Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 70 - Sales and Use Tax
Part 21 - Rentals and Leases of Tangible Personal Property (Including Motor Vehicles and Lock Boxes) (280-RICR-20-70-21)
Section 280-RICR-20-70-21.8 - Taxation of Rentals and Leases of Motor Vehicles

1. In many motor vehicle leasing transactions, the retail customer negotiates the terms and executes the lease contract with a motor vehicle dealer. In executing the lease, certain "Capitalization Cost Reductions" such as cash down payments, are factored into the lease as they reduce the amount of the monthly payments due under the term of the lease. These Capitalization Cost Reductions are part of the lease charges and are subject to tax. Other charges, such as acquisition fees, origination fees, registration and title fees are also subject to tax under a lease. Motor vehicle excise taxes are considered gross receipts and are subject to sales and use tax under a lease.

2. The dealer, acting on behalf of the leasing company, generally collects the first month's lease payment and the leasing company subsequently collects the balance of the lease payments due under the contract. The leasing company is responsible for collecting and remitting the tax on all lease charges including the initial charges collected by the dealer. If the dealer remits the tax it collects directly to the Division of Taxation and such collection or remittance is improper, the leasing company remains responsible for the remittance of the proper amount of the tax due.