JJB236

My mortgage lender said that I would need to pay off my 997 lease as a funding condition in getting a loan. So I did pay the lease off, then purchased the 997 by wiring in the $65k to Porsche Financial. They said they would mail me the necessary document, but they still haven't. It's been more than 6 months, but I didn't bother. Since I paid off my lease and purchased the car, I haven't called Porsche Financial requesting paperwork. I mean I have no obligation on the car, and I am not in a hurry to get the pink slip.

Some friends are now telling me that I need to pay sales tax on the $65k if it wasn't included at the time of the pay-off. I reside both in CA and AZ, and this $65k was wired from CA.

1) What would happen if I don't pay this sales tax? No DMV told me to pay it. Shouldn't Porsche Financial Services collect it at the time of pay-off?

2) If I do need to pay this sales tax, does CA or AZ sales tax apply? I didn't physically buy this 997 in CA or AZ. Money was wired

Dr_KarlB

I think it matters where you use it.

The DMV call this "use tax"... not sales tax but its exactly the same.

If you are registered in CA, then you probably have to pay this to the CA DMV

racer

Really? You wire $65K to an institution but don't bother to follow up with paperwork? Typically when you pay off a lease / buy out the car, it changes ownership from the leasing company to you. So its possible that the state in which the vehicle gets registered in would collect the sales tax. What have you done about insurance? It may be that you've actually been "uninsured" during this gap time.. since the ins shows ownership as being the leasing company no doubt.

While you may spend time in both states, I would think there are domicile rules to be met.. ie, 183 days in 1 state shows would show where your primary residence is. You have a drivers license from 1 state right? (as opposed to 2 states?)

Maybe home ownership isn't really for you

Tcc1999

Are you serious? Who wires 65K to buy out a lease and never checks paperwork? That aside, if you paid PFS the residual they are not beholden to pay your state tax. A change of ownership goes through the DMV and tax is collected at that point. But PFS has to transfer the title to you and you register the car in your name at the DMV in the state where you reside. Whether it is AZ or CA is up to you, the point is that ownership has changed and someone has to pay the tax in the state of registration. If you are registered in CA and you paid off the car but are still using the same lic. plate, then, as far as CA is concerned, the car is still in the PFS name as the lease holder. Its no secret here that plates change as owners change.

JJB236

If PFS has sent me the Certificate of Title, then it would have had my name as the registered owner with their lien being released. I didn't think that I would have to report such lien release to the DMV. At the time of the lease, I was the registered owner, and I still am the registered owner. PFS is simply releasing their lien. I still need to report this?

Ucube

The lienholder is the actual owner, so releasing a lien consitutes an ownership change. You'll still have to report this because a sale took place, which means sales tax has been incurred but not yet collected.

yossarian

That is technically only partially correct. The party that accepts a payment under a general guideline and contract that pertains to a known good or service is similar to signing a contract.

Now the dmv and insurance may have issues but ownership can be easily established.

And to what everyone else said... who pays off a car and does not get the slip fedexed next day. The car is 65k and if you crash it would be harder to collect.

Clifton

Just because you paid off the car does not mean you have satisfied all of your financial responsibilities. Think of it this way - if you buy a car out of state and then register it in your home state, you owe the local sales tax. You can't go back to the out of state dealer and tell them they owe your local tax because they did not charge you for it when you purchased the car.

You owe sales tax on the $65K where the car is registered and it sounds like your DMV is holding your title for ransom. Until you pay your sales tax, the DMV will not issue you a lien free title. The current title must still show Porsche Financial as the lien holder and that is why your mortgage company is not seeing you free of the debt.

ELUSIVE

When you paid off the lease did you pay tax on the remaining balance?
If not, then i would say you are responsible for the tax on more than $65K.

daddyscar

In CA you would have paid sales tax on your monthly rent payment. Your PFS statement shows your current buy out price which I'm pretty certain does not include sales tax. When you buy out your lease, it may not have included sales tax. If you live in CA, the DMV would have made you pay sales tax on $65k when you went to transfer the title under your name.

This is how it worked with my BMW lease which I sold. Buyer sent check to BMW and I transferred title and he paid the sales tax. Same with my Honda lease which I sold. This time I paid Honda and buyer paid me, but I had 10 days to transfer title or me and the buyer would have to pays sales tax. Our Mercedes lease was different. Mercedes would not let me buy out the lease without paying sales tax. I could never get a clear answer from anybody if the new buyer would also have to pay sales tax which made it very difficult to sell a few months early so I ended up just turning it in at lease end.

There also may be some insurance purposes to get this figured out soon. If it's totaled, how do you prove ownership?

jcnesq

There is no question that a sales or use tax (they are complimentary and mutually exclusive) was due when you bought the car from PFS (I am talking CA and assume it is registered here in CA). I am pretty sure PFS was required to collect the sales tax - they are a "seller" in CA (as defined in the Sales and Use Tax Law), even by just leasing (which is considered a continuing sale in CA). The state would or should go after PFS for the sales tax.

That doesn't necessarily get you off the hook for use tax but it might. If you buy from a non-"seller" e.g. private party, you as buyer do have to pay use tax when you register the vehicle (and you only have a limited time to register and would have late penalties and interest after that).

I would demand that PFS immediately get the title transferred into your name (try to put that process on them, although it might not work), just like an auto dealer would do if you bought from them. At this late date, I would take the position (if they ask for sales tax) that its too late and you paid them for the car inclusive of any sales tax and that it was their responsibility to collect the tax and transfer ownership to you.

You can't just ignore clearing up title, but perhaps you can use PFS's delay to save your rear on the tax issue.

stevepow

You really do need to fix your avatar size as well - don't make us wait six months for that!

winkingchef

Where is the car registered?
If in CA, you already paid "use tax" when you got your registration at the DMV.