Frequently Asked Questions

The Ohio Department of Taxation has compiled a list of frequently asked questions covering many different categories.

To view the questions, click on the "Select Category" bar and then click on the category you are interested in.  A list of questions will appear pertaining to that category. Then click on the question you are inquiring about and the answer will appear.

How are leases taxed?

Effective Feb. 1, 2002, Ohio changed the way sales tax was charged and collected on leases. The new method applies to many items, but this question will focus on motor vehicles, watercraft and outboard motors. There is one exception to motor vehicles that are designed by the manufacturer to carry a load of more than one ton. Those vehicles will be taxed on the old method, on each monthly lease payment.

The new law provides that the tax will now be collected up front, on the amount to be paid by the lessee over the term of the lease. The tax is to be collected by the dealer, based on the rate in the lessee’s county of residence. The dealer remits the tax directly to the State of Ohio on a transient vendor license. The tax is not paid to the Clerk of Courts at the beginning of the lease. When the vehicle is titled in the name of the leasing company, no tax is paid as the leasing company has an exemption based on resale.

At the end of the lease, the customer may choose to purchase the vehicle. The leasing company will collect the tax on the agreed upon “buyout” price, again based on the rate in the lessee’s county of residence. This tax IS paid to any office of the Ohio Clerk of Courts before title can be issued.

In the event of a fleet lease, a leasing company may lease several vehicles to a company located in one county. However, the vehicles may be used by employees in several counties. The sales tax rate to charge is the rate in the county that is the primary property location of each vehicle, which is the county where the vehicle is garaged overnight.

For more information on the taxing of leases, please see Information Release ST 2003-08, Leases and Rentals, issued July 2003.