Kit Menkin’s Leasing News Wednesday, January 16,2002 

Headlines---United Association of Equipment Leasing Membership Up 22%

                 Empire National Leasing to Become First Niagara Leasing

                      Arrow Capital Opens New Southern California Offices

                              Mortgage Boom Boosts Wells Fargo 4th Quarter Earning

                                 Silicon Valley to remain strong but faces challenges

                                          Ohio Releases Final Advisory on Up-Front Sales Tax

                                          Agenda for upcoming Streamlined Sales Tax Meeting

                                             ###Denotes press release


United Association of Equipment Leasing Membership Up 22%

as of december 31 2001   379

Bill Grohe

Membership Director

(  June, 2001 membership was 310.

Leasing News is in the process of up-dating all Association information.

We are waiting for the Eastern Association of Equipment Leasing numbers

and then will have the chart to begin comparison and up-dates.



Agenda for upcoming Streamlined Sales Tax Meeting


The National Conference of State Legislatures (NCSL) has posted the agenda for the upcoming Streamlined Sales Tax Implementing States Meeting in New Orleans at


Dennis Brown



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Empire National Leasing to Become First Niagara Leasing, Inc.



LOCKPORT, N.Y   Effective February 1, 2002, First Niagara Bank subsidiary Empire National Leasing, Inc. will establish a new brand name for the 17-year old commercial equipment lease financing company.


Empire National Leasing, Inc. will become First Niagara Leasing, Inc. to allow for more efficient, effective marketing and delivery of leasing services.


"Operating under a common brand name will also make it possible for our leasing subsidiary to better align with and leverage the growing presence of First Niagara Financial Group as a full service provider of business and consumer financial services. The benefits of successfully achieving this synergy far outweigh the costs associated with the various aspects of a name change over the long term," said Charles D. Clark, First Niagara's Vice President of Marketing/Public Relations.


The nationwide provider of equipment lease financing was acquired by First Niagara Bank in January 2000 allowing the bank to expand its indirect commercial lending business and its customer base outside of its traditional market. The acquisition has brought about positive results for both entities including fully automated systems for Empire, 24-hour turnaround for customers and more than $2 million in leads for the bank and its subsidiaries.


Empire National Leasing was founded in 1984 in Buffalo and provides commercial equipment lease financing for manufacturers, distributors, vendors and customers from many industries.


First Niagara Bank is the primary banking subsidiary of First Niagara Financial Group, Inc. (NASDAQ: FNFG), and is based in Lockport, N.Y. The bank has 23 locations in the Western New York counties of Erie, Niagara, Orleans, Genesee and Monroe with a 24th opening soon in the Rochester suburb of Greece. First Niagara Financial Group is also the parent of Central New York-based Cortland Savings Bank and Cayuga Bank.




First Niagara Bank, Lockport


Charles D. Clark, 716/625-7526


V.P. Marketing and Public Relations



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Arrow Capital Opens New Southern California Offices



Media and Entertainment Division Provides Flexible Equipment Leasing Services 


SAN JOSE, Calif., / -- Financial services company Arrow Capital Corporation announced  that it has opened two Southern California sales offices -- in Bel Air and San Diego -- to serve the market for entertainment production equipment and software.


The $33-billion Los Angeles entertainment industry is supported by a wide range of companies specializing in all aspects of film, video, television and music production, such as digital and sound effects, film editing, animation and graphic design.  Media production requires a substantial investment in equipment and software, and rapid technological change makes equipment leasing a cost-effective way to stay current.


"As an established, successful financial services company, we have all the resources needed to meet the special requirements of companies in the entertainment industry," said Richard K. Abrams, vice president of media sales for Arrow Capital.  "These companies are challenged to fund the acquisition of critical production equipment quickly and efficiently, and we respond by offering flexible and creative financing packages, unlike traditional lenders who limit financial options to generic transactions."


About Arrow Capital  


Founded in 1988, Arrow Capital is a financial services company that creates innovative, customized equipment leasing programs that enable its customers to increase revenue, maximize profitability and grow market share. Arrow sets itself apart with its financial program flexibility, broad funding capabilities, long-term company stability and deep industry experience.  Arrow has headquarters in San Jose, Calif. and sales offices in several other California locations and the East Coast.


