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.

  

Are farmers exempt from sales or use tax on vehicles that are licensed to operate on the highways?

Generally, no.  Farmers are only exempt on equipment that is primarily used in farming, such as tractors, planters or combines that plow the fields, plant 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 qualify for exemption only if used primarily (more than 50 percent of the time) in farming (similar to the way a tractor is used).

An exception is the purchase of a specially designed vehicle with a tank operated with a power take-off unit (PTO) and used primarily to spray liquid fertilizers, pesticides, herbicides, etc., on farm lands and crops. This vehicle is owned by a company hired by a farmer to provide a farming service and must operate on the highways since it travels from farm to farm. If the tank/sprayer is not operated by a power take-off unit, the vehicle is subject to the tax but the tank/sprayer unit is not.  In this case, the dealer must separate the charges for the vehicle and the tank/sprayer unit.

Another exception is 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 are not 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 may be exempt. Vehicles owned and used by egg producers to ship eggs from the farm to market under refrigerated conditions are also not subject to tax.

Are farmers exempt from sales or use tax on vehicles that are licensed to operate on the highways?

Generally, no.  Farmers are only exempt on equipment that is primarily used in farming, such as tractors, planters or combines that plow the fields, plant 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 qualify for exemption only if used primarily (more than 50 percent of the time) in farming (similar to the way a tractor is used).

An exception is the purchase of a specially designed vehicle with a tank operated with a power take-off unit (PTO) and used primarily to spray liquid fertilizers, pesticides, herbicides, etc., on farm lands and crops. This vehicle is owned by a company hired by a farmer to provide a farming service and must operate on the highways since it travels from farm to farm. If the tank/sprayer is not operated by a power take-off unit, the vehicle is subject to the tax but the tank/sprayer unit is not.  In this case, the dealer must separate the charges for the vehicle and the tank/sprayer unit.

Another exception is 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 are not 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 may be exempt. Vehicles owned and used by egg producers to ship eggs from the farm to market under refrigerated conditions are also not subject to tax.