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1. Can you provide an updated list of sales tax exception/exemption codes that may be available for motor vehicles/watercraft?
AP All-purpose vehicle purchased prior to July 1, 1999 (See Note E)
CF Commercial fishing – watercraft – commercial fishing license required
CH Church
CM Conversion – military (purchased out-of-state for use out-of-state)
CO Court-ordered transfer with no consideration
CS Consolidation
CV Conversion
DF Direct use – farming
DM Direct use – mining
DO Direct use – oil and gas
DP Direct pay (permit number required “98-XXXXXX”)
DR Research and development
DS Dissolution to stockholder with no consideration
DV Divorce – court-ordered transfer with no consideration
FA Federal agency
FD Foreign diplomat – exemption card required
HE Historical – converted yellow to ATPS title, no change of ownership
IC Resale – insurance claim
IH Inheritance with no consideration, includes surviving spouse
IP Individual to partnership with no consideration
IS Sale of a motor vehicle as interstate commerce
MB Manufacturer buy-back – lemon law
MH Manufactured homes or mobile homes sold on or after January 1, 2000 (See Note G)
MO Manufacturing operation – i.e., cement mixer
MR Corporate merger with no consideration
NC Corporate name change
NP Nonprofit, charitable or 501(c)(3) organization
NR Nonresident affidavit, immediate removal
OD Sale of a motor vehicle/watercraft to an out-of-state dealer
OH Off-highway motorcycle purchased prior to July 1, 1999 (See Note E)
PD Partnership, dissolution with no consideration
PT Nonlicensed production transportation
PU Direct use in a public utility service (See Note J)
RD Resale – demonstrator (dealer permit and VL required)
RE Resale – repossession (effective through June 8, 2000)
RF Resale – financial institution (effective June 9, 2000 – See Note H)
RI Resale – implement/equipment dealer (See Note D)
RL Resale – leasing (dealer permit and VL required)
RM Remanufacturing – chassis or part
RN Resale – new/used dealer (dealer permit and VL required)
RO Resale – out-state leasing (account number required “99-XXXXXX”)
RP Redeemed – repossession
RR Resale – daily rental (VL required)
RS Redeemed – return sale
RV Resale – watercraft (VL required)
RW Resale – wholesale only (See Note A)
SA Self-assembled
SP State/political subdivision
SR Salvage – resale (dealer permit and VL required)
TD Transfer on death beneficiary (See Note I)
TH Highway transportation for hire (PUCO or ICC permit required)
TS Transportation service (VL required) (See Note J)
UC Unclaimed vehicle by affidavit
UM Undisturbed mortgage
VF Volunteer fire department – contract basis
WH Warehousing – not licensed for highway use (See Note C)
WP Watercraft, personal – if purchased prior to January 1, 2000 (See Note F)
**** Special Notes ****
(A) On June 24, 1994, the Department of Taxation made an exemption code available “RW: Resale – wholesale only.”
This exemption code was inserted for the purpose of allowing financial institutions (GMAC, Ford Motor Credit, Chrysler Credit, etc.) to take title to motor vehicles only for the purposes of selling these vehicles to licensed used motor vehicle dealers.
Effective Aug. 12, 1996, the use of this exemption code was again expanded to cover those individuals who purchase a watercraft and/or outboard motor for the sole purpose of renting/leasing it (under contract) to a person, corporation or club who will then rent or lease the watercraft and/or outboard motor to others. The Department of Taxation would also recommend that the local Clerk of Courts obtain a copy of the contract that exists between the purchaser and the other individual, corporation or club that will be leasing/renting the watercraft and/or outboard motor. The purchaser must provide a properly completed exemption certificate.
(B) On Aug. 1, 1994, the Department of Taxation discontinued the use of the exemption code “TG: True gift with no consideration.”
If a person is trying to obtain a certificate of title and say they received the motor vehicle, watercraft or outboard motor as a “gift,” the transaction should be processed as a sale with a purchase price of $0.00. The system will then issue a title reflecting a purchase price of $0.00 and taxes paid of $0.00. This transaction will then be audited by the Department of Taxation's computerized audit program. If tax is found to be due, we will collect the tax or issue an assessment, with applicable penalty, against the new titleholder.
(C) On Jan. 30, 1996, the Department of Taxation authorized the use of the exemption code “WH: Warehousing – not licensed for highway use.”
Section 5739.02 (B)(42)(j) of the Ohio Revised Code provides for a warehousing exemption for items used in a warehouse, distribution center or similar facility when it is used to transport purchased inventory that is primarily distributed outside this state to retail stores owned or controlled by the operator of the warehouse, distribution center or similar facility.
(D) On June 3, 1996, the Department of Taxation authorized the use of the exemption code “RI: Resale – implement/equipment dealer.”
Farm implement or construction equipment dealers will occasionally acquire a horse, utility or equipment “trailer” with a gross weight in excess of 4,000 pounds, which requires a motor vehicle certificate of title. If the implement or construction equipment dealer is in the business of regularly selling trailers that are required to be titled, they will be licensed as a motor vehicle dealer by the Bureau of Motor Vehicles. Those that only occasionally sell trailers that are required to be titled will not be licensed as a motor vehicle dealer by the Bureau of Motor Vehicles. Nevertheless, the implement or equipment dealer must have a vendor’s license as they are making retail sales. Under sales and use tax law, these implement or equipment dealers are entitled to claim the resale exemption on these trailers, so long as they are being acquired for the purposes of resale. These implement or equipment dealers MUST submit an exemption certificate with the application for certificate of title using the term “Resale – implement/equipment dealer.”
Special Note: This exemption reason does not apply to trailers that are acquired for use by the business in transporting other items (tractors, plows, disc harrows, fertilizer spreaders, combines, bulldozers, backhoes, etc.) that are sold by the dealer or other motor vehicles (passenger vehicles, trucks, vans, etc.).
(E) Effective July 1, 1999, House Bill 611 changed the status of off-highway motorcycles (OHM’s) and all-purpose vehicles (APV’s). All OHM’s and APV’s sold on or after July 1, 1999 are required to be titled, and sales/use tax is required to be paid to the local Clerk of Courts unless the purchaser is entitled to claim exception or exemption. Dealer sales of OHM’s and APV’s prior to July 1, 1999 were subject to Ohio sales/use tax, and the tax was required to be collected by the dealer and remitted directly to the Treasurer of State, not to the Clerks of Courts. Nondealer sales of APV’s made prior to July 1, 1999 were also subject to the sales/use tax, but again, the tax was to be paid to the directly Treasurer of State, not to the Clerks of Courts.
Therefore, no tax should be collected by the Clerks of Courts on OHM’s and APV’s purchased prior to July 1, 1999. Titles issued on OHM’s and APV’s purchased prior to July 1, 1999 should be issued using the appropriate ATPS exemption code (OH for OHM’s or AP for APV’s).
(F) Effective Jan. 1, 2000, the status of personal watercraft changed. All personal watercraft sold on or after January 1, 2000 are required to be titled and sales/use tax is required to be paid to the local Clerk of Courts, unless the purchaser is entitled to claim exception or exemption. Dealer sales of personal watercraft prior to January 1, 2000 were subject to Ohio sales/use tax, and the tax was required to be collected by the dealer and remitted directly to the Treasurer of State, not to the Clerk of Courts. Nondealer sales of personal watercraft made prior to Jan. 1, 2000 were not subject to the sales/use tax since they were not required to be titled and they qualified for the “casual sale” sales and use tax exemption.
Therefore, the Clerks of Courts should collect no tax on personal watercraft purchased prior to Jan. 1, 2000. Titles issued on personal watercraft purchased prior to Jan. 1, 2000 should be issued using the appropriate ATPS exemption code “WP: Watercraft, personal – purchased prior to Jan. 1, 2000.”
(G) Used manufactured homes and mobile homes sold on or after Jan. 1, 2000 are not subject to sales or use tax. New manufactured homes or mobile homes sold on or after Jan. 1, 2000 are subject to sales and use tax, but the tax base is the dealer’s cost and the tax is not paid to the local Clerk of Courts, it is paid directly to the State of Ohio. Therefore, the Clerks of Courts will issue titles without collecting tax if a new or used manufactured or mobile home is sold on or after January 1, 2000. The clerks will use the ATPS exemption code of “MH: Manufactured homes or mobile homes sold on or after January 1, 2000” on these title transactions.
Sales of new or used manufactured or mobile homes made prior to Jan. 1, 2000 are subject to sales and use tax and the tax must be collected by the Clerks of Courts when the title is issued in the purchaser’s name in the purchaser’s county of residence.
