Who pays NY highway use tax under a lease?
Before operating a motor vehicle on the public highways of New York State you must obtain a certificate of registration (C of R) and decal for each motor vehicle subject to the state’s highway use tax. Once you’ve been issued a certificate, the recordkeeping and reporting requirements begin. If there’s a lease involved, both parties have a role to play.
Certificate holder must file either way
Leasing adds a new twist when filing state highway use taxes. In New York, if you have been issued a C of R you must file a HUT return, whether you are the owner (lessor) or carrier (lessee). This applies even if:
- no tax is due, or
- another person will pay any tax due on the use of the vehicle operated under the C of R.
If owner will pay: If the owner of the vehicle has a C of R and leases the vehicle during the reporting period to a carrier (lessee) who operates it under the owner’s certificate, the owner must report the motor vehicle and mileage on their tax return.
If lessee will pay: If the owner of the vehicle has a C of R and leases the vehicle during the reporting period to a carrier (lessee) who operates it under their (lessee’s) certificate:
- The owner must still file a HUT return listing the motor vehicle and indicate that:
- the carrier (lessee) will report the motor vehicle and mileage on their tax return, and
- the motor vehicle will be reported by another certificate holder.
- The carrier (lessee) reports the motor vehicle and mileage on their tax return.
Enforcement: Who pays the penalties?
Generally, HUT is imposed on the carrier operating the vehicle. If the carrier is not the owner of the motor vehicle, both the carrier and the owner may be held liable for payment of any tax due. If you do not comply with the HUT law, the NY Tax Department may:
- deny you a certificate of registration to operate a motor vehicle in New York State, or
- suspend or revoke your certificate for any violation of the provisions of the highway use tax.
Failure to comply could also result in criminal fines, imprisonment, or both.
Key to remember: If you lease vehicles that operate in New York State, make sure your written lease agreement makes it clear who is responsible for these taxes. If you have been issued a certificate of registration, you must file a HUT return even if no tax is due, or even if another person will pay any tax due on the use of the vehicle operated under the C of R.