Vehicle Taxability - Leasing & Dealers

Helpful Resources

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.

  

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 responsibilities.  This should not be done without the lessors’ knowledge or approval.

If the lease was consummated in Ohio after Feb. 1, 2002, and there are no changes to the original lease 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 each monthly installment, Ohio tax is calculated on the remaining payments and paid up front to the leasing company. If the other state collected tax up front, Ohio tax is calculated on the payments remaining upon entry into Ohio. Credit is given for taxes legally paid to the other state and the leasing company must collect any additional tax due.

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 responsibilities.  This should not be done without the lessors’ knowledge or approval.

If the lease was consummated in Ohio after Feb. 1, 2002, and there are no changes to the original lease 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 each monthly installment, Ohio tax is calculated on the remaining payments and paid up front to the leasing company. If the other state collected tax up front, Ohio tax is calculated on the payments remaining upon entry into Ohio. Credit is given for taxes legally paid to the other state and the leasing company must collect any additional tax due.

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 responsibilities.  This should not be done without the lessors’ knowledge or approval.

If the lease was consummated in Ohio after Feb. 1, 2002, and there are no changes to the original lease 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 each monthly installment, Ohio tax is calculated on the remaining payments and paid up front to the leasing company. If the other state collected tax up front, Ohio tax is calculated on the payments remaining upon entry into Ohio. Credit is given for taxes legally paid to the other state and the leasing company must collect any additional tax due.
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