(H) On June 9, 2000, we authorized the use of the exemption code “RF: Resale – financial institution” to cover the issuance of a title in the name of a financial institution when: 1) the financial institution is the lien holder, 2) the financial institution is obtaining title to protect its loan, and 3) the financial institution will sell the vehicle to recover all or part of the loan amount. The exemption code RF can also be used by pawnbrokers and by those who finance titled watercraft and titled outboard motors (provided they comply with the three requirements listed above). This exemption code replaces RE.
(I) Effective July 23, 2002, House Bill 345 allowed the sole owner of a motor vehicle, watercraft or outboard motor to designate a transfer-on-death beneficiary or beneficiaries. The beneficiary could be an individual, corporation, trust or any other legal entity. Exemption code TD was established to transfer the title to the beneficiary without payment of the tax, whether a lien exists on the deceased owner’s title or not.
(J) Effective Aug. 1, 2003, House Bill 95 enacted a new exemption for transportation services under 5739.02 (B)(41). It states that the tax does not apply to “Sales to a person providing services under division (B)(3)(r) of section 5739.01 of the Revised Code of tangible personal property and services used directly and primarily in providing taxable services under that section.” The new exemption is available for purchases made on or after Aug. 1, 2003. Examples of the types of vehicles that should be using this code are taxis, limousines and charter buses. Taxis that are titled in the name of a person could use the TS code. Taxis in the name of the taxi company should continue to use the PU (public utility) code. The TS code should be used when you are provided a properly completed exemption certificate that states, “Used directly and primarily in providing taxable intrastate transportation services as provided in 5739.01 (B)(3)(r).” A vendor license number must be provided on the exemption certificate and in ATPS.
(K) Effective Aug. 1, 2007, sales to purchasers of motor vehicles that will be titled in certain states became subject to the tax. These states are: Arizona, California, Florida, Indiana, Massachusetts, Michigan, South Carolina, and Washington. (For more information, please see Information Release ST 2007-04, Sales of Motor Vehicles to Nonresidents of Ohio, issued August 2007.)
The exempt code NR was used to cover sales to all nonresidents, including sales to dealers of other states. Since using the NR code could result in a taxable transaction, a new code OD was created for use when a dealer of another state or country purchases a motor vehicle or watercraft for resale. A dealer permit number should be indicated on the exemption certificate completed by the dealer.
When a dealer will deliver a motor vehicle or watercraft to a point outside of Ohio, or to an interstate carrier, that is a sale in interstate commerce. Code IS should be used. The dealer will complete the exemption certificate, form STEC IC.
2. Are members of the armed services exempt from sales or use tax?
There is no true “statutory” exemption for members of the armed services. If the vehicle is purchased in Ohio by a member of the armed services who is a resident of Ohio, Ohio sales or use tax is due.
If the vehicle is purchased in Ohio by a member of the armed services who declares that he/she is a resident of another state or country, but will be registering the vehicle for use in Ohio while stationed here, Ohio sales or use tax is due.
If the vehicle is purchased in Ohio by a member of the armed services who declares that he/she is not a resident of Ohio and that the vehicle will be immediately removed from Ohio for titling and registration in the other state, Ohio sales or use tax is not due, unless the vehicle will be titled in one of the eight states where Ohio collects the sales tax. A nonresident affidavit must be provided by the purchaser. Use the ATPS exemption code “NR: Nonresident affidavit – immediate removal.”
If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is to be driven in Ohio, Ohio sales or use tax is due.
If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is to be driven outside Ohio, the Ohio Supreme Court has ruled that no Ohio sales or use tax is due. The Supreme Court did not indicate the amount of time that a vehicle had to be driven outside of Ohio to qualify, so the department has adopted the “six-month” rule in that the period of time must be more than six months (as evidenced by a copy of the individual’s military orders indicating out-of-state service for a period of at least six months after the purchase date). The vehicle must be titled in the name of the military person. Use the ATPS exemption code “CM: Conversion – military.”
If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is or is to be driven outside of Ohio for less than six months (member of armed services being transferred to Ohio or is returning to Ohio upon separation from armed services), sales and use tax is due.
3. When must the Clerks of Courts obtain an exemption certificate or obtain or issue form T-610 or form T-615?
Exemption certificates must be obtained on dealer title transfers of retail sales and forms T-610/T-615 must be obtained or issued on casual (nondealer) title transfers only when the purchaser is claiming one of the below listed exceptions/exemptions supported by an ATPS exemption code. In reality, forms T-610/T-615 have become the exemption certificates on casual title transfers. Note: If taxes are being paid on a title transfer, exemption certificates or form T-610/T-615 are not necessary.
CF Commercial fishing – watercraft – commercial fishing license required
CH Church
CM Conversion – military (purchased out-of-state for use out-of-state)
CS Consolidation
DF Direct use – farming
DM Direct use – mining
DO Direct use – oil and gas
DR Research and development
DS Dissolution to stockholder with no consideration
FD Foreign diplomat – exemption card required
IS Sale of a motor vehicle as interstate commerce
IP Individual to partnership with no consideration
MO Manufacturing operation – i.e., cement mixer
MR Corporate merger with no consideration
NP Nonprofit, charitable
NR Nonresident affidavit
OD Sale of a motor vehicle/watercraft to an out-of-state dealer
PD Partnership, dissolution with no consideration
PT Nonlicensed production transportation
PU Direct use in a public utility service
RD Resale – demonstrator (dealer permit and VL required)
RI Resale – implement/equipment dealer
RM Remanufacturing – chassis or part
RS Redeemed – return sale
RV Resale – watercraft (VL required)
RW Resale – wholesale only
TH Highway transportation for hire (PUCO or ICC permit number required)
TS Transportation services (VL required)
UM Undisturbed mortgage
VF Volunteer fire department – contract basis
WH Warehousing – not licensed for highway use
4. Does the winner of a raffle, contest or lottery owe any Ohio sales or use tax?
Raffle or Contest Winner
The winner of a raffle or contest does not owe Ohio sales or use tax, as he/she has not paid a “price” for the item received. The sponsor of the raffle or contest, however, may be subject to Ohio sales or use tax. We request that the local Clerk of Courts provide the Department of Taxation with a copy of the MSO/title that has been assigned to the winner of the raffle or contest and a copy of the title that is issued in the name of the winner. The department will then determine if Ohio tax is due from the sponsor or contributor. ($0.00 price).
Ohio Lottery Winner
It is our understanding that the winner of a motor vehicle, all-purpose vehicle, off-highway motorcycle, watercraft or outboard motor (or any other item of tangible personal property) through one of the lottery games must take possession of the item won. The Ohio Lottery Commission will purchase the item in the name of the lottery winner and taxes will be paid on the purchase price. If the item is required to be titled, taxes will be paid to the local Clerk of Courts by the dealer (lottery commissioner will pay the dealer the price of the vehicle and the tax as part of lottery prize payment) at the time the title is issued.
5. Do rebates reduce the "price" for calculating sales or use tax?
No. A rebate is money that is or will be paid to the purchaser by the manufacturer after the sale is complete as an incentive to make the purchase. Typically, however, the purchaser assigns the rebate over to the dealer and it is used as all or part of the down payment. Therefore, the rebate amount that is part of the consideration received by the dealer and is part of the price paid upon which the tax is based.
6. Do dealer cash discounts reduce the price for calculating sales or use tax?
Yes. Cash discounts allowed at the time of sale reduce the price for calculating sales or use tax. Discounts allowed after the sale do not reduce the price.
7. Does a trade-in reduce the price when calculating sales or use tax?
Yes – when a motor vehicle is traded for a new motor vehicle, all-purpose vehicle or off-highway motorcycle.
No – when a motor vehicle is traded for a used motor vehicle, all-purpose vehicle or off-highway motorcycle.
No – when a watercraft, outboard motor or personal watercraft is traded for a new or used motor vehicle, all-purpose vehicle or off-highway motorcycle.
No – when a vehicle is under a valid lease and the lessee is attempting to trade-in the vehicle that is titled in the name of the leasing company. Under the terms of most lease agreements, the leasing company (during the life of the lease) can only sell (transfer title for consideration) the leased vehicle to the lessee or to a dealer. If the leasing company sells the vehicle to a dealer, it is no longer available to be used as a trade-in by the lessee. Note: The answer would be yes if the lessee first purchased the leased vehicle (paying sales tax on the purchase price paid to the leasing company), had title issued in the lessee’s name, and then used the vehicle as a trade-in on the purchase of a new motor vehicle.
