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Car lease sales tax by state (2026) and how to find your money factor
Short answer: in 30 states (counting D.C.) you pay sales tax on each monthly lease payment. In 18 states the tax is collected once, up front, often on the total of payments or the car's selling price, which can add hundreds or thousands of dollars to what's due at signing or to the amount you finance. Alaska, Montana and New Hampshire have no state tax on a lease (some Alaska cities and boroughs have local sales tax). Delaware and Oregon have no sales tax but charge a one-time document fee or privilege tax, so they're in the up-front group.
Why it matters: on a lease quote, the tax line is easy to get wrong. If your state taxes up front, the dealer may roll that tax into the capitalized cost; if it taxes each payment, tax should show on the monthly payment, and your cash down is usually taxed at signing.
Next step: get an itemized lease quote in writing (cap cost, residual, money factor, fees and tax), then run it through the free Fee Check. It checks the doc fee, add-ons and tax lines for your state.
Check my lease quote free →How to find the money factor on your lease contract
The money factor is the lease's finance rate. It isn't on the list of disclosures federal Regulation M requires on a lease contract, and if a lessor does show a percentage rate, it must add the notice “this percentage may not measure the overall cost of financing this lease,” and it can't call it an “annual percentage rate” (12 CFR 1013.4(s)).
But every motor vehicle lease contract must show how the payment is figured (12 CFR 1013.4(f)), including:
- Gross capitalized cost — the agreed value of the car plus anything paid over the lease (service contracts, insurance, any prior balance). You can ask for a separate written itemization of it, and if you ask, it must be given before you sign (1013.4(f)(1)).
- Capitalized cost reduction — trade-in allowance, rebates and cash you put down.
- Adjusted capitalized cost — the amount used to figure your base payment.
- Residual value — the car's value at lease end used in the payment.
- Depreciation and amortized amounts — adjusted cap cost minus residual.
- Rent charge — total base payments minus depreciation. This is the finance charge.
- Number of payments and the base payment.
Estimate the money factor from those lines: divide the rent charge by the number of payments, then divide by (adjusted cap cost + residual). Multiply by 2,400 for a rough APR comparison. This is the usual way lessors figure rent; your lessor may use a slightly different method, so treat the result as an estimate.
| Adjusted capitalized cost | $36,000 |
| Residual value | $22,000 |
| Rent charge (from the contract) | $4,176 over 36 payments = $116.00/mo |
| Money factor | $116.00 ÷ ($36,000 + $22,000) ≈ 0.00200 |
| Rough APR comparison | 0.00200 × 2,400 ≈ 4.80% |
| Check the math | Depreciation $14,000 + rent $4,176 = $18,176 total base payments; ÷ 36 = $504.89 base payment (before tax) |
What to ask the dealer, in writing: the money factor, whether it is the lender's base rate for your credit tier, the residual value, and the separate itemization of the gross capitalized cost. If the lines on the contract don't add up the way Regulation M describes, ask why before you sign.
State lease-tax rules checked Oct. 20, 2026 against the official state revenue, DMV or statute source linked on each card. Rates shown are state rates; county and city taxes can add more. This is general information, not tax or legal advice. If a rule looks wrong, tell us via corrections.
States that tax each lease payment (30)
Alabama (AL)
Tax on each monthly payment · 1.5% + local
1.5% state lease tax plus local lease tax on each payment; cash down, rebates, trade value applied and dealer/acquisition fees are taxed at signing.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: Alabama DOR Automotive Sales, Use & Lease Tax Guide; Code of Ala. §40-12-220
Arizona (AZ)
Tax on each monthly payment · 5.6% + local
5.6% state TPT plus city/county on each payment; cash down and rebates taxed; trade-in excluded.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Arizona DOR TPR 03-7 (cap cost reductions); A.R.S. §42-5001(6),(7)
Arkansas (AR)
Tax on each monthly payment · 8% + local
Option 2: 6.5% state sales tax + 1.5% long-term rental vehicle tax + local on every payment and the down payment. Option 1: tax on the purchase price at registration. Your leasing company chooses: it either charges tax on each payment (shown by default) or pays tax up front on the vehicle price. Your contract decides; switch the toggle to match it.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: Arkansas Gross Receipts Tax Rule GR-20 (Options 1 and 2); Ark. Code §26-63-304
California (CA)
Tax on each monthly payment · 7.25% + local
California taxes each payment at your local combined rate (7.25% minimum). Cash down, trade value applied, and doc/acquisition fees paid at signing are taxed; a manufacturer rebate kept by the lessor is not lease income.
