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Tax Expired January 1, 2003
ST 2002-01 - Federal Luxury Tax - Revised January, 2002
Effective January 1, 1991, the Federal government imposed an
excise tax on certain "luxury" goods. The rate of tax was 10%
of the amount of the price that exceeded a specified
threshold amount. Originally, this excise tax was imposed on
the sale of jewelry, furs, passenger vehicles, watercraft,
and aircraft. With the passage of the Omnibus Budget
Reconciliation Act of 1993 (effective August 10, 1993), this
federal excise tax was repealed on all luxury items except
passenger vehicles. The passage of the Small Business Job
Protection Act (effective August 29, 1996) then reduced the
luxury tax rate and made the threshold amount and tax rate
adjustable over the next several years.
The federal excise tax, which is levied on the seller when
the first retail sale or lease of a luxury passenger vehicle
occurs, will be calculated using the following rates and
threshold amounts for the periods specified:
PERIODS
TAX RATES THRESHOLD AMOUNTS
January 1, 1991 thru December 31,
1992
10%
$30,000.00
January 1, 1993 thru August 28,
1996
10%
$32,000.00
August 29, 1996 thru December 31,
1996
9%
$34,000.00
January 1, 1997 thru December 31,
1997
8%
$36,000.00
January 1, 1998 thru December 31,
1998
7%
$36,000.00
January 1, 1999 thru December 31,
1999
6%
$36,000.00
January 1, 2000 thru December 31,
2000
5%
$38,000.00
January 1, 2001 thru December 31,
2001
4%
$38,000.00
On or after January 1,
2002
3%
$40,000.00
You are advised to contact the Internal Revenue Service (IRS)
regarding future changes to the tax rate, the threshold
amount or other federal luxury tax issues.
STATE AND LOCAL SALES & USE TAXES
Since the luxury tax is levied on the vendor, it becomes part
of the vendor's cost of doing business. The vendor may choose
to recover all or part of this tax from the consumer much
like any other expense. That portion of the luxury tax that
is passed on to the consumer by the vendor becomes part of
the "price" for calculating sales and use tax, even if it is
separately stated on the consumer's bill.
If you have any questions regarding the application of the
Ohio sales tax, please contact our nearest taxpayer service
centers or call toll free 1-888-405-4039.