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.

If a motor vehicle is leased to an Ohio resident by an out of state dealer, how is the tax collected and remitted?

An out of state dealer would charge and collect the tax on the basis as an in-state dealer, that is, on the entire amount the customer would pay over the term of the lease. The tax can be remitted to Ohio in one of two ways.

If the out of state dealer makes frequent leases to Ohio customers, the dealer should register for an Ohio Seller’s Use Tax account on form UT-1000. The tax will be paid when filing sales tax return UST-1.

If the dealer seldom leases a vehicle to Ohio residents, the dealer may submit a copy of the lease agreement, and a check for the tax made payable to Treasurer, State of Ohio.

Send both to:

Ohio Department of Taxation

Sales Tax Division

P.O. Box 530

Columbus, OH 43266-0530

If a motor vehicle is leased to an Ohio resident by an out of state dealer, how is the tax collected and remitted?

An out of state dealer would charge and collect the tax on the basis as an in-state dealer, that is, on the entire amount the customer would pay over the term of the lease. The tax can be remitted to Ohio in one of two ways.

If the out of state dealer makes frequent leases to Ohio customers, the dealer should register for an Ohio Seller’s Use Tax account on form UT-1000. The tax will be paid when filing sales tax return UST-1.

If the dealer seldom leases a vehicle to Ohio residents, the dealer may submit a copy of the lease agreement, and a check for the tax made payable to Treasurer, State of Ohio.

Send both to:

Ohio Department of Taxation

Sales Tax Division

P.O. Box 530

Columbus, OH 43266-0530