Yes – when a watercraft, outboard motor or personal watercraft is traded for a new/used watercraft, outboard motor, and/or personal watercraft and the seller (located in-state or out-of-state) is, at the time of sale, licensed as a watercraft dealer through the Ohio Department of Natural Resources, Watercraft Division. License format is OH NNNN ZZ.
No – when a watercraft, outboard motor, or personal watercraft is traded for a new/used watercraft, outboard motor or personal watercraft and the seller (located in-state or out-of-state) is not, at the time of sale, licensed as a watercraft dealer through the Ohio Department of Natural Resources, Watercraft Division.
No – when a motor vehicle is traded for a watercraft, outboard motor or personal watercraft.
8. Are court-ordered title transfers subject to the sales or use tax?
Generally no, since the courts will order the transfer of title without consideration (divorce, dissolution, estate settlement, etc.). If, however, the court orders the transfer of title with consideration to be paid (including cancellation of debt) by the new titleholder, the transfer would be subject to the sales or use tax based on the amount paid. If no consideration and a court order, use ATPS exemption codes “CO: Court-ordered transfer with no consideration” or “DV: Divorce – court-ordered transfer with no consideration” or “IH: Inheritance with no consideration, includes surviving spouse.”
9. Can the clergy of a church obtain a title in his/her name without paying sales or use tax?
No. The exemption applies to the church, not the clergy. To be exempt, the vehicle would have to be titled in the name of the church.
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.
11. If a motor vehicle dealer accepts cash down payments, must the motor vehicle dealer charge sales tax when the vehicle is to be leased? If yes, how is the tax paid?
Cash down payments are subject to the sales tax.
Prior to Feb. 1, 2002, if a down payment was collected by the leasing dealer, the leasing dealer would also collect the sales tax. The leasing dealer would then remit the tax to the State of Ohio, like any other sales tax payment.
If a down payment is paid to the motor vehicle dealer, the motor vehicle dealer will also collect the sales tax and either remit it directly to the State of Ohio on the dealer's transient sales tax return or forward it to the leasing dealer so that the leasing dealer can remit it to the State of Ohio.
Note: In either of these situations, tax is not remitted to Clerks of Courts because the motor vehicle will be titled in the leasing company’s name under the "Resale - leasing" exemption.
As of Feb. 1, 2002, the dealer collects the cash down payment as part of the price paid for the lease of the motor vehicle, watercraft or outboard motor. It is charged at the rate in the lessee’s county of residence, and remitted to the State of Ohio on the dealer’s transient vendor’s license. For more information on leases, please see FAQ #10, above.
12. Are out-of-state leasing dealers/companies required to be registered for collection of sales or use tax?
Yes. Out-of-state leasing dealers/companies are required to be registered with the Department of Taxation, but they may not be required to have a leasing dealer’s permit (LD#) from the Bureau of Motor Vehicles. To title these vehicles in the leasing dealer’s name, use the ATPS exemption code: “RO: Resale – out-of-state leasing.” ATPS will require a valid Ohio use tax account number (99-XXXXXX) before it will proceed with issuing a title without collecting use tax.
Note: This could apply to watercraft and outboard motors.
If the out-of-state leasing dealer has a leasing dealer’s permit issued by the Bureau of Motor Vehicles, you would use the exemption code “RL: Resale – leasing” and you would use the leasing dealer’s permit number and the Ohio use tax account number (99-XXXXXX).
For information on obtaining an out-of-state seller’s vendor license, please visit our Web site at License and Filing Requirements.
13. If a motor vehicle is leased to an Ohio resident by an out of state dealer, how is the tax collected and remitted?
An out of state dealer would charge and collect the tax on the basis as an in-state dealer, that is, on the entire amount the customer would pay over the term of the lease. The tax can be remitted to Ohio in one of two ways.
(1) If the out of state dealer makes frequent leases to Ohio customers, the dealer should register for an Ohio Seller’s Use Tax account on form UT-1000. The tax will be paid when filing sales tax return UST-1.
(2) If the dealer seldom leases a vehicle to Ohio residents, the dealer may submit a copy of the lease agreement, and a check for the tax made payable to Treasurer, State of Ohio. Send both to: Ohio Department of Taxation, Sales Tax Division, P.O. Box 530, Columbus, OH 43266-0530.
14. Does a leasing company charge sales tax on the "sale" of its leased vehicles? If so, how is the tax paid to the State of Ohio?
Under Ohio sales and use tax law, a motor vehicle leasing company is required to collect sales and use tax on the “sale” of any of its vehicles, unless the purchaser has a statutory basis for claiming exception or exemption. The leasing company is required to collect the gross amount of sales and use tax based on the rate in effect in the purchaser’s county of residence. The leasing company would then remit the net amount (gross tax less allowable discount) of sales and use tax to any county Clerk of Courts, stating the purchaser’s county of residence so the title can be issued.
In case of an audit by the Ohio Department of Taxation, the leasing company must be able to show that sales and use tax was charged and collected and that this tax was paid to the local Clerk of Courts. Clerks of Courts issue receipts reflecting payment of taxes and associated title fees, which should be retained in the transaction file as evidence that the tax has been paid.
Early Buyout. For leases entered into after Feb. 1, 2002 where a lessee purchases the leased vehicle before the end of the lease, they are allowed credit for part of the sales tax, if the entire amount of sales tax was collected at the beginning of the lease. Part of the buyout purchase price could contain an amount for which tax has already been paid. The Department of Taxation will allow credit for part of the tax paid up front if the following conditions apply:
The sales contract between the leasing company and the lessee/buyer must list a separate amount that represents the present value of the remaining lease payments that are being paid by the lessee. This amount may not exceed the sum of the remaining lease payments. This is an amount for which tax has already been paid. The remainder of the sales contract would list other fees and charges, such as residual value and early termination fees. These items would be subject to the tax.
To determine the tax to be paid to the Clerk of Courts, calculate the entire tax due on the total purchase price of the vehicle, which includes the remaining lease payments, the residual value and any other fees associated with the purchase. Calculate the tax that was previously paid (at the rate in effect when lease began) on the present value of the remaining lease payments. Subtract the previously paid tax from the total tax. Submit the final tax due, less the allowable discount. A copy of the sales contract showing the separable charges must be submitted. If there is no separate line item that represents the present value of the remaining lease payments, no credit allowance will be given.
While a leasing company may not physically obtain the certificate of title for the purchaser (provide paperwork to purchaser and have purchaser obtain his/her own title), the company must ensure payment of the proper amount of tax to the clerks and obtain/retain receipts reflecting the tax payment.
15. Can a third party purchase a leased vehicle without payment of sales and use tax twice?
Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. The agreements are written this way to protect the lessee, in that the leasing company cannot sell their vehicle to just anyone during the life of the lease. However, there are times when the lessee wants out of the lease and finds someone (third party) who is willing to purchase the vehicle from the leasing company.
When the above situation occurs, the lessee and the third party should (highly recommended) enter into a written agreement (before the event occurs) that basically stipulates the following:
(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;
(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use taxes that will be due;
(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and
(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.
Special Note: If the third party has agreed to pay a higher “price” than the “price” required by the leasing company (difference going to the lessee), the difference between the “price” paid by the third party and the “price” paid to the leasing company should be reflected as the “price” in the assignment portion of the title between the lessee and the third party. The “price” does not include the amount of sales and use tax paid when the title transfers to the lessee.
The agreement needs to be duplicated and signed by each party. Each party needs to have a copy of the signed agreement to protect their interest and resolve any tax questions that may arise when the title transfers between the lessee and the third party.
This position taken here is similar to the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) as it applied to the two title transfers involving the Ford A-Plan situation.
Note: If the lessee decides to purchase the vehicle during the life of the lease or at the end of the lease term and then find a buyer for the vehicle, the above procedure would not apply. We would consider these as two separate sales and sales/use tax is due on each title transfer.
16. Is an out-of-state leasing company required to be registered with the Ohio Department of Taxation as a seller (account number 99-XXXXXX) when all of its customers are residents of other states or countries ?
No. In this particular situation, the out-of-state leasing company should complete the nonresident affidavit and the Clerk of Courts would issue an Ohio title using the OD, out-of -state dealer exemption code. If the lessee should later move to Ohio or if the leasing company would begin offering leases to Ohio residents, the leasing company MUST register with the Ohio Department of Taxation.
17. Are farmers exempt from paying sales or use tax on vehicles that are licensed to operate on the highways?
Generally, no. Farmers are only exempt on equipment that is directly used in farming, such as tractors, planters or combines that plow the fields, plant the crops or harvest the crops. Motor vehicles (automobiles, trucks, etc.) registered for use on the highways and used to transport seed, fertilizers, chemicals or finished products are taxable. APV’s would only qualify for exemption if they are being used primarily (more than 50 percent of the time) directly in farming (similar to the way a tractor is used).
