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.

What tax rate is charged on the sale or lease of motor vehicles, watercraft or outboard motors?

Titled motor vehicles, watercraft or outboard motors are subject to tax at the rate in effect in the county of the purchaser’s residence.

A lease of titled motor vehicles, watercraft or outboard motors, whether the lease is paid in one upfront payment, (no monthly payments), or by a stream of payments, is taxed at the rate in effect in the county of the primary property location of the vehicle(s) or watercraft. This may be the county of the lessee’s residence, or in the case of multiple vehicles leased to one person but used in several counties, the county where the vehicles are garaged overnight.

A sale or lease of a documented watercraft is taxed at the rate in effect where the customer takes possession of the watercraft. Any subsequent taxable charges on the lease will be sourced to the primary property location for the period in which the charges are incurred.

“Primary property location” means an address for tangible personal property provided by the lessee or renter that is available to the lessor or owner from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith.

There are some sales of titled or untitled vehicles, watercraft, outboard motors or other items of tangible personal property made by vendors or dealers that are not “licensed” dealers under sections 4517 or 1547 of the Ohio Revised Code. An example would be a vendor of all purpose vehicles or off-road motorcycles that is “registered” with the Bureau of Motor Vehicles, or a vendor that sells boats less the 14 feet in length. The tax would be collected by the vendor/dealer and reported and paid to Ohio on the vendor’s sales tax return.

What tax rate is charged on the sale or lease of motor vehicles, watercraft or outboard motors?

Titled motor vehicles, watercraft or outboard motors are subject to tax at the rate in effect in the county of the purchaser’s residence.

A lease of titled motor vehicles, watercraft or outboard motors, whether the lease is paid in one upfront payment, (no monthly payments), or by a stream of payments, is taxed at the rate in effect in the county of the primary property location of the vehicle(s) or watercraft. This may be the county of the lessee’s residence, or in the case of multiple vehicles leased to one person but used in several counties, the county where the vehicles are garaged overnight.

A sale or lease of a documented watercraft is taxed at the rate in effect where the customer takes possession of the watercraft. Any subsequent taxable charges on the lease will be sourced to the primary property location for the period in which the charges are incurred.

“Primary property location” means an address for tangible personal property provided by the lessee or renter that is available to the lessor or owner from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith.

There are some sales of titled or untitled vehicles, watercraft, outboard motors or other items of tangible personal property made by vendors or dealers that are not “licensed” dealers under sections 4517 or 1547 of the Ohio Revised Code. An example would be a vendor of all purpose vehicles or off-road motorcycles that is “registered” with the Bureau of Motor Vehicles, or a vendor that sells boats less the 14 feet in length. The tax would be collected by the vendor/dealer and reported and paid to Ohio on the vendor’s sales tax return.