How do I calculate sales tax on a lease of tangible personal property subject to the single-article local sales tax limitation?

Sales tax applies to a lease of tangible personal property on the billing basis of the lease payments, either on the lump sum due at the time of the lease execution or on a monthly/periodical basis, as provided in the lease contract.

 The state single article sales tax and the local option single article sales tax limitation will apply to a lease of tangible personal property if the tangible personal property being leased qualifies as a single article. The term single article means any item that is considered, by common understanding, to be a separate unit, apart from any accessories, extra parts, etc., and is capable of being sold as an independent item or as a common unit of measure (e.g. an automobile).

 The state sales tax rate of 7.00% applies to all lease payments under the lease contract. With the local option single article sales tax limitation, only the first $1,600 in lease payments are subject to the local option sales tax, at the applicable local tax rate. The state single article sales tax then applies to the remaining lease payments between $1,600.01 and $3,200, at a tax rate of 2.75%. For example, sales tax on a 12-month lease of a piece of equipment, with monthly lease payments of $400 (excluding interest/financing charges), is calculated as follows:

 

Month

Lease Payment

State Tax

(7.00%)

Local SA Tax

(2.25%)

State SA Tax

(2.75%)

Total Payment Due

1

$400

$28

$9

-

$437

2

$400

$28

$9

-

$437

3

$400

$28

$9

-

$437

4

$400

$28

$9

-

$437

5

$400

$28

-

$11

$439

6

$400

$28

-

$11

$439

7

$400

$28

-

$11

$439

8

$400

$28

-

$11

$439

9

$400

$28

-

-

$428

10

$400

$28

-

-

$428

11

$400

$28

-

-

$428

12

$400

$28

-

-

$428

TOTALS

$4,800

$336

$36

$44

$5,216

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