Cash down taxed at signing: Yes · Rebates taxed: No · Trade-in value taxed: No
Source: CDTFA Publication 34 (Oct 2025), Vehicle leases; Annotation 330.3620 (manufacturer rebates)
California fee guide
Check your California lease quote free →Colorado (CO)
Tax on each monthly payment · 2.9% + local
State 2.9% plus state-administered local tax on each payment; cash down and rebates taxed at signing; owned trade-in excluded.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: CO DOR, Sales & Use Tax Topics: Motor Vehicle Leases (Jul 2026)
Connecticut (CT)
Tax on each monthly payment · 6.35%
6.35% on each payment, or 7.75% if the agreed-upon value (price + acquisition fees + options) is over $50,000. Cash down, rebates and acquisition fees are taxed; an owned trade-in is excluded.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: CT DRS PS 96(10) (trade-ins, taxable lease charges); SN 2011(10) (agreed-upon value over $50,000)
Connecticut fee guide
Check your Connecticut lease quote free →District of Columbia (DC)
Tax on each monthly payment · 11%
11% on lease charges since Oct. 1, 2026 (9.25% before then), per the D.C. Code. Leased vehicles are exempt from the DC titling excise tax.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
District of Columbia fee guide
Check your District of Columbia lease quote free →Florida (FL)
Tax on each monthly payment · 6% + local
Florida taxes each lease payment (6% plus your county discretionary surtax, which applies to the first $5,000 of each payment). The down payment and first payment collected at signing are taxed when paid.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Florida Admin. Code 12A-1.071 (rentals and leases), 12A-15.004 (surtax limit); FL DOR TAA 06A-019
Hawaii (HI)
Tax on each monthly payment · 4% + local
Hawaii GET is 4% (4.5% with county surcharge) on the lessor's gross lease income; Hawaii has no trade-in credit. Lessors may pass on slightly more (up to 4.712%) because GET applies to the GET they collect.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: Hawaii DOTAX, Introduction to the General Excise Tax (rev. 2023); tax.hawaii.gov/get rate table
Idaho (ID)
Tax on each monthly payment · 6% + local
6% (+ local where it applies) on each payment; cash down taxed; trade-ins and manufacturer rebates reduce the tax.
Cash down taxed at signing: Yes · Rebates taxed: No · Trade-in value taxed: No
Source: Idaho State Tax Commission, Leasing or Renting a Motor Vehicle; Sales price (motor vehicle dealers)
Indiana (IN)
Tax on each monthly payment · 7%
7% on each payment; cash down and rebates taxed at signing; trade-in titled to the lessee not taxed.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Kansas (KS)
Tax on each monthly payment · 6.5% + local
6.5% state + local on each payment and on cash down; manufacturer rebates exempt; owned trade-in excluded.
Cash down taxed at signing: Yes · Rebates taxed: No · Trade-in value taxed: No
Source: Kansas DOR Pub. KS-1526 (Business Taxes for Motor Vehicle Transactions)
Kentucky (KY)
Tax on each monthly payment · 6%
Kentucky: a leasing company with a U-Drive-It permit pays the 6% usage tax on your gross lease charges (monthly payments plus down payment and trade-in consideration) instead of on the car's full retail price, and may charge it to you.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: Kentucky Transportation Cabinet: U-Drive-It; KRS 138.463
Louisiana (LA)
Tax on each monthly payment · 5% + local
5% state + local on the gross amount charged for the lease (each payment and amounts paid at signing). The 3% rental tax does not apply to leases over 29 days.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Massachusetts (MA)
Tax on each monthly payment · 6.25%
6.25% on each payment and on cash down; the net value of an owned trade-in is excluded.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: 830 CMR 64H.25.1(9); MA DOR Directive 04-3 (trade-ins on leases)
Massachusetts fee guide
Check your Massachusetts lease quote free →Michigan (MI)
Tax on each monthly payment · 6%
6% use tax on total rental receipts (each payment and amounts paid at signing), or 6% on the price if the lessor paid up front. Your leasing company chooses: it either charges tax on each payment (shown by default) or pays tax up front on the vehicle price. Your contract decides; switch the toggle to match it.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: Michigan Treasury RAB 2024-18; MCL 205.95(4), 205.94a(a)
Mississippi (MS)
Tax on each monthly payment · 5% + local
5% on gross lease income (payments and amounts paid at signing); the 6% rental tax applies only to 30 days or less.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
Source: 35 Miss. Admin. Code Pt. IV, Subpt. 5, Ch. 03 (Rules 101, 203, 401); MS DOR FAQ
Mississippi fee guide
