The Illinois Department of Revenue recently released guidance on how to determine the selling price of leased vehicles. The selling price for leased motor vehicles is determined by either the actual selling price or the alternate selling price. The "alternate selling price" is the amount due at lease signing, plus the total amount of payments over the term of the lease. The alternate selling price must be used when a qualifying motor vehicle is sold for the purpose of being leased under a fixed-term lease contract for a period of more than one year. "Qualifying motor vehicles" include first division motor vehicles, and certain second division motor vehicles converted for recreation, van configurations, or motor vehicles with a gross vehicle weight rating of 8,000 pounds or less.
When using the alternate selling price, trade-in credit is not allowed to reduce the selling price and a credit for tax paid on a previously leased motor vehicle cannot be used against the tax liability when it is sold at the end of the lease. Also, additional charges at the end of the lease must be reported by the leasing company on a new form using the same taxable location and rate as the original return that reported the transaction.