Vehicle Taxability

All title transfers and exemption claims on motor vehicles and other equipment is regularly audited by the Ohio Department of Taxation in accordance with Ohio Revised Code (RC) 4505.09(B)(2)(c) and 5739.13 to verify if the sales tax liability has been satisfied.

When a motor vehicle title is transferred, the price of the vehicle is reported to a Clerk of Courts Title Office and sales tax is paid on the price of the vehicle.   

 

Key Resources

Casual Sales – These sales are defined as the transfer of a motor vehicle title between two individuals who are not affiliated with a licensed dealership. Learn more here.  

Exemptions & Taxability – Ohio law allows certain vehicle transactions to be made without paying sales tax. Find out more here.

Leasing & Dealer Transactions – This link is for licensed dealerships to obtain more information on the application of sales tax to their transactions including leases.   

Aircraft – The sale of an aircraft may be subject to sales tax. This page will provide additional resources regarding the taxability of aircraft.

Watercraft & Outboard Motors – The transfer of a watercraft or outboard motor is generally taxed in the same manner as motor vehicles. Get the information you need here.

Downloads – Forms, questionnaires, and additional resources can be found on this page. Please click on the download link in order to see a list of available forms to download.

Did you receive a letter from us?  - This link will provide more information on notices that are sent and how best to respond.

 

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.

Does a leasing company charge sales tax on the "sale" of its leased vehicles? If so, how is the tax paid to the State of Ohio?

Under Ohio sales and use tax law, a motor vehicle leasing company is required to collect sales and use tax on the “sale” of any of its vehicles, unless the purchaser has a statutory basis for claiming exception or exemption. The leasing company is required to collect the gross amount of sales and use tax based on the rate in effect in the purchaser’s county of residence. The leasing company would then remit the net amount (gross tax less allowable discount) of sales and use tax to any county Clerk of Courts, stating the purchaser’s county of residence so the title can be issued.

In case of an audit by the Ohio Department of Taxation, the leasing company must be able to show that sales and use tax was charged and collected and that this tax was paid to the local Clerk of Courts. Clerks of Courts issue receipts reflecting payment of taxes and associated title fees, which should be retained in the transaction file as evidence that the tax has been paid.

Early Buyout. For leases entered into after Feb. 1, 2002 where a lessee purchases the leased vehicle before the end of the lease, they are allowed credit for part of the sales tax, if the entire amount of sales tax was collected at the beginning of the lease. Part of the buyout purchase price could contain an amount for which tax has already been paid. The Department of Taxation will allow credit for part of the tax paid up front if the following conditions apply:

The sales contract between the leasing company and the lessee/buyer must list a separate amount that represents the present value of the remaining lease payments that are being paid by the lessee. This amount may not exceed the sum of the remaining lease payments. This is an amount for which tax has already been paid. The remainder of the sales contract would list other fees and charges, such as residual value and early termination fees. These items would be subject to the tax.

To determine the tax to be paid to the Clerk of Courts, calculate the entire tax due on the total purchase price of the vehicle, which includes the remaining lease payments, the residual value and any other fees associated with the purchase. Calculate the tax that was previously paid (at the rate in effect when lease began) on the present value of the remaining lease payments. Subtract the previously paid tax from the total tax. Submit the final tax due, less the allowable discount. A copy of the sales contract showing the separable charges must be submitted. If there is no separate line item that represents the present value of the remaining lease payments, no credit allowance will be given.

While a leasing company may not physically obtain the certificate of title for the purchaser (provide paperwork to purchaser and have purchaser obtain his/her own title), the company must ensure payment of the proper amount of tax to the clerks and obtain/retain receipts reflecting the tax payment.