Check your Mississippi lease quote free →Missouri (MO)
Tax on each monthly payment · 4.225% + local
4.225% state + local on each payment, or tax paid at titling on the price. Your leasing company chooses: it either charges tax on each payment (shown by default) or pays tax up front on the vehicle price. Your contract decides; switch the toggle to match it.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Missouri DOR Motor Vehicle Dealer Manual Section 9 (Lease/Rental); RSMo 144.010.1(5), 144.070
Nebraska (NE)
Tax on each monthly payment · 5.5% + local
5.5% state + local on each payment and on down payments; an owned trade-in is allowed.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Nebraska DOR Information Guide 6-373 (Motor Vehicle Leases)
Nevada (NV)
Tax on each monthly payment · 6.85% + local
6.85% + local on each payment if the lessor elected to tax rentals; otherwise tax on the lessor's cost. Your leasing company chooses: it either charges tax on each payment (shown by default) or pays tax up front on the vehicle price. Your contract decides; switch the toggle to match it.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
New Mexico (NM)
Tax on each monthly payment · 4.875% + local
Gross receipts tax (4.875% state + local) on lease receipts; the 4% vehicle excise does not apply to leases over 6 months.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
New Mexico fee guide
Check your New Mexico lease quote free →North Carolina (NC)
Tax on each monthly payment · 3%
North Carolina: a lease of 365 days or more pays the 3% alternate highway use tax on gross receipts (each payment and related charges) instead of sales tax.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: NCDOR: Motor Vehicle Lease and Subscription Tax; Alternate Highway Use Tax Bulletin
North Carolina fee guide
Check your North Carolina lease quote free →Pennsylvania (PA)
Tax on each monthly payment · 9% + local
Pennsylvania taxes lease payments at 6% sales tax plus the 3% motor vehicle lease tax (9%); add 1% in Allegheny County or 2% in Philadelphia. Down payments are taxed too. Trade-in on a lease: not settled in what we read; not taxed here.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: PA Department of Revenue: Tire and Vehicle Rental Taxes/Fees; 61 Pa. Code 47.17
Pennsylvania fee guide
Check your Pennsylvania lease quote free →Rhode Island (RI)
Tax on each monthly payment · 7%
7% on each payment, cash down, rebates and acquisition/doc fees; owned trade-in excluded. Your leasing company chooses: it either charges tax on each payment (shown by default) or pays tax up front on the vehicle price. Your contract decides; switch the toggle to match it.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: RI Division of Taxation Regulation SU 12-62, Rules 8 and 9
Rhode Island fee guide
Check your Rhode Island lease quote free →Tennessee (TN)
Tax on each payment (Tennessee single-article rules) · 7% + local
Tennessee taxes lease payments at 7%, plus your local rate on the first $1,600 and 2.75% single-article tax on the next $1,600. The cap cost reduction (cash down and rebates; TN says rebates do not reduce the taxable price) counts as an up-front lease payment, taxed first, so it uses up the local and single-article bands. Dealers may also pass through the TN business tax (0.15% state + 0.15% city where levied) on the price plus doc fee.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Utah (UT)
Tax on each monthly payment · 6.1% + local
6.1% statewide (4.85% state + 1.25% uniform local) plus other local on each payment and up-front payments.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Utah State Tax Commission Publication 5 (Lease Transactions)
Washington (WA)
Tax on each monthly payment · 7% + local
6.5% state + 0.5% motor vehicle tax + local on each payment; cash down taxed (at the lessor's location rate); trade-in excluded.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: WA DOR Auto dealers: Leases/rental; Motor vehicle sales/use tax page
Washington fee guide
Check your Washington lease quote free →West Virginia (WV)
Tax on each monthly payment · 5%
5% on each payment; 6% at titling on the cap cost reduction minus a WV-titled trade-in.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: WV DMV 2025 Dealer Seminar manual (lease vehicles); W.Va. Code §11-15-3c(f)(10)
West Virginia fee guide
Check your West Virginia lease quote free →Wisconsin (WI)
Tax on each monthly payment · 5% + local
5% state plus county tax on each payment; cash down and rebates taxable; owned trade-in reduces taxable receipts.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Wisconsin DOR Publication 202 (incl. Appendix A trade-in examples)
Wyoming (WY)
Tax on each monthly payment · 4% + local
4% state + local on each lease payment and amounts paid at signing.
