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Senate Study Bill 64.1

Bill Text

  1  1    Section 1.  Section 423.4, subsection 16, Code 1997, is
  1  2 amended by adding the following new unnumbered paragraph:
  1  3    NEW UNNUMBERED PARAGRAPH.  A lessor may maintain the
  1  4 exemption from use tax under this subsection for a qualifying
  1  5 lease that terminates at the conclusion or prior to the
  1  6 contracted expiration date, if the lessor does not use the
  1  7 vehicle for any purpose other than for lease.  Once the
  1  8 vehicle is used by the lessor for a purpose other than for
  1  9 lease, the exemption from use tax under this subsection no
  1 10 longer applies and, unless there is an exemption from the use
  1 11 tax, use tax is due on the fair market value of the vehicle
  1 12 determined at the time the lessor uses the vehicle for a
  1 13 purpose other than for lease, payable to the department.  If
  1 14 the lessor holds the vehicle exclusively for sale, use tax is
  1 15 due and payable on the purchase price of the vehicle at the
  1 16 time of purchase pursuant to this chapter.
  1 17    Sec. 2.  Section 423.7A, subsections 1, 2, and 4, Code
  1 18 1997, are amended to read as follows:
  1 19    1.  The tax imposed upon the use of leased vehicles subject
  1 20 to registration under chapter 321, with gross vehicle weight
  1 21 ratings of less than sixteen thousand pounds, excluding
  1 22 motorcycles and motorized bicycles, which are leased by a
  1 23 lessor licensed pursuant to chapter 321F for a period of
  1 24 twelve months or more shall be paid by the owner of the
  1 25 vehicle to the county treasurer or state department of
  1 26 transportation from whom the registration receipt or
  1 27 certificate of title is obtained.  A registration receipt for
  1 28 a vehicle subject to registration or issuance of a certificate
  1 29 of title shall not be issued until the tax is paid in the
  1 30 initial instance.  Tax on the lease transaction that does not
  1 31 require titling or registration of the vehicle shall be
  1 32 remitted to the department.  Tax and the reporting of tax due
  1 33 to the department shall be remitted on or before fifteen days
  1 34 from the last day of the month that the vehicle lease tax
  1 35 becomes due.  Failure to timely report or remit any of the tax
  2  1 when due shall result in a penalty and interest being imposed
  2  2 on the tax due pursuant to sections 423.18 and 423.23.
  2  3    2.  The amount subject to tax shall be computed on each
  2  4 separate lease transaction by multiplying the number of months
  2  5 of the lease by the monthly taking the total of the lease
  2  6 payments, plus the down payment, less any manufacturer's
  2  7 rebate and excluding all of the following:
  2  8    a.  Title fee.
  2  9    b.  Registration fees.
  2 10    c.  Vehicle lease tax pursuant to this section.
  2 11    d.  Federal excise taxes attributable to the sale of the
  2 12 vehicle to the owner or to the lease of the vehicle by the
  2 13 owner.
  2 14    e.  Optional service or warranty contracts subject to tax
  2 15 pursuant to section 422.43, subsection 6.
  2 16    f.  Insurance.
  2 17    g.  Manufacturer's rebate.
  2 18    h.  Refundable deposit.
  2 19    i.  Finance charges, if any, on items listed in paragraphs
  2 20 "a" through "h".  
  2 21 If any or all of the items in paragraphs "a" through "i" are
  2 22 excluded from the taxable lease price, the owner shall
  2 23 maintain adequate records of the amounts of those items.  If
  2 24 the parties to a lease enter into an agreement providing that
  2 25 the tax imposed under this statute is to be paid by the lessee
  2 26 or included in the monthly lease payments to be paid by the
  2 27 lessee, the total cost of the tax shall not be included in the
  2 28 computation of lease price for the purpose of taxation under
  2 29 this section.  The county treasurer or, the state department
  2 30 of transportation, or the department of revenue and finance
  2 31 shall require every applicant for a registration receipt for a
  2 32 vehicle subject to tax under this section to supply
  2 33 information as the county treasurer or director deems
  2 34 necessary as to the date of the lease transaction, the lease
  2 35 price, and other information relative to the lease of the
  3  1 vehicle.
  3  2    4.  If the lease is terminated prior to the termination
  3  3 date contained in the lease agreement, no refund shall be
  3  4 allowed for tax previously paid on the monthly rental payments
  3  5 under this section, except as provided in section 322G.4.  
  3  6                           EXPLANATION
  3  7    Section 423.4, subsection 16, was enacted in 1996 to
  3  8 provide an exemption from use tax for vehicles purchased for
  3  9 lease qualifying under section 423.7A.  The current language
  3 10 of that exemption indicates that once a lessor has met the
  3 11 qualifications for exemption under the statute, the exemption
  3 12 is maintained regardless of how the vehicle is subsequently
  3 13 used by the lessor.  In addition, the statute also provides
  3 14 that if a vehicle subject to lease does not meet the
  3 15 qualifications under the statute, then use tax is due on the
  3 16 vehicle.  The statute does not provide a period of time to
  3 17 allow the vehicle to be released.  Accordingly, section 423.4,
  3 18 subsection 16, is amended to assist in the administration of
  3 19 the tax by providing that the use tax exemption may be
  3 20 retained as long as the lessor does not use the vehicle for
  3 21 any purpose other than for lease.
  3 22    Section 423.7A is amended to allow for the department of
  3 23 revenue and finance to receive tax under section 423.7A in
  3 24 instances where tax is due on the lease, but the transaction
  3 25 creating the tax does not require registration or titling of
  3 26 the vehicle subject to the lease.
  3 27    Section 423.7A is also amended to provide that certain
  3 28 items shall not be included in the computation of the lease
  3 29 price.  These items include title and registration fees,
  3 30 federal excise taxes, insurance, manufacturer's rebates, and
  3 31 refundable deposits.  The amendment of this section also sets
  3 32 forth that when the parties to a lease agree to include the
  3 33 tax in the lease payments to be paid by the lessee, the total
  3 34 of the use tax shall not be included in the computation of
  3 35 total lease price.  Instead, the cost of the tax shall only be
  4  1 reflected as part of the monthly lease payments.  Providing an
  4  2 exclusion of the tax in the computation of total lease price
  4  3 in this situation will assist in the computation of the tax
  4  4 and auditing of lessor records.
  4  5    The bill also provides that if a lease is terminated prior
  4  6 to the termination date, no use tax paid is refundable except
  4  7 in the case the lease is terminated under the defective motor
  4  8 vehicle (lemon law) statute.  
  4  9 LSB 2411SS 77
  4 10 mg/jw/5

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