In Southern California, Arrow Capital can be contacted at 1820 N. Beverly Glen, Bel Air, Calif., 90077; 310-475-4384; and 3990 Old Town Ave., Suite A-101, San Diego, Calif., 92110; 619-295-5897;

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Mortgage Boom Boosts Wells Fargo 4th Quarter Earning

Associated Press

SAN FRANCISCO – Wells Fargo & Co. Tuesday said a mortgage refinancing boom enabled the bank to offset sluggish loan demand among its business customers and boost its fourth-quarter profit by 5 percent.

The San Francisco-based bank earned $1.18 billion, or 69 cents per share, during the final three months of 2001, an improvement from net income of $1.13 billion, or 65 cents per share, the previous year.

The earnings per share surpassed the consensus estimate of analysts polled by Thomson Financial/First Call by a penny.

The pleasant surprise helped push up Wells' shares 69 cents to $43.71 in early trading Tuesday on the New York Stock Exchange.

Wells attributed most of the fourth-quarter gains to "robust" consumer loan demand, particularly in its mortgage division, which cashed in on the lowest interest rates since the 1960s.

With its home loan volume more than tripling in the fourth quarter, the bank ended the year with $194 billion in mortgage originations, breaking its previous record of $109 billion in 1998. Last year's mortgage volume represented an 155 percent increase from 2000, the bank said.

Meanwhile, Wells' business loans remained flat as the bank's corporate customers pulled in their reins to counteract the recession.

The downturn also saddled Wells with more losses. The bank said it charged off loans totaling $536 million in the fourth quarter, up 52 percent from the $352 million charged off at the same time in the prior year.

For all of 2001, Wells earned $3.42 billion, or $1.97 per share, a 15 percent drop from 2000's profit of $4.03 billion, or $2.33 per share.

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Silicon Valley to remain strong but faces challenges


San Jose Mercury News

Silicon Valley shows strong signs of remaining an economic powerhouse despite the current recession, but it must make progress against disturbing social problems that threaten the region's long-term health.

That broad conclusion emerges from the Index of Silicon Valley for 2002, an annual survey of conditions in high-tech region surrounding Santa Clara County. The study, scheduled for release today, paints a statistical portrait of the area and measures the region's progress against key economic and social goals. It was prepared by Collaborative Economics in Mountain View for Joint Venture: Silicon Valley Network to help plan regional initiatives this year.

It shows that the recession has without question hurt Silicon Valley. Last year, the region lost at least 25,000 jobs -- considered a conservative estimate -- and the real income for each person dropped for the first time since 1993. The gravy train for investors also came to a screeching halt: Venture capital investment dropped by 71 percent in 2001, and initial public stock offerings dropped below their low level in 1991.

But these setbacks should prove temporary. Some of the most important findings highlight the strengths of the economy in Silicon Valley, which the survey defines as Santa Clara County, the part of San Mateo County south of Highway 92, the southwest area of Alameda County and the Scotts Valley area of Santa Cruz County.

For instance, despite a decade of competition from other technology regions in the country, Silicon Valley's industries and institutions steadily increased their share of technological advance throughout the 1990s, as measured by the number of patents awarded. In 1999, the latest data available, Silicon Valley won 6,800 patents, or 8 percent of all U.S. patents, compared to less than 2,000 in 1990 amounting to only 3 percent of U.S. patents.

``Patents are an indicator of future developments in technology,'' said Doug Henton, president of Collaborative Economics. ``It is our best indicator of whether we are developing new knowledge locally.''

This would mean that assuming Silicon Valley companies can convert these technological breakthroughs into successful products, local firms have years of growth ahead of them.

Henton believes Silicon Valley's new strength could come from blend of information technology and bioscience, in areas such as the development of biological semiconductors and DNA-specific drugs. ``We may be at the beginning of something, not at the end,'' he said.

AnnaLee Saxenian, a professor at UC Berkeley, believes the start-ups launched during a recession will indicate the valley's future direction. ``Typically recessions, like that in mid-1980s and then early 1990s, are a time when new start-ups emerge to experiment with new directions and the survivors become the basis for the subsequent wave of growth,'' she said.

