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Excise / Property Tax Billed By Your City

how-excise-or-property-tax-rate-works-with-leasing-boston
 

Excise/Property tax is different from Sales/USE Tax on a lease.

Sales/USE Tax in MA is Based on a 6.25% Rate Throughout the state and is billed into your monthly payment on a lease.

Sales/USE tax in Massachusetts is not calculated on the whole value of the vehicle, but is calculated using your monthly payment.

Excise/Property tax, calculated based on the whole value of the vehicle, is billed annually, or prorated the first year, and paid directly by the leasing company to the city.

The following Information is published by the Secretary of the Commonwealth in their Motor Vehicle Excise Information PDF Booklet (Click To Open):

Figures are the manufacturers’ list prices for vehicles in their year of manufacture. Present market value, price paid, or condition are not considered for excise tax purposes. The excise tax law (M.G.L. c.60A, s.1) establishes its own formula for valuation for state tax purposes whereby only the manufacturer’s list price and the age of the motor vehicle are considered. Motor Vehicle Excise Information

The formula is as follows:

In the year preceding the model year

(brand new car released before model year)...............................50% In the model year .....................................................................90% In the second year ....................................................................60% In the third year .......................................................................40% In the fourth year .....................................................................25% In the fifth and succeeding years...............................................10%

(Source: https://www.sec.state.ma.us/cis/cispdf/Motor_Vehicle_Excise.pdf)

When you are leasing the vehicle, the bulk of its value is being taxed in the first three years. With the exception of Ford, which bills excise tax into your monthly payment along with States Sales/use tax, most Leasing companies pay the excise tax bill on your behalf directly to the city garaging the vehicle, and add it to your billing statement.

Motor Vehicle Excise Information PDF Booklet (Click To Open) states: "Leased cars are still subject to excise tax. However, whose obligation for payment is determined by any terms in the original leasing contract. If not addressed, the driver should inquire of the leasing company. Normally, if the car is registered in the driver’s name, the registration creates an obligation and liability for payment of excise tax upon the driver, not the leasing company. Even if the car is registered in the leasing company’s name, however, there may be terms in the contract passing on any taxes, excise included, onto the driver, so it is best to check the contract."

Please use all the information provided as a rough guideline for calculating your car purchase expenses. Always confirm tax rates and obligations with your leasing company or local cities jurisdiction, as well as your lease contract.

 
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