There is an exception to the general rule and that is a specifically designed vehicle that contains a tank, operated with a power take-off unit (PTO) that is used to spray liquid fertilizers, pesticides, herbicides, etc., on farm lands and crops. This vehicle is generally owned by someone who is hired by a farmer to provide a farming service and must operate on the highways since it must travel from farm to farm. If the tank/sprayer is not operated by a power take-off unit, the vehicle is subject to the tax while the tank/sprayer unit is not. In this case, the dealer must provide a separation of the amounts between the vehicle and the tank/sprayer unit.
Another exception would be vehicles and trailers that are primarily used to prevent illness to farm livestock for sale, or to prevent contamination of livestock products for sale. For example, a trailer primarily used to inoculate swine and cattle for sale, or transport sick animals to and from quarantine areas would not be subject to the tax. Also, a trailer owned by the farmer to primarily transport feed to the farm that would otherwise be contaminated if shipped commercially would be exempt. Vehicles owned and used by egg producers to ship eggs from the farm to market under refrigerated conditions would not be subject to the tax.
18. Who is entitled to claim exemption from sales tax based on the "Highway Transportation for Hire" (TH) exemption?
Those individuals who are being paid to transport personal property belonging to others over the highways are deemed to be engaged in highway transportation for hire. These individuals must be regulated by the Public Utilities Commission of Ohio (PUCO) or under Interstate Commerce Commission (ICC) rules and must provide the permit number issued by PUCO (PUCO XXXXXX) or under ICC (ICC XXXXXX or MC XXXXXX) rules as part of their claim for exemption.
Generally, the owner of the motor vehicle is the one who holds the PUCO or ICC/MC permit. However, the owner of the motor vehicle could be under contract with the PUCO/ICC/MC permit holder. When the owner of a motor vehicle being used in highway transportation for hire is not the permit holder, the owner must provide a copy of the contract, which authorizes the owner to operate the vehicle under the PUCO/ICC/MC permit number.
Any motor vehicle (tractor/trailer rig, pick-up truck, automobile, van, sport utility vehicle and/or motorcycle) could qualify for the TH exemption if it is primarily used in highway transportation for hire. If the motor vehicle is use primarily as a parts vehicle or a vehicle used to transport drivers, it does not qualify for the exemption.
Effective July 1, 2003, tow-truck operators are required to be registered with the PUCO. Therefore, if they are transporting goods that belong to others, they may use the Highway Transportation for Hire (TH) exemption code. They need to provide their PUCO number or their ICC/MC permit on the exemption certificate.
The Highway Transportation for Hire exemption does not apply to those who are in the business of transporting people. For example, it does not cover bus companies, taxicab companies or limousine services.
This exemption does not apply to all-purpose vehicles, off-highway motorcycles, watercraft and outboard motors since they cannot be used to transport items over the highway.
The USDOT number cannot be used to qualify for the TH exemption as these individuals are hauling their own inventory/personal property so they are not engaged in highway transportation for hire.
19. Who is entitled to pay tax to the Clerks of Courts net of the allowable discount?
Dealers and sellers licensed with the Department of Taxation as a vendor selling motor vehicles, watercraft and/or outboard motors may pay the tax collected to the Clerks of Courts net of the allowable discount. The vendor must provide a valid vendor’s license number (01-XXXXXX through 89-XXXXXX or 99-XXXXXX) when they are obtaining the title for the purchaser.
GAP stands for guaranteed auto protection. It is a coverage sold when a new car is purchased or leased. In the event a vehicle is totally destroyed, it covers the negative difference between what the vehicle is worth, and the amount still owed on the loan.
If GAP insurance or GAP product is sold by a company separate from and not part of a retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.
When a GAP policy is sold and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it would be subject to sales.
R.C. 5739.01(B)(10) includes in the definition of a "sale":
All transactions in which “guaranteed auto protection” is provided whereby a person promises to pay to the consumer the difference between the amount the consumer receives from motor vehicle insurance and the amount the consumer owes to a person holding title to or a lien on the consumer’s motor vehicle in the event the consumer’s motor vehicle suffers a total loss under the terms of the motor vehicle insurance policy or is stolen and not recovered, if the protection and its price are included in the purchase or lease agreement.
21. Is the amount charged for the federal excise tax (FET) included in the tax base for calculating sales tax?
No. This is a 12 percent federal excise tax, which is required to be collected by a motor vehicle dealer when the dealer sells a heavy truck. Since it is a direct tax on the purchaser, it is not part of the tax base for collecting sales tax.
22. Can a motor vehicle dealer obtain title to a watercraft under a "resale" exemption?
Yes. A motor vehicle dealer may claim “Resale – watercraft” (RV) when the dealer acquires a watercraft, if it is acquired for purposes of resale. The dealer need only provide a valid vendor’s license for the dealership’s location (do not use the motor vehicle dealer’s permit number to support exemption). If the dealer uses the watercraft for personal use, a resale exemption should not be claimed and tax must be paid on either the price paid or the value given in trade for the watercraft.
When the dealer, who is not a licensed watercraft dealer, sells a watercraft, title must be obtained in the customer’s name. Sales tax must be collected. If the sale is to an Ohio resident, tax is collected at the rate in effect in the customer’s county of residence. The tax is paid to the Clerk of Courts when title is obtained. If the sale is to a nonresident of Ohio, tax is collected at the rate which is the lower between the Ohio rate in the dealer’s county, or the rate in the state of the customer. The customer must complete form ST WC AFF. The tax is submitted directly to the Department of Taxation on form ST WC NR, along with the completed ST WC AFF. A nonresident title may still be obtained from the Clerk of Courts.
23. What is included in the "price" of a motor vehicle when calculating the sales and use tax?
“Consideration” or “price” means the aggregate value in money of anything paid or promised to be paid or delivered in exchange for the transfer of either title to or possession of a motor vehicle, all-purpose vehicle, off-highway motorcycle, watercraft, outboard motor or personal watercraft. No deduction may be made from the “consideration” or “price” upon which the tax is based by reason of any trade-in allowance (except for the sale of a new motor vehicle, all-purpose vehicle or off-highway motorcycle by a new motor vehicle dealer upon which a motor vehicle, all-purpose vehicle or off-highway motorcycle is given in trade; OR the sale of a new or used watercraft, outboard motor or personal watercraft by a licensed watercraft dealer upon which a watercraft, outboard motor or personal watercraft is given in trade) or a manufacturer's rebate. The sales or use tax is computed upon the total amount of consideration, whether in cash, by exchange (trade) or by any means whatsoever.
The tax base should include the amount charged for the following:
(a) Base price of vehicle, watercraft or outboard motor.
(b) Accessories (floor mats, mud flaps, air conditioning, cruise control, radio, CD player, etc.).
(c) Freight or transportation charges from the manufacturer to the dealer.
(d) National advertising that may be charged on a unit basis.
(e) Service and handling prior to delivery (preparation charge).
(f) Documentary fees (does not include separately stated title and registration fees or fees associated with the documentation of a watercraft with the U.S. Coast Guard).
(g) Undercoating.
(h) Extended warranty, service or maintenance contracts sold at the same time as the item covered by the extended warranty, service or maintenance agreement. (Note: Sales of extended warranties, service or maintenance agreements that are sold some time after an item is sold are subject to sales tax, but tax will be paid directly to Ohio, not through the Clerks of Courts.)
(i) Delivery charges from the dealer to the customer effective Aug. 1, 2003
**** Special Notes ****
Manufacturer’s rebates and cash down payments do not reduce the “price” for calculating sales or use tax. “Price” can be reduced by any cash discount given at the time of sale.
The 12 percent federal excise tax (FET) levied by the federal government on the purchaser of a heavy truck is not to be included in the “price” since it is a direct federal tax on the consumer.
24. Is the consumer entitled to a tax credit for taxes paid to another state?
Basically, yes. When it is determined that Ohio use tax is due on the purchase of a motor vehicle from an out-of-state seller, a credit allowance shall be given for the amount of sales and/or use tax legally required to be paid to another state or jurisdiction. The amount of the credit allowance must be established by evidence to the satisfaction of the Clerk of Courts. When the amount of tax paid to another state or jurisdiction has been established, it shall be deducted from the total amount of use tax due Ohio. If the credit equals or exceeds the Ohio use tax due, no additional tax payment shall be required.
