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.

  

Is the consumer entitled to a tax credit for taxes paid to another state?

Generally, yes. Credit is given for the amount of sales or use tax legally paid to another state or jurisdiction. Proof of tax paid to the other jurisdiction must be provided to the clerk of courts. If the amount paid to the other jurisdiction equals or exceeds the Ohio use tax due, no additional tax is due.

For vehicles leased outside Ohio after February 1, 2002, and subsequently moved into Ohio, the balance of the lease charges due after the leased vehicle is brought into Ohio is subject to Ohio’s up front sales tax. If the other state taxed the lease up front, credit is given for the other state’s sales or use tax. If the other state’s tax equals or exceeds the Ohio tax, no additional tax is due. If the other state taxed the lease on the monthly payments, no credit is allowed for the tax paid to the other state for the months prior to the vehicle entering Ohio. Tax is due “up front” on the total of the balance of the remaining lease payments.  

No credit is given for sales, use or similar taxes paid to a foreign country, such as Canada, Mexico, Germany, etc.

Is the consumer entitled to a tax credit for taxes paid to another state?

Generally, yes. Credit is given for the amount of sales or use tax legally paid to another state or jurisdiction. Proof of tax paid to the other jurisdiction must be provided to the clerk of courts. If the amount paid to the other jurisdiction equals or exceeds the Ohio use tax due, no additional tax is due.

For vehicles leased outside Ohio after February 1, 2002, and subsequently moved into Ohio, the balance of the lease charges due after the leased vehicle is brought into Ohio is subject to Ohio’s up front sales tax. If the other state taxed the lease up front, credit is given for the other state’s sales or use tax. If the other state’s tax equals or exceeds the Ohio tax, no additional tax is due. If the other state taxed the lease on the monthly payments, no credit is allowed for the tax paid to the other state for the months prior to the vehicle entering Ohio. Tax is due “up front” on the total of the balance of the remaining lease payments.  

No credit is given for sales, use or similar taxes paid to a foreign country, such as Canada, Mexico, Germany, etc.

Is the consumer entitled to a tax credit for taxes paid to another state?

Generally, yes. Credit is given for the amount of sales or use tax legally paid to another state or jurisdiction. Proof of tax paid to the other jurisdiction must be provided to the clerk of courts. If the amount paid to the other jurisdiction equals or exceeds the Ohio use tax due, no additional tax is due.

For vehicles leased outside Ohio after February 1, 2002, and subsequently moved into Ohio, the balance of the lease charges due after the leased vehicle is brought into Ohio is subject to Ohio’s up front sales tax. If the other state taxed the lease up front, credit is given for the other state’s sales or use tax. If the other state’s tax equals or exceeds the Ohio tax, no additional tax is due. If the other state taxed the lease on the monthly payments, no credit is allowed for the tax paid to the other state for the months prior to the vehicle entering Ohio. Tax is due “up front” on the total of the balance of the remaining lease payments.  

No credit is given for sales, use or similar taxes paid to a foreign country, such as Canada, Mexico, Germany, etc.