§4217 Leases

Summary

If a maker, producer, or importer leases an item, that lease is treated like a sale for tax rules. When the tax is based on the sale price, the maker must collect a portion of the tax from each lease payment. The portion is the tax rate in effect on the day of the payment. The maker keeps charging that portion on each payment until the total tax collected from the leases equals the "total tax." The "total tax" is either the tax on the constructive retail sale price calculated under section 4216(b) on the date of the first lease to which this rule applies, or if that first lease is not actually the first lease of the item, the tax on the fair market value of the item on that date. The rule only applies if, when making the lease (or an earlier lease covered by this rule), the lessor was also selling the same type and model in normal sales. If the item is sold before the total tax is fully paid, the tax on the sale is the smaller of (A) the remaining tax to reach the total tax or (B) the tax on the sale price at the rate on the sale date. If the item is sold after the total tax is paid, no tax applies on that sale. For cars subject to the gas guzzler tax in section 4064, the general lease rule does not apply. Instead, the manufacturer's first lease counts as a sale and later manufacturer leases do not. The manufacturer must apportion the total gas guzzler tax across lease payments in proportion to each payment. If the lease ends or the car is sold before the full gas guzzler tax is paid, the manufacturer must pay the remaining difference. If the car is sold after the full gas guzzler tax is paid, no tax under section 4064 applies to that sale. "Manufacturer" includes a producer or importer, and "total gas guzzler tax" means the tax under section 4064 computed at the rate in effect on the date of the first lease.