Vehicle Taxability - Leasing & Dealers

Leasing and Auto Dealer Transactions

When buying a vehicle from an auto dealer, there are many options available to the consumer.  Here we will provide information on how the sales tax applies to the different transactions that may occur.

 

Leases

A lease is any transfer of the possession or control of tangible personal property for a fixed or indefinite term, for consideration. Leases include future options to purchase or extend, and agreements where the amount of consideration may be increased or decreased by reference to the amount realized upon the sale or disposition of the property.

The link below will take you to a memo drafted by the Ohio Department of Taxation explaining how leases of motor vehicles are taxed.

Leasing Memo

 

Sales to Non-Residents of Ohio

Sales made in Ohio to a non-resident of Ohio that will be immediately removed from this state are generally exempt from Ohio sales tax.  Sales of motor vehicles that will be immediately removed to Arizona, California, Florida, Indiana, Massachusetts, Michigan, and South Carolina are the only sales that are the exception to this rule.  Please see the Information Release for details.

 

The below chart can be used for a quick guide on how to calculate sales tax for these states:

 

 

State

Sales Tax Rate

Trade-In Allowance

Special Provisions

Arizona

6.60%

Yes –New and Used

 

California

7.25%

No

 

Florida

6.00%

Yes- New and Used

 

Indiana

7.00%

Yes-New and Used

Nonresident exemption for RVs and trailers with a load capacity of at least 2200 pounds

Massachusetts

6.25%

Yes-New and Used

 

Michigan

6.00%

No

 

South Carolina

5.00%

Yes-New and Used

Tax cap of $300.00

 

Frequently Asked Questions Tool

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.

What is included in the "price" of a motor vehicle when calculating the sales and use tax?Can you provide some examples of "consideration" other than money that is given in exchange for a certificate of title?Can a third party purchase a leased vehicle without payment of sales and use tax twice?Is the consumer entitled to a tax credit for taxes paid to another state?How are lease assumptions of motor vehicles and other tangible personal property taxed?Is GAP taxable?Is mobility-enhancing equipment added to a motor vehicle subject to the sales or use tax?How is tax paid on golf carts?How is a utility trailer taxed and where is the tax paid?Are members of the armed services exempt from sales or use tax?When must the clerks of courts obtain an exemption certificate or completed forms T-610 or T-615? Does the winner of a raffle, contest or lottery owe any Ohio sales or use tax?Are court-ordered title transfers subject to the sales or use tax?Can the clergy of a church obtain a title in his/her name without paying sales or use tax?Are farmers exempt from sales or use tax on vehicles that are licensed to operate on the highways?Who is entitled to claim exemption from sales tax based on the "Highway Transportation for Hire" (TH) exemption?Can a motor vehicle dealer obtain title to a watercraft under a "resale" exemption?Can a pawnbroker obtain title to a motor vehicle under a resale exemption?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?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? Can a dealer donate an item (motor vehicle, watercraft and/or outboard motor) to a nonprofit, charitable organization and avoid payment of tax?Do rebates reduce the "price" for calculating sales or use tax? Does a trade-in reduce the price when calculating sales or use tax? Does a trade-in reduce the price when calculating sales or use tax? How are leases taxed?How are leases taxed?What charges are taxable or not taxable on leases?What charges are taxable or not taxable on leases?I leased vehicle in Ohio and then moved to another state. Am I entitled to a refund of the up-front sales tax that was paid at the beginning of the lease?If the lease is terminated prior to the end of the lease term, is any of the sales tax paid refunded?If the lessee decides to purchase the leased property, what is the tax consequence?A lessor may advance tax 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?How should tax be calculated on a lease with no definite term?A lease is consummated after January 31, 2002, between a lessor and lessee, both initially located outside Ohio in a state that taxes leases upfront. Thereafter the lessee brings the leased equipment into Ohio. How is the lease taxed in Ohio?Tangible personal property is leased in another state and subsequently brought into Ohio. How is the price of the leased property determined for purposes of sales and use tax?Does the assignment of a lease to a third party result in a new lease?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? 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? Are out-of-state leasing dealers/companies required to be registered for collection of sales or use tax? Are out-of-state leasing dealers/companies required to be registered for collection of sales or use tax? If a motor vehicle is leased to an Ohio resident by an out of state dealer, how is the tax collected and remitted?If a motor vehicle is leased to an Ohio resident by an out of state dealer, how is the tax collected and remitted?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? Is an out-of-state leasing company required to register with the Ohio Department of Taxation as a seller (account number 99-XXXXXX) if all of its customers are residents of other states or countries? How is negative equity taxed? What is a "new" motor vehicle for purposes of the trade-in allowance?If I purchase a vehicle at a local auto dealer and have the vehicle shipped out of the state or country, do I pay Ohio sales tax?Are auto dealers entitled to refunds when a vehicle is returned or repurchasedWho may pay tax to the clerks of courts net of the allowable vendor discount?Is a dealer required to title a “parts truck” and pay tax when the title is issued?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?Can a used motor vehicle dealer purchase a new motor vehicle under the "resale" exception?What tax rate is charged on the sale or lease of motor vehicles, watercraft or outboard motors?Do dealer cash discounts reduce the price for calculating sales or use tax? Is the amount charged for the federal excise tax (FET) included in the tax base for calculating sales tax?As an auto dealer, when a purchaser is claiming exemption, what exemption forms should I use or accept?