Lease tax by state
How is a car lease taxed in Minnesota?
Tax on the total of all payments is collected up front. The Minnesota state-level rate is 6.88%.
- Method
- Up-front tax on the total of all payments
- State base rate
- 6.88% (excludes local add-ons)
- Down payment taxed?
- Yes — cap-cost reduction is taxed
- As of
- 2026-06-20
What this means for your lease
In plain English: tax on the total of all payments is collected up front. Minnesota's state-level lease sales-tax rate is 6.88% (before any local add-on).
Your cap-cost reduction (cash down, trade equity, or rebates applied as a down payment) IS taxed in Minnesota, so putting more cash down does not escape the tax.
The detail
Quirk: For leases of more than 28 days, Minnesota collects the ENTIRE tax UP FRONT on the total amount to be paid under the lease (MN Stat. 297A.815). Total lease price = vehicle value minus rebates/residual/trade-in allowance, plus taxable add-ons, interest and finance charges. Importantly, cash down payments / cap-cost reductions do NOT reduce the taxable vehicle value (so the down payment is effectively taxed). Lessor collects tax in full at lease signing. Does not apply to rentals <=28 days or GVWR over 10,000 lbs.
Local add-ons
Local sales taxes (and the metro-area transit/vehicle taxes) apply if the vehicle is principally garaged in a taxing jurisdiction; added on top of 6.875%.
See what this does to your true monthly cost
Minnesota's tax method changes the real cost of a lease — sometimes more than the headline payment does. Drop your numbers into the calculator (we preselect Minnesota) to fold the tax into one honest, comparable effective monthly figure.
Estimate my Minnesota lease cost →Source: revenue.state.mn.us · High confidence · Reviewed 2026-06-20. Tax method is researched and cited per state; rates are state-level and exclude local add-ons. This is an estimate — verify with your dealer or the Minnesota Department of Revenue before you sign.