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NBC 10 I-Team: Drivers who lease cars complain of ‘double tax'

A tax charged on top of another tax sounds outrageous, but the NBC 10 I-Team learned it’s real deal for some Rhode Island drivers.

It’s a complaint the NBC 10 I-Team has heard time and again from people who lease cars. Charges on their bills appear to show sales tax, applied on top of the car’s property tax.

Mark D’Elia of Johnston has been leasing cars for years, but discovered the charge when he opened his lease bill recently, costing him an extra $70 each month.

"You've got to be kidding me. Tax on top of property tax?" D’Elia said. "I pay a mortgage to a mortgage company. They don't charge me tax on top of my property tax."

So is that what’s happening? Well, sort of. The NBC 10 I-Team went to Michael Canole at the Division of Taxation to break down the numbers.

"The sales tax is imposed on the sales price, which includes all charges for the vehicle,” Canole said.

That includes the car tax paid by the leasing company that owns the vehicle. Some companies lump it all into one larger lease payment. Others, like D’Elia’s leasing company, wait until the tax is due to pass the cost on to the consumer.

"What they'll try to do is show a lower monthly rental charge, then when the property tax comes in quarterly, they bump up your charge for that month,” Canole said.

The bigger issue for Rhode Island drivers, whether they lease or own their cars, is the car tax system itself.

It appears that momentum to reform the state’s most hated tax is building. In a change of focus during a heated reelection campaign, House Speaker Nicholas Mattiello promised to make car tax reform a top priority when the new session begins in January. He was later re-elected in a tight victory that came down to a hand recount.

“That tax, car tax, is just a stone in people’s shoe,” Mattiello said in October.

The Division of Taxation told the NBC 10 I-Team that more than a million cars are on the Rhode Island tax rolls statewide each year -- 1,087,672 last year. The vehicle has an average taxable value of $9,768, although the actual tax you pay depends on the city or town in which you live. Each community sets its own car tax rate and exemptions, meaning the same car can be far more costly to own in Providence than in Narragansett.

A longstanding problem with the current system is that values are based on the National Car Dealers Association Clean Retail Value -- a price nowhere near what consumers could actually get for their cars.

During a meeting on Wednesday, members of the state’s Vehicle Value Commission, which sets the state’s taxable values, again told the NBC 10 I-Team that they have no legal power to change the system. Those changes must come from inside the State House, members said.

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