For vehicles that are leased, assume a motor vehicle was leased outside Ohio after Feb. 1, 2002, then subsequently moved into Ohio. The balance of the lease charges due after the leased vehicle is brought into Ohio will be subject to Ohio’s up front sales tax. If the other state taxes a lease “up front,” credit will be given for the other state’s sales tax. If the other state’s tax equals or exceeds the appropriate Ohio tax, no additional tax will be due. If the other state taxes a lease on the monthly payments, no credit will be allowed for the tax paid to the other state for the months prior to the vehicle entering Ohio. Tax will be due “up front” on the total of the balance of the remaining lease payments.
Credit cannot be given for sales, use or similar taxes paid to another country, such as Canada, Mexico, Germany, etc.
25. Can a pawnbroker obtain title to a motor vehicle under a resale exemption?
Yes. Pawnbrokers taking title to a vehicle pursuant to Section 4505.102 of the Ohio Revised Code to protect a loan may use the term “Resale – financial institution” (RF).
26. Can the providers of transportation services claim exemption from the sales or use tax on the purchase of motor vehicles such as taxicabs, limousines, or charter buses?
Taxicab companies are licensed by a local government entity (county, township or municipality) to provide pick-up and delivery of individuals. These companies must provide their service as demanded by the general public. If they refuse to provide their service when demanded and a complaint is filed with the regulating entity, they could lose their authority to operate. Also, as part of the general local government regulations, these companies are only allowed to pick-up individuals within a specified geographical area and their service fees are negotiated and set by the regulating entity. Taxis in the name of the taxicab company should use the PU (public utility) code.
While limousines services may be somewhat regulated by a local government entity (county, township or municipality) to provide safe and reliable pick-up and delivery service of individuals, they are not regulated to the same extent as are taxicab companies. There is no requirement that they must provide their services as demanded by the general public. Also, they are free to pick up individuals almost anywhere and they can charge any service fee that the public is willing to pay. Therefore, they are not considered to be rendering a public utility service and are not entitled to claim the sales/use tax exemption code PU. However, see below for an exemption that may be available.
Effective Aug. 1, 2003, House Bill 95 enacted a new exemption for transportation services under 5739.02 (B)(41). It states that the tax does not apply to “sales to a person providing services under division (B)(3)(r) of section 5739.01 of the Revised Code of tangible personal property and services used directly and primarily in providing taxable services under that section.” The new exemption is available for purchases made on or after Aug. 1, 2003. Examples of the types of vehicles that could be using this code are taxis, limousines and charter buses. Taxis that are titled in the name of a person should use the TS code. The TS code should be used when you are provided a properly completed exemption certificate that states, “Used directly and primarily in providing taxable intrastate transportation services as provided in 5739.01 (B)(3)(r).” A vendor license number must be provided on the exemption certificate and in ATPS.
27. Are there sales and use taxes due on a self-assembled motor vehicle or watercraft?
No. When an application for title to a self-assembled motor vehicle or watercraft is made, the owner must provide copies of invoices for all of the parts. If tax were charged on all of the parts, NO tax would be due. The clerk could issue a title by using the self-assembled exemption code (SA).
Yes. If tax was not paid on all or some of the parts, the clerk would allow the system to calculate the taxes due (the "price" of the motor vehicle or watercraft being the total amount paid for all of the various parts), then give the owner credit for the taxes paid on the various parts which would off-set part of taxes calculated to be due. The balance due would then be collected as the title is issued.
28. Does a dealer title a "parts truck" and pay tax when the title is issued?
When a dealer removes a vehicle from inventory (or purchases a vehicle from another dealer) and utilizes the vehicle as a “parts” vehicle, the dealer should title the vehicle in the dealer’s name and remit sales and use tax on the dealer’s acquisition cost. If the dealer purchased the vehicle, the “price” upon which sales tax is calculated is the purchase price. If the dealer acquired the vehicle through trade, the “price” upon which tax is calculated is the value of the trade-in allowance granted when the vehicle was acquired.
29. Can an Ohio title be issued on a watercraft, outboard motor, or personal watercraft purchased in Ohio for use in Ohio by a resident of another state?
Yes, per the Ohio Department of Natural Resources, Watercraft Division.
When a resident of another state purchases a watercraft, outboard motor or personal watercraft in Ohio for use in Ohio (has a vacation or weekend home on an Ohio body of water where the watercraft, outboard motor or personal watercraft is used and kept), an Ohio title must be issued. The title can be issued at any office of the Ohio Clerk of Courts, but the tax rate and county of residence will be the county where the watercraft, outboard motor or personal watercraft will be used the most or kept.
Note: If the watercraft, outboard motor or personal watercraft was first purchased outside of Ohio, credit would be given for any sales or use taxes paid to another state (not country) up to but not exceeding the amount due Ohio. If the Ohio tax liability is greater than the amount paid to the other state, the balance would be due Ohio when the Ohio title is issued.
30. Is an ambulance service entitled to claim exemption from sales and use tax under the "used directly in the rendition of a public utility service" exemption?
The Department of Taxation has reviewed an assessment appeal and determined that under certain circumstances an ambulance service is entitled to claim exemption from sales and use tax under the “used directly in the rendition of a public utility service” exemption.
Specifically, an ambulance service is eligible for the exemption if:
(a) The service is provided without discrimination,
(b) The territory that the service provider services is restricted and it services that territory exclusively,
(c) The service is highly regulated at both the state and local level, and
(d) The service of providing emergency medical care and transportation of the sick and injured is a service of public consequence or need.
For this exemption, the purchaser must provide two copies of a motor vehicle exemption certificate indicating that the vehicle is "used directly in the rendition of a public utility service.” The clerk will retain one copy and forward one copy to the Department of Taxation’s district office for review. The clerk would issue the title using the ATPS exemption code: “PU: Direct use in a public utility service.”
31. Can a manufacturer obtain title to a motor vehicle without paying sales tax when the vehicle was purchased back by the manufacturer pursuant to the lemon law?
Yes. When a manufacturer is required to buy back a motor vehicle, all-purpose vehicle or off-highway motorcycle from the consumer pursuant to the lemon law, they can obtain title without paying sales or use tax. The Clerk of Courts must obtain sufficient evidence that the buy-back provision of the lemon law is being enforced. The clerk would use the ATPS sales and use tax exemption code “MB: Manufacturer buy-back – lemon law.”
32. If the manufacturer repurchases my motor vehicle, watercraft or outboard motor, pursuant to the lemon law, and replaces it with another vehicle, do I have to pay tax when applying for title on the second vehicle?
Yes. According to the lemon law, the manufacturer is required to refund to the purchaser the entire purchase price plus the sales tax. That refund is used to purchase the second motor vehicle, watercraft or outboard motor. Therefore, sales tax must be paid to the Clerk of Courts when obtaining title for the replacement item.
If the manufacturer has refunded the entire purchase price and sales tax, it is eligible to apply for a refund of the sales tax on the first purchase.
33. How do I obtain a refund if tax has been paid in error?
You must submit an application for sales/use tax refund (form ST-AR) as well as the supporting schedule (ST-AR-S) for vendor-filed claims. You should also submit copies of any documents that are necessary in support of your application for refund (e.g., receipts issued by the Clerk of Courts, titles issued by the Clerk of Courts, retail buyers agreements or invoices, proof that the entire purchase price was returned to the customer, etc.) See form ST-AR-S for more details. These forms are available on our Web site at Tax Forms (search under "Sales Tax").
***Special Note on Leased Vehicles Moved Out of State***
There is no refund allowed for sales tax paid upfront on a motor vehicle when the lessee subsequently removes the vehicle from Ohio. Refunds are allowed on tax paid on leased motor vehicles when the lessee returns the vehicle and is reimbursed all amounts paid on the transaction, or the vehicle is otherwise used in an exempt manner.
34. What is a "new" motor vehicle as it pertains to the trade-in allowance?
If you have any questions as to whether a motor vehicle is considered new or used, you should address the question to the Bureau of Motor Vehicles (BMV), Title Division. The sales and use tax law does not provide a definition of new or used motor vehicle so we have to defer to the BMV’s definition and determination. If BMV establishes the fact that a “new” vehicle is being sold, a trade-in allowance can be used to reduce the tax base. If BMV determines that a “used” vehicle is being sold, a trade-in allowance cannot be used to reduce the tax base.
35. How is a utility trailer taxed and where is the tax paid?
Trailers that weigh 4,000 pounds or more should be titled as a motor vehicle and taxed as any other motor vehicle.
