LSE-1, Tax Return for Vehicle Leasing Companies Instructions

You must complete Form LSE-1, Tax Return for Vehicle Leasing Companies,

• along with Form LSE-2, Original Motor Vehicle Lease Information, if you offer for lease for a period of longer than one year a qualifying motor vehicle, titled or registered in Illinois, and under this lease the customer pays additional reportable amounts that were not included in the original selling price of the motor vehicle at the start of the lease; or
• along with Form LSE-3, Lease/Rental Payments for Certain Titled or Registered Property if you had receipts for leases or rentals from the following titled or registered property:
  • (i) trailers, other than semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, that are required to be registered with an agency of this State; and
  • (ii) items that are required to be titled with an agency of this State but not required to be registered with an agency of this State, such as all-terrain vehicles (“ATVs”) and off-road motorcycles.

What are the qualifying leased motor vehicles that are reported on Form LSE-2? Qualifying motor vehicles are:

• all first division motor vehicles, including motorcycles; and
• the following second division motor vehicles:
  • those with a gross vehicle weight rating of 8,000 pounds or less;
  • those of a van configuration designed to transport not less than 7 or more than 16 passengers; and
  • those which are self-contained and designed or permanently converted to provide living quarters for recreational, camping, or travel use and have direct walk-through access to the living quarters from the driver’s seat.

Illinois law provides that when a qualifying motor vehicle is sold for lease and will be titled or registered in Illinois, in addition to amounts reported on the original Form RUT-25-LSE or Form ST-556-LSE, the selling price of the vehicle includes any amount received by the lessor from the lessee that is not calculated at the time the lease is executed, including, but not limited to, excess mileage charges and charges for excess wear and tear. This amount also includes monthly lease payments if these payments were not included in the original selling price (e.g., lease payments made when the lease is extended beyond its original term). The law also provides that the lessor assumes the responsibility of the retailer for reporting and paying the tax due on this additional amount.

Effective January 1, 2025, Public Act 103-592 amends the Retailers’ Occupation Tax Act to provide that a lease of tangible personal property is considered a sale at retail. Generally, this tax on lease receipts does not apply to leases of motor vehicles, watercraft, aircraft, or semitrailers, as defined in Section 1-187 of the Illinois Vehicle Code, that are required to be registered with an agency of the State of Illinois. However, lease or rental receipts from the following titled or registered property is subject to tax:

• (i) trailers, other than semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, that are required to be registered with an agency of this State; and
• (ii) items that are required to be titled with an agency of this State but not required to be registered with an agency of this State, such as all-terrain vehicles (“ATVs”) and off-road motorcycles.

Use Form LSE-3 to report receipts for leases or rentals of these items. This does not apply to “rent-to-own” transactions.

See below and Form LSE-2 and Form LSE-3 instructions for additional information to calculate your tax due.

You must file Form LSE-1, along with any payment you owe, on or before the 20th day of the month following the month in which (i) the lease customer paid additional reportable amounts that were not included in the original selling price of the vehicle (Form LSE-2), or (ii) you had receipts for leases or rentals of certain titled or registered property (e.g., ATVs, off-road motorcycles, trailers other than semitrailers, etc.) (Form LSE-3).

Note: If the due date falls on a weekend or holiday, your return and payment are due the next business day.

You can use at MyTax Illinois at mytax.illinois.gov to file your Form LSE-1, Form LSE-2, and Form LSE-3 electronically and make an electronic payment of any tax due.

You owe a late filing penalty if you do not file a processable return by the due date, a late payment penalty if you do not pay the tax you owe by the date the tax is due, a bad check penalty if your remittance is not honored by your financial institution, and a cost of collection fee if you do not pay the amount you owe within 30 days of the date printed on a bill that we send you. Interest is calculated on tax from the day after the original due date of your return through the date you pay the tax. We will bill you for penalties and interest. For more information about penalties and interest, see Publication 103, Penalties and Interest for Illinois Taxes, available on our website at tax.illinois.gov.

If you need help, visit our website at tax.illinois.gov.

If you cannot find the answer to your question, you can call us weekdays between 8:00 a.m. and 5:00 p.m. at 1 800 732-8866 or 217 782-3336 or 1 800 544-5304 (TTY).

Language assistance services are available upon request and are free of charge.

Step 1: Figure tax

Lines 1 and 2: Use Form LSE-2 to report the total amount of additional reportable charges required to be paid by your lease customers that were not calculated at the start of the qualifying lease and the total tax due. Use Form LSE-3 to report receipts for leases or rentals of items of titled or registered property that are subject to tax on lease receipts (e.g., ATVs, off-road motorcycles, trailers other than semitrailers, etc.) and the total tax due. Combine the two totals from Form LSE-2 and LSE-3 and enter on Lines 1 and 2.

Line 3: You are entitled to a discount if you electronically file your return and payment on or before the due date. The discount amount is 1.75 percent (.0175) of your tax due or $5 per calendar year, whichever is greater. Beginning with returns due on or after January 1, 2025, the maximum discount you may claim per month is $1,000.

Line 4: Subtract Line 3 from Line 2.

Line 5: If you collected more tax than is due on the transactions reported on your Form LSE-2 or LSE-3 entries, enter the total amount you overcollected.

Line 6: Add Lines 4 and 5.

Line 7: If you have a credit memorandum or prior overpayment and you wish to use it towards what you owe, enter the amount you are using.

Line 8: Subtract Line 7 from Line 6. This is your total amount of tax due.

LSE-1 Instructions (R-12/24)