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: Yes
States that tax a lease up front (18)
Delaware (DE)
Tax up front on the selling price · 5.25%
No sales tax on payments. A one-time 5.25% document fee is charged when the leased car is titled, on the sale price (or NADA value if higher). The fee is figured in $100 steps, so it can differ by a few dollars.
Georgia (GA)
One-time title tax (TAVT) up front · 7%
Georgia lease payments are not sales-taxed. You pay the one-time Title Ad Valorem Tax (TAVT, 7%) on the lease's fair market value: total depreciation plus amortized amounts plus cash down (rebates and trade allowances are not counted as down payment). Usually rolled into the lease or paid at signing.
Source: Georgia DOR: TAVT Calculation for New, Leased Vehicles (HB 340) and Policy Bulletin MVD-2021-04
Illinois (IL)
Tax up front on the total of payments · 6.25% + local
Since Jan. 1, 2015, Illinois taxes a lease over one year on the amount due at signing plus all monthly payments, with no deduction for trade-ins. Dealers usually collect it at signing or roll it into the lease. Add your local rate (Chicago totals 10.25%).
Source: Illinois Department of Revenue ST-9-LSE and RUT-25-LSE instructions
Iowa (IA)
Tax up front on the total of payments · 5%
Iowa charges a one-time 'fee for new registration' on a lease of 6 months or more: 5% of the lease price (total payments plus down payment; rebates excluded) plus $10. The lessor pays it and usually passes it to you.
Maine (ME)
Tax up front on the total of payments · 5.5%
5.5% up front on total payments plus cash down (incl. rebates) plus trade equity; trade-in credit does not apply to long-term leases.
Source: Maine Revenue Services Instructional Bulletin 24 (rev. 2025-12-22); 36 M.R.S. § 1752(14)(A)(5)
Maryland (MD)
Tax up front on the selling price · 6.5%
Maryland charges its titling excise tax (6.5%) once, up front, on the vehicle's agreed value (including dealer processing charges, less any trade-in allowance). Lease payments are not taxed again.
Source: Maryland MVA: Excise Tax; COMAR 11.15.33.03 (taxable price)
Minnesota (MN)
Tax up front on the total lease price · 6.875% + local
Minnesota collects sales tax up front on the 'total lease price': selling price minus rebates, residual and trade-in, plus taxable add-ons and the rent charge. Cash down does not reduce it. Local tax applies where the car is garaged.
Source: Minnesota Department of Revenue: Motor Vehicle Leases; Minn. Stat. 297A.815
New Jersey (NJ)
Tax up front on the total of payments · 6.625%
New Jersey collects sales tax up front on a lease over 6 months, on the total of payments plus cash down, rebates, acquisition and doc fees. Your trade-in value is credited (not taxed). The tax may be rolled into the payment.
New Jersey fee guide
Check your New Jersey lease quote free →New York (NY)
Tax up front on the total of payments · 4% + local
New York collects sales tax at lease signing (or registration) on the down payment plus all monthly payments for the full term. Add your county/city rate (NYC totals 8.875%). The tax can be rolled into the lease.
Source: NY Tax Department Publication 839 (long-term motor vehicle leases); 20 NYCRR 527.15
North Dakota (ND)
Tax up front on the total of payments · 5%
5% motor vehicle excise up front at titling on all payments + down payment + trade value + acquisition fee; doc fees and factory rebates excluded.
Source: ND Tax Commissioner guideline: Lease or Rental of Motor Vehicles
North Dakota fee guide
Check your North Dakota lease quote free →Ohio (OH)
Tax up front on the total of payments · 5.75% + local
Ohio collects sales tax when the lease is signed, on the total amount you will pay: all payments plus down payment, manufacturer rebates and doc fees. Add your county rate. Trade-in treatment on a lease: we did not find it in the Ohio text we read, so trade equity is not taxed here; verify on your contract.
Source: Ohio Department of Taxation: Leasing and auto dealers; Lease memo (Q2); Ohio Rev. Code 5739.02(A)(2)
Oklahoma (OK)
Tax up front on the selling price · 3.25%
No sales tax on payments for leases of 12+ months; a one-time 3.25% vehicle excise tax on the sales price is paid at titling (usually passed to you).