Trailers that weigh less than 4,000 pounds are not titled as motor vehicles. While they are still subject to sales or use tax, the tax should be collected by the Ohio vendor or registered out-of-state seller and remitted directly to the State of Ohio. If the seller is not a vendor in Ohio and is not registered as an out-of-state seller, the consumer still owes Ohio use tax. This use tax can be remitted as a voluntary payment using our VP-USE form found on our Web site at VP-USE, OR the use tax can be paid as part of the state income tax return.
36. Can a dealer donate an item (motor vehicle, watercraft and/or outboard motor) to a nonprofit, charitable organization and avoid payment of tax?
Effective Sept. 21, 2006, a dealer may donate a motor vehicle, watercraft, and/or outboard motor to a nonprofit, charitable organization and not have to pay tax.
Prior to Sept. 21, 2006, when a dealer acquired an item without payment of tax under the “resale” exception and later transferred ownership for no consideration (donation), the dealer owed tax on the dealers’ cost of acquiring the item. Since the dealer did not sell the donated item, the dealer lost the “resale” exception and was required to pay tax under a consumer’s use tax return or through the voluntary payment procedures.
This change was enacted in 5741.02 (C)(9):
(C) The tax does not apply to the storage, use, or consumption in this state of the following described tangible personal property or services, nor to the storage, use, or consumption or benefit in this state of tangible personal property or services purchased under the following described circumstances:
(9) Tangible personal property held for sale by a person but not for that person's own use and donated by that person, without charge or other compensation, to either of the following:
(a) A nonprofit organization operated exclusively for charitable purposes in this state, no part of the net income of which inures to the benefit of any private shareholder or individual and no substantial part of the activities of which consists of carrying on propaganda or otherwise attempting to influence legislation; or
(b) This state or any political subdivision of this state, but only if donated for exclusively public purposes.
For the purposes of division (C)(9) of this section, "charitable purposes" has the same meaning as in division (B)(12) of section 5739.02 of the Revised Code.
This change applies to donations made on or after September 21, 2006, regardless of the date the property was acquired by the donor.
If a dealer transfers a vehicle for no consideration to a consumer that is not exempt according to R.C. 5741.02(C)(9), use tax is due on the value of the vehicle. The tax due is computed by using the price paid for the vehicle when the vehicle was acquired by the dealer. If the dealer accepted the vehicle in trade, the amount the dealer allowed as a trade-in will be the amount on which to compute the tax.
For more information, please see the Information Release entitled Motor Vehicles - Dealer Transfers for No Consideration, and Sales or Gifts to Nonprofit Organizations.
37. How is tax paid on golf carts?
Generally, golf carts are not used on public highways and are not titled as motor vehicles. However, a municipality may pass an ordinance to allow for the use of golf carts on public streets. A chief of police or county sheriff may designate an area under their jurisdiction as being an area that would allow the use of golf carts on public highways. If so, the chief of police or county sheriff would send notification to the Bureau of Motor Vehicles and the BMV would then do a letter of authority to the Clerk of Courts who has jurisdiction over the affected area.
The owner of a golf cart that is currently not used on public highways may want to obtain a title and a plate. The Clerk of Courts may issue the title without payment of the sales tax if the owner of the golf cart can show proof of tax paid at the time of the intial purchase.
Golf cart dealers are not required to have a dealer permit issued by the Ohio Department of Public Safety. If a golf cart is sold by a dealer, the dealer must collect the tax and remit it to the state on the Ohio sales tax return, unless the purchaser has a statutory basis for claiming exception or exemption. If a title is requested, the Clerk of Courts may allow credit for the tax paid to the dealer, and collect the difference due, if any.
38. Can a person trade in more than one motor vehicle on the purchase of a new motor vehicle and deduct the trade-in value of both vehicles?
Yes. The combined value of the two or more vehicles given in trade can be used to reduce the “price” of the new motor vehicle being sold by the new motor vehicle dealer. If the value of the traded in vehicles is less than the “price” of the new vehicle, tax is due on the difference. If the value of the traded in vehicles equals or exceeds the “price” of the new vehicle, no tax is due as the “price” would be reduced to zero. (Note: The “price” for calculating sales tax on the new vehicle cannot be less than zero.)
39. Is mobility-enhancing equipment added to a motor vehicle subject to the sales or use tax?
Ohio law provides a sales tax exemption for sales of durable medical equipment for home use, or mobility-enhancing equipment, when made pursuant to a prescription and when such devices or equipment are used by a human being. “Mobility-enhancing equipment” means equipment, including repair and replacement parts for such equipment, that is primarily and customarily used to provide or increase the ability to move from one place to another and is appropriate for use either in a home or a motor vehicle, that is not generally used by persons with normal mobility, and that does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.
The price for these exempt items on the sale of a new motor vehicle MUST be separately stated from the price of the motor vehicle and other options that are added to the vehicles. If there is no separation of price, the entire price of the motor vehicle is subject to tax.
If a mobility-enhanced modified motor vehicle is being sold by a used vehicle dealer or as a casual sale (nondealer sale), the price for the entire vehicle would be subject to tax as there is no separation of price for any additional equipment that was already part of the vehicle.
40. Are auto auctioneers required to collect and remit sales tax?
Most auto auctioneers are only allowed to sell motor vehicles to other licensed motor vehicle dealers. Therefore, all sales should be for “resale” and exempt from Ohio sales and use tax.
However, individuals are allowed to attend and purchase at auctions of repossessed vehicles. At the time of auction, the vehicles are titled in the name of the financial institutions. Titles are assigned to the winning bidder. The bidder is required to obtain title at any Ohio Clerk of Courts office. Tax is paid at the time of titling at the rate of the bidder’s county of residence. Tax is computed on the amount of the winning bid and any fees or commissions added by the auction.
41. What happens when a nonresident purchaser returns to Ohio?
When a nonresident purchases a motor vehicle from an Ohio dealer, the Ohio dealer is required to obtain an Ohio title in the name of the purchaser. The purchaser is entitled to claim exemption from Ohio sales and use tax by executing the nonresident affidavit. Pursuant to Ohio law, the purchaser must immediately remove the vehicle from Ohio and title and register the vehicle in the purchaser's resident state.
If the purchaser never removes the vehicle from Ohio or never title and registers the vehicle in another state, Ohio tax would be due.
A nonresident purchaser may have paid some Ohio tax at the initial sale. Credit for that tax paid will be allowed if the nonresident never removes the vehicle from Ohio or never titles and registers the vehicle in another state.
**** Special Notes ****
If the purchaser has complied with these requirements and later returns to Ohio (more than six months after date of purchase) to become an Ohio resident, the non-Ohio title should be converted to an Ohio title under the ATPS exemption code of CV or CM.
If the purchaser has complied with these requirements and later returns to Ohio (less than six months after date of purchase) to become an Ohio resident, the non-Ohio title should be converted to an Ohio title but Ohio tax would be due. The purchaser should be given credit for any sales or use or similar tax paid to this state or another state. (Note: The purchaser cannot be given credit for sales or use or similar tax paid to another country.)
42. Can a used motor vehicle dealer purchase a new motor vehicle under the "resale" exception?
Under Ohio tax laws, any person making retail sales may acquire items (including motor vehicles) excepted from sales or use tax based on the “resale” exception. The problem is obtaining an Ohio title, as motor vehicle law does not allow a used motor vehicle dealer to acquire a new motor vehicle for purposes of resale.
If a used motor-vehicle dealer purchases a new motor vehicle, pays Ohio sales and use tax when the Ohio title is obtained, and subsequently sells the vehicle with few, if any, miles added to the odometer, we would entertain an application for refund of the taxes paid by the dealer.
If the used motor-vehicle dealer obtained the new motor vehicle by trading in a used vehicle, the taxes paid by that used motor vehicle dealer would be based on the price of the new vehicle, reduced by the used vehicle trade-in allowance.
43. How are taxes calculated on a brokered watercraft sale?
The sale of watercraft, outboard motors and parts thereof made by boat dealers and/or brokers are deemed to be sales subject to the sales or use tax regardless of who holds title to such watercraft, outboard motors or parts prior to the sale.
Tax Commissioner Rule 5703-9-40, dated Feb. 24, 1965, reads as follows:
"Persons engaged in the business of selling tangible personal property who are authorized, engaged or employed to sell tangible personal property belonging to another are the vendors of such tangible personal property and shall be responsible for the proper collection and remittance of the sales tax with respect to such sales.
"Persons engaged in the business of selling tangible personal property shall include persons who hold themselves out to the public as conducting a business regardless of whether the merchandise sold is owned by them or by other persons who have authorized, engaged or employed them to sell tangible personal property.”
