Leasing or Renting – Motor Vehicles – Private and Nondealer

Leasing or renting a motor vehicle is a taxable sale in Idaho. You’re renting or leasing your motor vehicle if you allow someone to use it and you receive payment (cash, property, or other financial gain). You’re a retailer, whether you’re a business owner or an individual if you make one or more sales (including motor vehicles) or hold yourself out as being in business.

As a retailer

  • You must get a seller’s permit. (See the Idaho Business Registration guide to learn more.)
  • You must collect tax on the full amount you charge for the lease or rent.
  • You must forward the tax on your sales tax return filed with the Tax Commission. (See the Retailers guide.)

Note: You don’t need to collect tax when you list your motor vehicle on an internet marketplace and it collects and forwards the tax.

The type of lease or rent determines when you collect tax

Motor vehicle leases and rents fall into three general categories:

Type of lease/rentalHow the lease/rental worksWhen to collect sales tax
Basic lease or rentalThe customer returns the motor vehicle to the lessor at the end of the lease or rental term.Collect sales tax on each lease or rental payment.
Lease or rent with option to buyThe customer has the option of buying the motor vehicle during the lease or rental term or at the end of the term at fair market value.Collect sales tax on each lease or rental payment and on the price the customer pays when buying the motor vehicle.
Lease/rent and purchaseThe customer makes regular payments during the lease or rental term. At the end of the term, title to the motor vehicle passes to the customer for $0 or an amount that’s less than fair market value.The customer will own the motor vehicle at the end of the lease or rental term, so this is a sale and a financing arrangement. Collect sales tax on the sales price of the vehicle at the beginning of the term, when the sale is made (the contract is completed).