FAQs - Sales & Use Tax: Motor Vehicles & Watercraft

Is GAP taxable?

GAP stands for guaranteed auto protection. It is a coverage sold when a new car is purchased or leased. In the event a vehicle is totally destroyed, it covers the negative difference between what the vehicle is worth, and the amount still owed on the loan.

If GAP insurance or GAP product is sold by a company separate from and not part of a retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.

When a GAP policy is sold and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it would be subject to sales.

R.C. 5739.01(B)(10) includes in the definition of a "sale":

All transactions in which “guaranteed auto protection” is provided whereby a person promises to pay to the consumer the difference between the amount the consumer receives from motor vehicle insurance and the amount the consumer owes to a person holding title to or a lien on the consumer’s motor vehicle in the event the consumer’s motor vehicle suffers a total loss under the terms of the motor vehicle insurance policy or is stolen and not recovered, if the protection and its price are included in the purchase or lease agreement.