Source: OAC 710:65-13-30(h); 68 O.S. §2103 (3.25% excise, actual sales price from July 1, 2026 per HB 1183)
Oregon (OR)
Tax up front on the selling price · 0.5%
No sales tax. A 0.5% vehicle privilege tax applies to new vehicles bought from Oregon dealers, on the agreed-upon value; the dealer may pass it on.
Source: Oregon DOR, Vehicle Privilege and Use Taxes; ORS 320.405
South Carolina (SC)
Tax up front on the total of payments · 5%
South Carolina leases are exempt from sales tax; instead the 5% Infrastructure Maintenance Fee applies to the gross proceeds of the lease, capped at $500, collected at titling.
Source: SC DOR: Sales and use tax on motor vehicles; S.C. Code 56-3-627
South Carolina fee guide
Check your South Carolina lease quote free →South Dakota (SD)
Tax up front on the total of payments · 4%
4% motor vehicle excise up front at titling on total payments plus cash, rebates, net trade and fees; no sales tax on the payments.
Source: SD DOR, Motor Vehicle Leases & Rentals (Apr 2025)
South Dakota fee guide
Check your South Dakota lease quote free →Texas (TX)
Tax up front on the selling price · 6.25%
Texas does not tax lease payments. The leasing company pays 6.25% motor vehicle tax on its purchase price (normally your selling price) when the car is titled, and passes it to you: either due at signing or rolled into the lease. No local tax; no trade-in credit because you are not the buyer.
Source: Texas Comptroller: Motor Vehicle Taxes FAQ (leasing) and Tax Guide 96-254 'Leases'
Vermont (VT)
Tax up front on the selling price minus residual · 6%
6% purchase-and-use tax up front on (selling price minus residual); trade-in credit does not apply to leased vehicles.
Virginia (VA)
Tax up front on the selling price · 4.15%
Virginia charges the 4.15% Motor Vehicle Sales and Use Tax once, at titling, on the gross sales price (after manufacturer rebates, including the dealer processing fee; trade-ins are not deducted). Monthly payments are not taxed again. $75 minimum.
Source: Virginia DMV: Motor Vehicle Sales and Use Tax; Va. Code 58.1-2402
No state tax on a lease (3)
Alaska (AK)
Tax on each monthly payment · 0% state + local
Alaska has no state sales tax, but some boroughs and cities levy local sales tax. Enter your local rate (0 if none).
Cash down taxed at signing: Yes · Rebates taxed: Yes · Trade-in value taxed: No
Source: Alaska Division of Community and Regional Affairs: Alaska Taxable (local sales tax database)
Montana (MT)
No state sales tax · 0% state
Montana has no sales tax; registration fees apply.
Source: Montana revenue department
New Hampshire (NH)
No state sales tax · 0% state
New Hampshire has no sales tax; town permit fees apply at registration.
Source: New Hampshire revenue department
New Hampshire fee guide
Check your New Hampshire lease quote free →
Sources
- Regulation M, 12 CFR 1013.4(f) and (s) (eCFR, read Oct. 31, 2026)
- State lease-tax rules: one state source per state, linked on each card (checked Oct. 20, 2026).
Doc fees by state · Rebate sales tax by state · Trade-in tax credit · All 50-state car-buying rules
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FAQ
Do you pay sales tax on a car lease?
In most states, yes. In 30 states (counting D.C.) tax is charged on each monthly payment. In 18 states it's collected up front at signing or titling (Delaware, Georgia, Illinois, Iowa, Maine, Maryland, Minnesota, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Texas, Vermont, Virginia). Alaska, Montana and New Hampshire have no state tax on a lease (some Alaska cities and boroughs have local sales tax). Each state card below links to the state source.
Is the down payment on a lease taxed?
In most states that tax each payment, a cash down payment (capitalized cost reduction) is taxed at signing. Rebates and trade-in value vary by state; each state card shows what the state source says.
How do I find the money factor on my lease?
Take the rent charge on your lease contract, divide by the number of payments, then divide by the adjusted capitalized cost plus the residual value. Regulation M (12 CFR 1013.4(f)) requires those lines on every motor vehicle lease. Multiply by 2,400 for a rough APR comparison.
Can I see what's in the capitalized cost?
Yes. Regulation M gives you the option to get a separate written itemization of the gross capitalized cost, and if you ask, it must be provided before you sign (12 CFR 1013.4(f)(1)).
Educational auto deal, sales tax, doc-fee, and loan/lease math only — not legal, tax, or financial advice. Dealerships are independent sellers; verify all out-the-door figures on your written buyer's order before signing.