In Pennsylvania, as in most states, you don't pay sales tax when you purchase a motor vehicle but you do so when you decide to rent a vehicle. Sales taxes are applied to your monthly payment rate, taking into account state, county and local rates. The state sales tax in Pennsylvania is six percent but some counties and cities add an additional surtax to this amount.
Tax Rate
The state sales tax rate for leasing a motor vehicle in Pennsylvania is six percent. Some counties impose additional surtaxes, however. For example, the rate in Allegheny County is seven percent and that in Philadelphia County is eight percent. The city of Philadelphia imposes an additional two percent, raising the rates in that city and county -- which are coterminous -- to 10 percent.
Example
If you live in the city and county of Philadelphia your tax rate is 10 percent consisting of six percent sales tax, two percent local county surtax and two percent local city sales tax. If your base monthly lease payment is $400, you will pay $40 in taxes per month ($400 x 10 percent).
Tax Collection
In practice, the leasing company collects the tax from your monthly lease payment and remits the payment to the state tax authorities. It is the Pennsylvania Department of Transportation that collects motor vehicle sales taxes.
Sales Tax Credits
If you have a trade-in vehicle at the time you lease, you may be eligible for sales tax credit for the value of the trade-in. You are still subject to Pennsylvania sales tax on the value of the vehicle if you decide to purchase it at the end of the lease term. In general, it is good practice to read the fine print before leasing any vehicle.