Another key indicator shows why Silicon Valley should remain economically strong: Employees here added more value to the goods and services produced at nearly three times the national average. This measure of value added per employee rose by 4.6 percent last year to $170,000, compared to the average nationally of $56,000.

As long as employees increase their productivity, their employers are able to pay them high wages. In fact, despite the drop in 2001, average pay in Silicon Valley remains significantly higher than the national average.

Overall, these indicators suggest the steep tech downturn is not doing the kind of long-term damage to the valley that the decline in the defense and aerospace industries did to the Los Angeles area in the early 1990s. The difference, says Henton, is that LA suffered because the basic demand declined as the defense budget was cut sharply with the end of the Cold War.

In Silicon Valley, the current tech downturn reflects too much investment, not a decline in basic demand for computers, software or communications products, he says.

``This is a temporary decline,'' agreed Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto and an advisor to the index survey. ``No one is saying that it is a permanent decline.''

If only Silicon Valley could solve its pressing social problems as easily as it invents new products. The survey shows that some basic problems have worsened in the 1990s: Housing has become more expensive, traffic congestion remains intractable and some disturbing trends are developing in education.

``In assessing the progress on these challenges, we could do better,'' Levy said. ``If we give these up, we will lose our competitive edge slowly over time.''

For instance, only 71 percent of the public high school students graduated last year, down from 77 percent in 1993, and fewer students are taking intermediate algebra in high school, the key course for training in technical fields or college-level mathematics.

In one disturbing sign, Hispanic students, the fastest growing portion of the student population, were the least likely to take intermediate algebra of all the ethnic groups. Surprisingly, girls are taking the intermediate algebra much more than the boys.

The survey also shows that a widening disparity between the most highly paid and the lowest paid. While the top 20 percent of households saw their income rise by 22 percent to an average annual of $155,000, the lowest 20 percent have had virtually no income growth as a group since 1993.

Some of the worst excesses of the bubble are moderating, according to the survey, but not by much. Housing prices have dropped, but only 75 percent of all households could afford to buy a home at the median price of $481,000. The same is true for renters. Even though rents have declined, they have risen much faster than incomes steadily since 1996.

Young families with two wage-earners are feeling the squeeze of living in Silicon Valley, because the cost of childcare has risen much faster than inflation.

At the same time, the valley is accomplishing one of its key goals, to make development more accessible to public transportation. In 2001, 61 percent of all the new housing units approved were close to transit, nearly twice the percentage of the year before.

Still, the long-term social trends require more of a response from the community, the index participants say. ``If we don't deal with education and housing, we undermine productivity because productivity isn't just a function of technology but also of people,'' says Henton. ``We can't have economic innovation without social innovation.


  sales tax up-front position Announcement

Ohio Releases Final Advisory on Up-Front Sales Tax

The Ohio Department of Taxation has released a final letter to vendors on the new upfront sales and use tax treatment of leases in Ohio. This letter is meant to cover leases of all property and may not expand on any one issue. It will be an important topic of review during the industry workshop on implementation of the up-front sales tax scheduled in Columbus on Tuesday morning, January 29. For additional information on the industry workshop and registration, please see first related site of reference at the end of this article.


Comments or questions relating to the letter can be directed to Tim Sachs, Ohio Department of Taxation at Please copy ELA at If you prefer to have ELA submit your comments without your company name being forwarded to the Ohio Department of Taxation so indicate in a message to


Ohio Department of Taxation
Sales & Use Tax Division
P.O. Box 530
Columbus, Ohio 43216-0530
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To All Ohio Vendors:

The Ohio 124th General Assembly recently passed Amended Substitute House Bill 405, which made significant changes in the way Ohio sales and use tax is applied to the lease of motor vehicles, watercraft, outboard motors, and aircraft. The change in the law also applies to leases of tangible personal property used for business purposes. Effective February 1, 2002, the sales tax on most leases of these types of property will be computed and paid at the beginning of the lease rather than on the monthly payments. The following information will explain the changes of the law and how they may apply to your business.

