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.

How are leases taxed?

 

Lease Charges NOT Subject to Tax

Lease Charges Subject to Tax

· Credit life and disability insurance premiums

· Late charges for payments made after the due date

· Collection/repossession fees

· Assumption fees billed a lessee when the lease is assumed by another lessee

· Legal fees incurred by a lessor for collection proceedings against the lessee

· Interim interest billed the lessee on a loan granted by the lessor prior to lease inception

· Motor vehicle registration fees

· “Noninsurance” fees charged to a lessee that fails to document adequate insurance

· NSF (bad check) fees

· ACH Debit fees

· Parking ticket fees assessed on the leased vehicle and billed to the lessee

 

- Luxury taxes

· Acquisition fees

· “GAP” or “reverse equity” fees

· Disposition fees determined at lease termination

· Property taxes

· Payment or lease extension fees

· Rewrite fees

· Federal excise taxes levied on the lessor

· Administration fees

· Maintenance fees

· UCC search fees

· Title search fees

· Excess wear or mileage fees

· Turn in fees

· Other or miscellaneous fees

· Federal highway use tax levied on the lessor

· Lien fees, fees for filing a lien against the leased property, when contractually levied on and paid by the lessor but passed on to the lessee

 

 

How are leases taxed?

 

Lease Charges NOT Subject to Tax

Lease Charges Subject to Tax

· Credit life and disability insurance premiums

· Late charges for payments made after the due date

· Collection/repossession fees

· Assumption fees billed a lessee when the lease is assumed by another lessee

· Legal fees incurred by a lessor for collection proceedings against the lessee

· Interim interest billed the lessee on a loan granted by the lessor prior to lease inception

· Motor vehicle registration fees

· “Noninsurance” fees charged to a lessee that fails to document adequate insurance

· NSF (bad check) fees

· ACH Debit fees

· Parking ticket fees assessed on the leased vehicle and billed to the lessee

 

- Luxury taxes

· Acquisition fees

· “GAP” or “reverse equity” fees

· Disposition fees determined at lease termination

· Property taxes

· Payment or lease extension fees

· Rewrite fees

· Federal excise taxes levied on the lessor

· Administration fees

· Maintenance fees

· UCC search fees

· Title search fees

· Excess wear or mileage fees

· Turn in fees

· Other or miscellaneous fees

· Federal highway use tax levied on the lessor

· Lien fees, fees for filing a lien against the leased property, when contractually levied on and paid by the lessor but passed on to the lessee