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

Please see the Information Release   for details.

Here's how to determine the tax due from Nonresidents who will remove the motor vehicle to one of the seven states listed below:

  1. Calculate the Ohio price of the vehicle under Ohio law, i.e., as you would for a sale to an Ohio resident, taking into account the trade-in deduction if a new vehicle is purchased.  The sales tax rate to apply to the Ohio price is 6.0%.
  2. Calculate the price in the applicable state taking into account the adjustments in the chart below, such as a trade-in allowance if permitted by the state, and apply the sales tax rate of the appropriate state listed in the chart below.  Please note that the sales tax rates listed in the chart below may be subject to change.
  3. The lesser of the two amounts must be collected as the sales tax due from the customer.

The following is the list of the states, applicable tax rate, and the adjustments required to determine the proper amount of sales tax to collect: 

State

Sales Tax Rate

Trade-In Allowance

Special Provisions

Arizona

5.60%

Yes –New and Used

 

California

7.5%

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 GAP taxable?

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 the vehicle’s value and the amount still owed on the loan.

If GAP is sold with the motor vehicle and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it is subject to sales tax.  Conversely, if GAP is sold separately from the retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.

R.C. 5739.01(B)(10) includes 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.

Is GAP taxable?

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 the vehicle’s value and the amount still owed on the loan.

If GAP is sold with the motor vehicle and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it is subject to sales tax.  Conversely, if GAP is sold separately from the retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.

R.C. 5739.01(B)(10) includes 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.

Is GAP taxable?

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 the vehicle’s value and the amount still owed on the loan.

If GAP is sold with the motor vehicle and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it is subject to sales tax.  Conversely, if GAP is sold separately from the retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.

R.C. 5739.01(B)(10) includes 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.