Statutory Law

Section 5739.01 (H) (4) has been added to the definition of “Price”. It states:

“In the case of the lease of any motor vehicle designed by the manufacturer to carry a load of not more than one ton, watercraft, outboard motor, or aircraft, or the lease of any tangible personal property, other than motor vehicles designed by the manufacturer to carry a load of more than one ton, to be used by the lessee primarily for business purposes, the sales tax shall be collected by the vendor at the time the lease is consummated and shall be calculated by the vendor on the basis of the total amount to be paid by the lessee under the lease agreement. If the total amount of the consideration for the lease includes amounts that are not calculated at the time the lease is executed, the tax shall be calculated and collected by the vendor at the time such amounts are billed to the lessee. In the case of an open-end lease, the sales tax shall be calculated by the vendor on the basis of the total amount to be paid during the initial fixed term of the lease, and then for each subsequent renewal period as it comes due.

Additions similar to the above were made to the Use Tax code in Section 5741.01 (G) (6).

Section 5739.01 (VV) has been added. It defines the term “lease”.

“Lease” means any transfer for a consideration of the possession of and right to use, but not title to, tangible personal property for a fixed period of time greater than twenty-eight days or for an open-ended period of time with a fixed period of more than twenty-eight days.

This change in the sales and use tax law applies to qualifying lease contracts entered into on and after February 1, 2002. The tax will be collected at the time the lease is consummated. Sales and use tax apply to the total amount that will be paid throughout the term of the lease. Tax on charges that are not or cannot be calculated at the time the lease is consummated must be collected at the time those charges are billed to the lessee. Examples of this type of charge would be an excess mileage charge or a reimbursement of personal property tax.

There are many questions that arise as a result of the law change. Below you will find questions and answers to assist you in implementing the new law. At a later date, there will be more detailed information available on the Department of Taxation website, Error! Hyperlink reference not valid./tax.

Questions and Answers

Q1) To what items does the new law apply?

A1) The law specifically lists motor vehicles, watercraft, outboard motors and aircraft. (Note the exclusion of motor vehicles designed by the manufacturer to carry a load of more than one ton. A lease of this type of vehicle will still be subject to the tax on each monthly lease payment as treated under prior law). Also included under the new law is “tangible personal property used primarily for business purposes.” This includes, but is not limited to, leases of computers, computer peripherals, canned software, furniture, machinery, plants, wall hangings, communication equipment, and any other personal property used by a business.

Q2) How is the “price” determined for computing sales tax due at the time the lease is consummated?

A2) The price on which to compute the sales tax is the total amount to be paid by the lessee under the lease agreement. The change in the law requires that price includes the sum of all lease payments over the term of the lease. For example, if the lease calls for 48 payments of $300.00, total payments would be $14,400.00. “Price” includes this amount. As under prior law, “price” also includes other amounts that represent consideration for the lease of motor vehicles, watercraft, aircraft and other personal property including, but not limited to: down payments, manufacturer rebates, interest, and documentary fees.

Refundable deposits, to the extent those deposits are actually refunded to the lessee, are not part of the price. Should part of the deposit be held at the end of the lease to cover taxable charges and fees, the tax on that amount will be collected at the time the charge is imposed.

Q3) How will trade-ins be handled?

A3) Trade-ins are similar to charges such as down payments or manufacturer rebates in that they reduce the cost of the leased property on which the lease payments are computed. As a general rule, items taken in trade on a sale or lease are part of the price. Tax will apply on trade-in amounts in the same manner as for down payments or manufacturer rebates.

However, under Ohio law, the credit afforded a lessee for a trade-in of a used motor vehicle on the lease of a new motor vehicle is not included in the taxable price of the transaction. Likewise, the credit afforded a lessee for the trade-in of a used watercraft or outboard motor on the lease of a new or used watercraft or outboard motor from a watercraft dealer registered with the Ohio Department of Natural Resources is not included in the taxable price. In these types of transactions, no tax need be collected on the credit afforded the lessee for the trade–in. If the lessee owes an outstanding balance on the motor vehicle, watercraft or outboard motor that is traded, and that balance is financed as part of the lease, the financed amount is part of the price of the lease.