Therefore, persons who represent themselves as dealers and/or brokers and make sales of tangible personal property on their own behalf or on behalf of others must collect the tax on all such sales unless otherwise exempted. Such dealers and/or brokers are required to have a vendor's license or out-of-state seller’s use tax registration with the State of Ohio for the collection and remittance of tax. Tax must be paid by the dealer/broker as follows:
(a) On titled watercraft and/or outboard motors, the dealer/broker will remit the proper amount of tax [net of discount when the dealer/broker has a vendor’s license or an out-of-state seller’s registration (99-XXXXXX)] to the Clerk of Courts at the rate for the purchaser’s county of residence.
(b) On watercraft that are not required to be titled, documented watercraft or accessories and parts, the dealer/broker will remit the proper amount of tax to the Department of Taxation on the dealer/broker’s tax return. This remittance will be net of discount if the return is timely filed and the amount of tax that is due is paid in full. The tax rate to collect would be: Before July 1, 2005, the rate in effect in the dealer/broker’s county or customer’s county if the dealer/broker is located outside Ohio. After July 1, 2005, the rate in the county where the customer takes possession of the watercraft or accessories.
**** Special Notes ****
If the dealer/broker is licensed with the Ohio Department of Natural Resources as a watercraft dealer, the “price” for calculating sales tax may be reduced by any watercraft or outboard motor taken in trade by the dealer/broker.
Failure to comply with all statutory reporting and payment requirements will subject the dealer or broker to an assessment for the unreported or unpaid sales or use tax.
44. Can you provide more examples of situations where there is no tax due on the transfer of title of a motor vehicle, all-purpose vehicle, off-highway motorcycle, titled watercraft, titled outboard motor, or titled personal watercraft?
Here are some examples:
(A) Sales to an organization that has been granted and maintains 501(c)(3) status by the Internal Revenue Service or is a not-for-profit organization operated exclusively for charitable purposes in this state. (NP)
Note: A motor vehicle sold to any organization for use in the operation or carrying on of a trade or business would be taxable.
(B) Sale in interstate commerce with delivery being made by the seller to a point outside this state for use outside this state or delivered to an interstate carrier for delivery outside of Ohio. (IS)
(C) Sale to a purchaser who is to use the motor vehicle as follows:
(a) As transportation equipment, except those licensed to operate on the public highways, to transport items in the process of production for sale by manufacturing, processing, assembling or refining within a plant. (PT) (See Rule 5703-9-21, Ohio Adm. Code)
(b) Directly in production of tangible personal property for sale by mining. Used prior to the tipple or crusher, or in the construction, operation and maintenance of private power lines to distribute electric energy for use in mining, whether licensed or not for highway use. (Rule 5703-9-22, Ohio Adm. Code) (DM)
(c) Directly in the exploration for or production of crude oil or natural gas. (DO)
(d) Sale to a nonresident of this state upon presentation of an affidavit executed in this state by the nonresident purchaser affirming that:
(1) the purchaser is not a resident of this state,
(2) that possession of the vehicle is taken in this state for the sole purpose of immediately removing it from the state,
(3) the resident state provides a nonresident motor vehicle exemption from their sales and use tax law under which Ohio residents can purchase a vehicle and not be required to pay sales or use tax, and
(4) that the vehicle will be permanently titled and registered in another state and that it will not be used in the State of Ohio. (NR)
Note: The sale of a motor vehicle consummated in Ohio to a nonresident member of the Armed Forces stationed in Ohio is subject to Ohio sales or use tax. This type of transaction does not qualify under the nonresident exemption because the vehicle will be used in Ohio.
Another exception to the nonresident exemption would be the sale of a motor vehicle consummated in Ohio to a nonresident student attending school in Ohio. In this case, the vehicle would not be immediately removed from the state as required by law and it will be used in Ohio.
(e) A motor vehicle that will be used as a “yard truck” to transport purchased inventory in a warehouse, distribution center or similar facility when the inventory is primarily distributed outside this state to retail stores of the person who owns or controls the warehouse, distribution center or similar facility. This exemption does not apply if the vehicle is licensed to operate on the public highways. (WH)
(D) Where the purchaser of the motor vehicle is:
(a) The State of Ohio or any political subdivision thereof. (SP)
(b) The federal government or any agency thereof. (FA)
(c) A motor vehicle dealer (new, used, leasing or salvage) obtaining title for “resale.” The Clerk of Courts will record on the title the valid dealer’s permit number and/or vendor’s license number. (RD, RL, RN, RO, or SR)
(d) A motor vehicle rental company having a valid vendor’s license (Resale – daily rental). (RR)
(e) A direct pay permit holder, in which case the direct pay number (98-XXXXXX) will be recorded on the title. (DP)
(f) A motor vehicle or watercraft dealer from another state or country and the vehicle, watercraft or outboard motor will be resold. (OD)
(E) Where evidence (court documents, Highway Patrol inspection report, etc.) obtained and retained by the Clerk of Courts is such that tax is not due as a result of:
(a) Transfer of title pursuant to a divorce decree. (DV)
(b) Transfer of title to a beneficiary through inheritance in the administration of an estate by Probate Court where there is no clear consideration. (IH)
(c) Where a finance company or lending institution takes constructive possession of a mortgagor’s car to protect its loan and thereafter the same mortgagor makes definite arrangements with the company to regain the car, it shall be titled back to the original mortgagor as “Redeemed.” (RP)
(d) The issuance of title to an unclaimed motor vehicle when the proper affidavit has been executed. (UC)
(e) The transfer of a pre-ATPS (gold) title to an ATPS title without a change of ownership. (HE)
(f) A resident of another state has purchased (not including rentals or leases) in their home state a motor vehicle for use in that state, but then moves to Ohio. If the individual takes up residence in Ohio at least six months after purchase of the vehicle, they may obtain an Ohio title without having to pay use tax. They must prove to the satisfaction of the Clerk of Courts that the vehicle was purchased outside Ohio and used outside this state for at least six months. (CV)
(g) Insurance company taking title as result of a claim settlement may use the term “Resale – insurance claim.” (IC)
(h) All-purpose vehicle (APV) purchased prior to July 1, 1999; Clerk of Courts must have confirmation of the purchase date. (AP)
(i) Off-highway motorcycle (OHM) purchased prior to July 1, 1999; Clerk of Courts must have confirmation of the purchase date. (OH)
(j) New or used manufactured home or mobile home purchased on or after Jan. 1, 2000. (MH)
(k) Personal watercraft sold before Jan. 1, 2000. (WP)
(l) Transfer of a motor vehicle into the name of a franchised motor vehicle dealer for purposes of demonstration to prospective purchasers. When issuing title, the word “Demonstrator” is to be placed on the title. (RD)
(m) Sales of emergency and fire-protection vehicles to volunteer fire departments that are under contract with a political subdivision of this state (county, township or municipality) to provide fire protection and emergency services. (VF)
(n) A foreign diplomat may purchase a motor vehicle exempt from Ohio sales or use tax if the diplomat is the holder of an exemption card issued by the U.S. Department of State that grants exemption for all state taxes on the purchase of motor vehicles and other items of tangible personal property. The exemption card indicates the extent of the exemption granted. (FD)
(o) The transfer of title to a motor vehicle that was purchased outside of Ohio for use outside of Ohio by a member of the Armed Services. The titleholder must be able to establish the fact that the vehicle has been or will be used outside of Ohio for at least six months after it is acquired. (CM)
(p) The purchaser of a motor vehicle is using the vehicle (through a power take-off unit) in the production of a product for sale by manufacturing, processing or refining (i.e., cement mixer where the mixing unit is operated through a power take-off unit instead of a separate power source). (MO)
(q) The purchaser of a motor vehicle is purchasing a specially designed and equipped motor vehicle for use in rendering a public utility service. (PU)
Note: The PU exemption will cover ambulance services if the following conditions exist:
(1) the service is provided without discrimination, (2) the territory that the service provider services is restricted and it services that territory exclusively, (3) its service is highly regulated at both the state and local level, and 4) its service of providing emergency medical care and transportation of the sick and injured is a service of public consequence or need. The purchaser must provide a motor vehicle exemption certificate indicating that the vehicle is “used directly in the rendition of a public utility service.”
