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Leasing companies can take tax credits when retailing off-lease vehicles

November 24, 2010

A change to the Illinois Revenue Department's Form ST-556 allows a leasing company to take a tax credit when a vehicle the company originally purchased to lease subsequently is sold at retail by the company.

Form ST-556 has been changed slightly to report any qualified tax credits. The updated form is apparent by the revision date on the upper left corner of the return. The revision date is October 2001; it appears as R-10/01.

The changed ST-556 primarily impacts leasing companies. However, it affects all businesses that file the ST-556 return because of the revisions made to the form itself. Dealers have to make certain adjustments to computer programs to use the new edition.

Now, dealers who both lease items in Illinois and retail the same items at the end of the lease may take credit for the previously paid tax.

If the original tax was $1,000, and then $600 is due when the vehicle is sold, the business may report a $600 credit on Line 10 of the revised ST-556. No balance remains for the other $400; that difference is gone.

The new regulations change is different than an advance trade-in credit, which is established when a leasing company trades in an off-lease vehicle towards a future purchase of a vehicle to be leased. The new tax credit is allowed only when a leasing company sells an off-lease vehicle at retail.

Dealers should have received an informational bulletin from the Revenue Department in December that fully explains the new tax credit.

Form ST-556 must be filed with the revenue department to report the retail sale of items which must be titled-vehicles, watercraft, aircraft, trailers and mobile homes-in Illinois.

The tax credit change is not the result of any new legislation. For more information, call 1-800-732-8866.

 

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