Q4) Who is responsible for collecting and remitting the tax?

A4) The vendor collects and remits the tax. In the case of the lease of a motor vehicle, the vendor is the dealer with whom the lessee negotiates the transaction and from whom delivery of the leased vehicle is taken. In all other cases, it is the person to whom the down payment or initial lease payment is made. The vendor will pay the tax on the appropriate Ohio sales or use tax return. The vendor is entitled to the .75% discount of the tax for returns that are paid and received in a timely manner.

Q5) When should the tax be collected and remitted?

A5) The tax should be collected at the time the lease is “consummated.” For purposes of sales and use tax, the lease will be considered to be consummated when the property which is the subject of the lease is delivered or the initial payment under the lease is required to be made, whichever is earlier.

Charges payable under the terms of the lease during the period the lease property is being produced, and which compensate the lessor for the cost of acquiring the leased property, are not considered to be the initial payment on the lease. Such charges are part of the taxable price of the leased property and tax should be collected and remitted on these charges on the sales or use tax return for the period in which the lease is consummated.

Q6) What is the rate of tax to collect?

A6) In the case of a lease of a motor vehicle, watercraft or outboard motor, the dealer must collect the tax at the rate of the lessee’s county of residence. In the case of the lease of an aircraft or federally documented watercraft, the vendor should collect the tax at the rate where the aircraft or documented watercraft is based. For other tangible personal property used for business purposes, the vendor should collect tax at the rate in effect for the county where the property is to be primarily located and used. Non-Ohio vendors must collect the tax at the point of use of the property.

Q7) What is the appropriate sales or use tax account on which to report and pay the tax?

A7) In-state businesses that facilitate lease transactions will need two accounts to report their sales and lease transactions: a regular county vendor’s license and an Ohio transient vendor’s license, license number 89-X5XXXX. Out-of-state sellers will need an Ohio seller’s use tax account, account number 99-XXXXXX.

Q8) What is to be reported on each of the sales and/or use tax returns?

A8) For leases where a dealer collects the tax on the leasing transaction, the dealer is effecting two sales for purposes of reporting on sales and use tax returns. One for the sale of the property to the leasing company and the other for the tax collected on the amount paid for the term of the lease.

For the sale to the leasing company, the sale price should be reported on the return for the retailer’s regular vendor’s license (Form ST-10) as an exempt sale. The amount of the sale would be reported on line 1, Gross Sales, and subtracted on line 2, Exempt Sales.

For the other sale to the lessee, the sale and tax will be reported and remitted on the return for the transient vendor’s license (Form UST-1). The amount of the sale and the tax will be listed on the supplemental portion of the return on the line for the county rate that was collected. It will be included with all other taxable transactions on line 1, Gross Sales. The amount of the sale is everything included in the “price” as described in A2, above. If the lease is not subject to the tax, it should be included on line 2, Exempt sales, and not reported on a county line in the supplemental portion of the return.

For leases by an Ohio leasing company where the leasing company is collecting and remitting the tax, the tax will be reported and paid under a transient vendor’s license. An out-of-state leasing company in the same situation will report and pay the tax on a seller’s use tax account.

Q9) If the lease is terminated prior to the lease term, is there a refund for any of the sales tax previously paid?

A9) No. There is no provision in the Ohio Revised Code for a refund of the tax, unless the entire purchase price is refunded to the customer.

Q10) Is sales tax due on charges that are not or cannot be calculated at the time the lease is consummated?

A10) If the lessor assesses charges for items such as property tax reimbursement, or excessive wear or mileage, either during the lease period or at the end of the lease, sales tax must be collected on these charges at the time they are billed to the lessee. This tax collected should be reported and paid on the lessor’s regular sales or use tax return.

Tax is due on any early termination charge unless that charge represents a compensation for the unpaid amounts on the lease that have already been subject to taxation at the consummation of the lease.

Q11) If the lessee decides to purchase the leased property, what is the tax consequence?

A11) If the customer decides to purchase the property, tax should be collected on the purchase price and any other charges associated with the transfer of ownership. For motor vehicles, watercraft and outboard motors, tax should be paid to the Ohio Clerk of Courts at the rate in effect in the customer’s county of residence. For other property, the tax should be paid on the leasing company’s Ohio transient vendor’s License.

