Leasing or renting a motor vehicle is a taxable sale in Idaho.
| Type of lease/rental | How the lease/rental works | When to collect sales tax |
|---|---|---|
| Basic lease or rental | The 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 buy | The 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 purchase | The 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). |
You calculate the taxable sales price for a lease of a motor vehicle the same as the sale of a motor vehicle. See Sales price.
Out-of-state leasing companies
Out-of-state companies that lease motor vehicles in Idaho must follow all these requirements:
- Get an Idaho sales tax permit before the motor vehicle can be registered in Idaho.
- Collect and forward sales tax on the leased motor vehicle to Idaho.
- Report income from Idaho leases on their Idaho income tax return.