i (Oct 26, 2005)

I'm in CA- Dealer is charging $243 in cap reduction tax as part of my drive off (based on $2500 spring credit)

Is that valid? :dunno:

Also, do we have to pay tax on acq fee and doc fee (part of drive off)

Cash drive off includes SD, 1st month, license fee, doc fee, acq fee, tax on acq fee, tax on doc fee, and tax on cap reduction (2500 spring credit) ---- are all these tax charges valid?

Please help..thanks


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## JW_BMW (Oct 3, 2007)

Peda330i said:


> I'm in CA- Dealer is charging $243 in cap reduction tax as part of my drive off (based on $2500 spring credit)
> 
> Is that valid? :dunno:
> 
> ...


Look at my sig name and look at the quote you received...

I will let others answer your question...because if I say it is valid you will not believe me...conflict of interest.


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## ///M Rakete (Apr 1, 2002)

Peda330i said:


> I'm in CA- Dealer is charging $243 in cap reduction tax as part of my drive off (based on $2500 spring credit)
> 
> Is that valid? :dunno:
> 
> ...


Yes.

Think of it this way: cap cost reduction is a prepayment of principle, or depreciation, you pay sales tax on the monthly depreciation so why not on the prepayment?

The acquisition fee and documentation fee (limited by statute in CA to $45) appears to be treated as a service, hence "fee", meaning it's subject to sales tax. At least that has always been the case with every car I've leased in California.

No sales tax on DMV fees (which include tire eco fee, electronic filing, etc.) or security deposit (it's a round up of your monthly payment and is not a fee but a deposit).


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## Orient330iNYC (Jul 30, 2002)

http://www.intellichoice.com/carBuying101/LeasingGlossary

_Remember, you must pay sales tax on any cap cost reduction you make._
​this applies to both MFR cash incentives applied as cap cost reductions (almost all are when leasing) and customer cap cost reductions.


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## ///M Rakete (Apr 1, 2002)

Orient330iNYC said:


> http://www.intellichoice.com/carBuying101/LeasingGlossary
> 
> _Remember, you must pay sales tax on any cap cost reduction you make._
> ​this applies to both MFR cash incentives applied as cap cost reductions (almost all are when leasing) and customer cap cost reductions.


+1

I had to pay the sales tax on the $1,500 Holiday Credit for my M3.


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