Q12) What about existing leases entered into prior to February 1, 2002?

A12) The method of tax collection on these leases will remain the same as under prior law. Tax should be collected on each monthly payment through the end of the lease. Tax should be charged on any fee for the early termination of such a lease. Similarly, additional fees such as property tax reimbursement, or excessive wear or mileage charges would be taxable as they are billed.

Lease contracts entered into prior to February 1, 2002 may provide for extensions of the original lease. If the extension contains the same provisions of the original lease, the tax shall continue to be collected and reported on the monthly lease payments. However, if the provisions of the original lease are changed by the extension, this constitutes a new lease and tax would be collected up front according to the terms of the new lease contract.

Q13) When is a lease “entered into” as it pertains to the February 1, 2002 date?

A13) For purposes of applying the “grandfather” provision of Sub. H.B. 405, the Department of Taxation will consider a lease “entered into” when the parties are obligated to the terms of the lease, the specific motor vehicle, watercraft, outboard motor, aircraft, or tangible personal property that is the subject of the lease is identified, and steps toward performing the lease have been undertaken. For example, assume that prior to February 1, 2002, a lessor and a lessee have agreed to the lease of an airplane. Also prior to February 1, 2002, an order has been placed and the airplane is being manufactured for delivery to the lessor. In this case, the parties have obligated themselves to the lease, the specific property has been identified and performance has been undertaken by having production of the airplane initiated. This lease would qualify under the grandfather clause as one to be treated under the terms of the law that existed prior to that date.

Often lessors and lessees will enter into agreements whereby a lessor will agree to lease property to a lessee where the specific items that may be subject to the lease are not identified in the agreement or the property leased may change over time. Some examples of this type of agreement may be styled master lease or fleet lease. Many of these contracts have been in existence for many years. In determining the application of the “grandfather” provision to these agreements, the Department of Taxation will look to the date when each specific motor vehicle, watercraft, outboard motor, aircraft, or other tangible personal property was identified and included in the lease. In other words, we will consider each item to be separately leased under the terms of the pre-existing contract. For example, a lessee with an agreement to lease a fleet of motor vehicles from a lessor orders new vehicles to be covered by the lease on March 1, 2002. The lease of these newly identified vehicles would be taxable at the time the lease is consummated on the total amount to be paid under the lease agreement for those vehicles. The existing fleet on January 31, 2002, would continue to be taxed on the monthly installments.

Q14) A lessor may advance the tax money to the lessee and finance the tax over the term of the lease. If this is done, is the repayment of the tax and any interest on that repayment subject to tax?

A14) The repayment of the financed tax and any interest on that financed tax are not part of the tax base of the lease for sales and use tax purposes where the records of the vendor and the lease clearly document the total price on which the tax was calculated and the tax collected on the lease. It would be preferable, though not required, that the financed tax portion of the lessee’s payment be separately stated on lease billings.

Q15) Will existing sales and use tax exemptions and exceptions apply to leased property after February 1, 2002?

A15) Yes. Current exemptions and exceptions based on the use of the item, the identity of the item, or the identity of the purchaser will still apply.

Q16) If the lessee has a Direct Payment Permit, should tax be paid to the vendor at the time the lease is consummated?

A16) No. The Direct Payment holder will report tax on their direct payment tax return.

Q17) Would non-taxable items such as customized software and professional services that are included in the lease of taxable personal property be subject to the tax?

A17) No, provided that the payments for non-taxable items are separately stated within the records of the lease document, and that the records of the vendor and the lease clearly document the total price on which the tax was calculated and the tax collected on the lease.

Q18) How should tax be calculated on a lease with no definite term?

A18) Tax should be collected on the total amount to be paid for the initial established term of the lease in the manner described in this letter at the time the lease is consummated. Tax should then be collected for each renewal period as payment for that period becomes due.   

If you should have any other questions, please contact our Taxpayer Service Center at 1-888-405-4039.

Sites of Reference:

Dennis Brown
Phone Number: 703-516-8368
Fax Number: 703-527-2649


( courtesy of )

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