(r) The transfer of title to the beneficiary or beneficiaries stated on a title that is in the name of a sole owner with transfer-on-death designation. (TD)
(F) Where there is no “good and valuable consideration” given in exchange for the transfer of title to the motor vehicle, watercraft or outboard motor:
(a) The transfer of an asset of a corporation to the surviving corporation as a result of a merger or to a new corporation as a result of a consolidation. (MR or CS)
(b) The transfer of title from a corporation to one of its stockholders upon dissolution of the corporation. (DS)
(c) The transfer of title due to a corporate name change only. (NC)
(d) Transfer of title from an individual to a partnership of which the individual is a member if no clear consideration is given by the partnership for the transfer. (IP)
(e) Transfer of title from a partnership to a partner (individual) upon dissolution of the partnership. (PD)
(f) Transfer of title from an employee to an employer for the sole purpose of insuring the vehicle as a part of the employer’s insurance. (PRICE OF $0.00)
(g) Transfer of title from an employer to an employee for the sole purpose of insurance. (PRICE OF $0.00)
(h) Where a trade-in is titled by a dealer for resale pursuant to the sale of another vehicle and that sale is not consummated, the trade-in title may be transferred back to the original titleholder as “Redeemed.” (RS)
(i) The transfer of title where an undisturbed mortgage is involved and the transferor is not relieved of his original principal liability and there have been no changes in the original mortgage paper filed or any other consideration given. Also, title transfers from two names to only one of the original names and the mortgage remains in both names or the title transfers from two names to only one of the original names and the mortgage also changes from two names to only one of the original names. (UM)
(j) The transfer of title between parents and their children, husband and wife, or between two unrelated parties in the absence of any clear consideration. (PRICE OF $0.00)
(k) The transfer of an unencumbered title from a sole owner, partnership or corporation to a limited liability partnership (LLP) or limited liability company (LLC), and there is no clear consideration. Or, the transfer of title and there is an outstanding loan or lien on the title, and there is no change to the loan agreement as a result of the transfer (undisturbed mortgage). (PRICE OF $0.00)
(G) Where title to a vehicle is to be transferred to an individual who is not a motor vehicle dealer but the vehicle is to be resold. Indicated is the wording, which may be used on the title to claim exemption.
(a) A finance company or bank is repossessing a vehicle to protect the loan may use the term “Resale – repossession” (RE) through June 8, 2000 or “Resale – financial institution.” (RF) effective June 9, 2000.
(b) Pawnbroker taking title to a vehicle pursuant to Section 4505.102 of the Ohio Revised Code to protect a loan may use the term “Resale – repossession” (RE) through June 8, 2000 or “Resale – financial institution.” (RF) effective June 9, 2000.
(c) Insurance company taking title as result of a claim settlement may use the term “Resale – insurance claim.” (IC)
(d) Any licensed dealer taking a salvage title to a vehicle that is to be dismantled and sold as parts, or to sell the salvage vehicle on a salvage title to a new or used dealer or an individual may use the term “Salvage – resale.” (SR)
(e) Manufacturer taking title to a chassis which will become part of a manufactured item that will be titled as a motor vehicle when sold to the ultimate consumer must accompany the application for title with an exemption certificate setting forth the statutory reason for exemption of “use or consumption as a material or part for incorporation into personal property to be produced for sale by manufacturing, assembling or processing.” (RM)
(f) Financial institution taking title to a motor vehicle for the sole purpose of selling the motor vehicle to a licensed motor vehicle dealer may use the term “Resale – wholesale.” (RW)
(g) Farm implement or construction equipment dealers will occasionally acquire a horse, utility or equipment “trailer” with a gross weight in excess of 4,000 pounds, which requires a motor vehicle certificate of title. If the implement or construction equipment dealer is in the business of regularly selling trailers that are required to be titled, they will be licensed as a motor vehicle dealer by the Bureau of Motor Vehicles.
Those that only occasionally sell trailers that are required to be titled will not be licensed as a motor vehicle dealer by the Bureau of Motor Vehicles. Nevertheless, the implement or equipment dealer must have a vendor’s license as they are making retail sales. Under sales and use tax law, these implement or equipment dealers are entitled to claim the resale exemption on these trailers, so long as they are being acquired for the purposes of resale. These implement or equipment dealers MUST submit an exemption certificate with the application for certificate of title using the term “Resale – implement/equipment dealer.” (RI)
Special Note: This exemption reason does not apply to trailers that are acquired for use by the business in transporting other items (tractors, plows, disc harrows, fertilizer spreaders, combines, bulldozers, backhoes, etc.) that are sold by the dealer or other motor vehicles (passenger vehicles, trucks, vans, etc.).
45. Can you provide some examples of "consideration" other than money that is given in exchange for a certificate of title?
The following list is not an all-inclusive listing:
(A) An item of tangible personal property; such as another vehicle, a boat, a horse, etc., given in exchange. In each case, a value has to be established for the item being exchanged and it should be the fair market value of the item that is traded. Where there is an even trade of motor vehicles between two individuals with no money involved, each individual would pay tax due based on the value of the motor vehicle, which is transferred to the other.
(B) A piece of real estate, such as a lot, that is given in exchange. In this instance, a value has to be established for the real property, which was given towards the acquisition of the motor vehicle.
(C) An item of tangible personal property, such as shares of corporate stock, whether transferred to or from a corporation in exchange for a motor vehicle. An example would be the transfer of a motor vehicle from an individual to a corporation of which the individual is sole owner or a stockholder constitutes a sale and the fair market value of the stock or other consideration given in exchange would be the tax base. Where there is no established market value for the stock or other securities so exchanged, it will be presumed that they are equivalent to the fair market value of the vehicle or the value as listed under corporate assets in which case this would be used as the tax base.
(D) Cancellation of an existing debt owed to the purchaser or new titleholder.
(E) The transfer of a motor vehicle resulting from the assumption, by the transferee (new titleholder), of a mortgage through a “transfer of equity or interest agreement” wherein the transferor (previous titleholder) is relieved of its original principal liability and becomes a guarantor is a transfer for a consideration and subject to the tax. The tax base would be the total amount of the mortgage assumed plus any other consideration given.
(F) The transfer of a motor vehicle as the result of the transferee (new titleholder) paying off the mortgage in the name of the transferor (previous titleholder) is a transfer for a consideration. The tax base would be the amount of the pay off plus any other consideration given either in trade or money.
46. How are lease assumptions of motor vehicles and other tangible personal property taxed?
A lease assumption is when a lessee has another person assume the lease payments and lease end responsibilities. This should not be done without the lessors’ knowledge or approval.
If the lease is/was consummated in Ohio after Feb. 1, 2002, and there are no changes to the original leasing agreement, there is no sales tax due to the State of Ohio.
If an Ohio resident assumes an out of state lease, Ohio use tax may be due and payable up front on the remainder of the lease payments. If the other state required the tax to be paid on the monthly installment, Ohio tax is calculated on the remaining payments and paid up front to the leasing company. If the other state collected taxes up front, Ohio tax will be calculated on the payments remaining upon entry into Ohio, credit will be given for taxes paid to the other state and the leasing company will collect any additional tax due.
47. What is the correct tax rate to charge a customer on the sale or lease of motor vehicles, watercraft or outboard motors?
On the sale of a titled motor vehicles, watercraft or outboard motors, the tax rate would be the rate in the county of residence of the purchaser.
On the lease of titled motor vehicles, watercraft or outboard motors, whether the lease is paid by one upfront payment, (no monthly payments), or by a stream of payments, the tax rate to apply is the rate in the county that is the primary property location of the vehicle(s) or watercraft. This may be the county of residence of the lessee, or in the case of multiple vehicles leased to one person and the vehicles are used in several counties, the county where the vehicles are garaged overnight would apply.
On the sale or lease of a documented watercraft, the tax rate to apply is the rate where the customer takes possession of the watercraft. Any subsequent taxable charges on the lease will be sourced to the primary property location for the period in which the charges are incurred.
“Primary property location” means an address for tangible personal property provided by the lessee or renter that is available to the lessor or owner from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith.
There are some sales of titled or untitled vehicles, watercraft, outboard motors or other items of tangible personal property made by vendors or dealers that are not “licensed” dealers under sections 4517 or 1547 of the Ohio Revised Code. An example would be a vendor of all purpose vehicles or off-road motorcycles that is “registered” with the Bureau of Motor Vehicles, or a vendor that sells boats less the 14 feet in length. The tax would be collected by the vendor/dealer and reported and paid to the State of Ohio on the vendor’s sales tax return. The vendor/dealer may not be required to obtain a title for the item sold, but the customer would be required to obtain title from the Clerk of Courts. The tax rate collected by the dealer/vendor would be (1) the county of the location of the vendor if the customer takes possession at the vendor’s place of business, or (2) the county where the vendor/dealer delivers the item and possession is taken by the customer. If the purchaser’s county of residence has a higher rate of tax than the county of the vendor/dealer, credit will be allowed for taxes paid to the vendor, and any additional tax due will be collected by the Clerk of Courts at titling.
The following forms can be downloaded on from the ODT Web site at Tax Forms:
