Vehicle Taxability & Exemptions

Taxability & Exemptions of Motor Vehicles

All sales of motor vehicle are subject to sales or use tax unless an exemption applies.  The tax rate charged is based on the county of the purchaser’s residence.  While  other items may be exempted as a casual sale, the resale of a used motor vehicle is not eligible for this exemption.  

Did you receive a notice from us? 

The definition of a Casual Sale is found in R.C. 5739.01(L).

The application of Sales and Use tax to a casual sale can be referenced in R.C. 5739.02(B)(8)

What is an exemption?

An exemption is a statutory reason that a retail sale is not subject to  sales or use tax. This page discusses exemptions that may apply to motor vehicle transfers.

 

A few examples of exemptions for motor vehicles:

Direct FarmingFarming –Motor vehicles  used primarily in the production of agricultural products for sale may be exempt under R.C. 5739.02(B)(17)

Transportation for Hire – Motor vehicles used primarily in transporting tangible personal property for others may be exempt under R.C. 5739.02(B)(32)

Nonprofit Organizations & Churches – Purchases of motor vehicles by nonprofit charitable organizations and churches may be exempt if the vehicle is purchased by and titled in the name of the organization.  R.C. 5739.02(B)(12)

Transportation Services and Public Utilities  – Vehicles   primarily used to provide taxable transportation services,  such as taxicabs or charter services.  Note—the purchaser  is required to have a vendor’s license and remit sales tax on its taxable transportation services.  R.C. 5739.02(B)(41)

What other vehicle purchases are exempt from the sales and use tax?

Find the answer on our Exemptions Definitions page.

 

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.

  

Can a third party purchase a leased vehicle without payment of sales and use tax twice?

Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party.  In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:

(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;

(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;

(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and

(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.

The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement. 

This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.

Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.

Can a third party purchase a leased vehicle without payment of sales and use tax twice?

Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party.  In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:

(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;

(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;

(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and

(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.

The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement. 

This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.

Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.

Can a third party purchase a leased vehicle without payment of sales and use tax twice?

Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party.  In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:

(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;

(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;

(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and

(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.

The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement. 

This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.

Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.