Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(a) IN GENERAL
330.1885 Automobile Provided to Employee. A corporation provides an automobile to an employee as part of his/her compensation package. The auto is purchased tax-paid and is given to the employee at the end of four years. One fourth of the total cost of the auto is added to the employee's Form W-2 each year. The employee may terminate his/her employment at will. If this occurs, the automobile may be acquired at an option price based on the number of years remaining before the four year period ends, e.g. if termination occurs at the end of the first year the employee pays 75 percent of the acquisition cost of the vehicle.
In this case, the transaction is regarded as a lease of tax-paid property, and since the vehicle is leased to the employee in the same form as acquired, the rent is not subject to tax.
At the end of four years the vehicle is given to the employee, with no payment required to obtain title. As such, there is no sale to the employee and therefore no tax liability. If the employee quits during the four year period and pays an amount in order to keep the car, a sale occurs. Provided the corporation is not a licensed automobile dealer, the employee must pay use tax to DMV measured by the amount paid. If the corporation is a licensed dealer, the corporation is liable for the sales tax on the amount paid by the employee. 9/24/93.