Information Release

ST 2003-13 (Rev, 02/04) Towing Service - Updated - Supersedes Information Release dated August 1, 2003. Questions 3,6,10, & 11 revised. Questions 17 & 18 added.

The purpose of this release is to provide information to vendors and consumers to assist them in meeting their obligations under the tax. Am. Sub. H.B. 95 of the 125th Ohio General Assembly included several expansions to the sales tax base. One such expansion appears in new Ohio Revised Code ("R.C.") section 5739.01(B)(3)(t), which applies the sales tax to all transactions by which:

On or after August 1, 2003, motor vehicle towing service is or is to be provided. As used in this division, "motor vehicle towing service" means the towing or conveyance of a wrecked, disabled, or illegally parked motor vehicle.

The following, in question and answer format, is some additional information on the tax imposed on motor vehicle towing.

I provide motor vehicle towing. What type of license do I need?

A provider of towing service in Ohio must obtain a vendor’s license for each fixed place of business where the towing service provider is located. Vendor’s licenses are available from the county auditor of the county in which the fixed place of business is located. The application form for a vendor’s license is available on the Ohio Department of Taxation website: tax.ohio.gov under the tab for "FORMS."

Providers of towing service located outside Ohio that perform towing service in Ohio need to establish a transient vendor’s license account with the Ohio Department of Taxation. The application form for a transient license is also available on the Department of Taxation website.

I provide towing service from my automobile repair shop. I already have a vendor’s license for the repair shop. Do I need another vendor’s license?

No. The charges for, and the tax collected on the towing service should be reported on the returns for the existing vendor’s license.

What types of charges are included in a taxable motor vehicle towing service?

All charges which are part of, and essential to the performance of the towing service, are part of the taxable price of the service. Some examples of taxable charges associated with the provision of motor vehicle towing service include:

  • Charges for digging snow from around a vehicle before towing.
  • Trip charges, to the extent a taxable service is performed.
  • Hook-up charges.
  • Hourly charges, to the extent a taxable service is performed.
  • Charges to disconnect drivetrain before towing.
  • Dolly charges.
  • Charges for righting overturned vehicles.

I transport vehicles by lifting them onto a flatbed, rather than towing them behind a tow truck. Are my services taxable?

Yes. The statute applies tax to "the towing or conveyance of a wrecked, disabled, or illegally parked motor vehicle." (Emphasis added.)

I transport new motor vehicles to dealers. Is this a taxable service?

No. This is merely a transportation charge. The vehicles being transported are not "wrecked, disabled, or illegally parked."

I repossess vehicles for finance companies. Occasionally, I have to tow the vehicle I am repossessing. Is this a taxable service?

No. The service being provided to the finance company is the repossession, not a towing service. Furthermore, the vehicle being towed is not necessarily "wrecked, disabled, or illegally parked." For the same reason, if the finance company contracts with a third party to repossess the vehicle, and the third party contracts with a tow operator to pick up the vehicle, that tow would not be subject to the tax, unless the vehicle is wrecked, disabled or illegally parked.

I am towing a motor vehicle from Indiana into Ohio. Is that service taxable in Ohio?

No. The taxability of towing is determined by where the service originates. A towing service provider is not required to collect Ohio tax on towing that originates in another state. However, towing that originates in Ohio and ends in another state is taxable in Ohio.

The statute applies to towing "a wrecked, disabled, or illegally parked motor vehicle." If all I do is pull a vehicle out of a ditch in which it is stuck, is that a taxable service?

Yes. Since the vehicle is stuck in the ditch it is at least temporarily disabled.

I transport road construction machinery that has broken down to locations where it is repaired. Is this taxable?

No. Under R.C. 4505.01(A) construction machinery not designed for general highway operation does not fall under the definition of a "motor vehicle." Therefore, the transportation of that equipment is not a "motor vehicle towing service."

I provide roadside assistance to motorists under a contract with an automobile club. This assistance can include changing flat tires, jump starting vehicles, opening locked vehicles or towing inoperative vehicles. The automobile club pays me for these services. However, if a tow is provided the club only pays up to a maximum number of miles. If the tow exceeds the allowed mileage, the club member must pay the additional towing charge. How do I charge tax?

Charges for roadside assistance that does not involve towing may or may not be taxable. Some services such as jump starting a vehicle or opening locked doors, are not taxable services. While others such as changing a tire or making minor repairs, are taxable as repair or installation services. Tax must be collected from the automobile club on all towing service for which the club pays. Furthermore, tax must be collected from the club member on any portion of a towing charge the member pays.

I provide roadside assistance under a contract with an automobile manufacturer. The manufacturer provides the roadside assistance as part of a new vehicle warranty. When an owner has trouble with a warrantied vehicle, the manufacturer dispatches me to assist. If the vehicle needs to be towed, I tow it to the nearest authorized dealer. For this service I receive payment from the manufacturer. How do I collect tax on this transaction?

In this case the towing service is being provided to the manufacturer. Tax should be charged to the manufacturer for the cost of any towing done under the roadside assistance contract. As noted in the question above, any charges for roadside assistance that do not involve towing (e.g. jump starting a vehicle or opening locked doors) are not taxable.

I tow a disabled or wrecked vehicle to a repair shop. The repair shop pays my towing fee and re-bills the fee to the vehicle owner, or to a manufacturer if the vehicle is under warranty. Do I collect tax on this transaction?

In this situation, the repair shop should provide the tow operator with an exemption certificate showing "resale" as the reason for exemption. The repair shop should collect tax from the warranty provider or customer (or, if applicable, the customer’s insurance provider) when it re-bills the towing service.

I tow illegally parked motor vehicles under a contract with a city. The cars are towed to the city impound lot. My towing fee is paid by the city. Is this taxable?

No. Sales to a political subdivision of the State of Ohio are not taxable.

Are charges for towing a motor vehicle that are paid by a vehicle owner to a municipality subject to tax?

No. R.C. 5739.02(B)(22) provides an exemption for sales of services provided by the State of Ohio or any of its political subdivisions.

I tow illegally parked vehicles to my own lot. I charge owners a towing fee and a storage fee to retrieve their vehicles. Do I collect tax on both the towing fee and the storage fee?

Yes. Both the towing and the storage activities are taxable on and after August 1, 2003. [For storage, see R.C. 5739.01(B)(8) and the Department of Taxation’s Information Release titled Storage, which is available on the Department’s website.]

Can I claim exemption on equipment purchased to perform my towing service?

Tow truck operators regulated by the Public Utilities Commission of Ohio as a for-hire motor carrier are providing highway transportation for hire within the meaning of R.C. 5739.01(Z). Accordingly, a regulated towing operator may claim exemption under R.C. 5739.02(B)(32) on purchases of:

The sale, lease, repair, and maintenance of, parts for, or items attached to or incorporated in, motor vehicles that are primarily used for transporting tangible personal property by a person engaged in highway transportation for hire.

I provide towing service to a person that is engaged in highway transportation for hire (e.g. trucking company). Should I collect the sales tax?

Yes. As shown in question 16, the exemption for persons engaged in transportation for hire applies to the sale, lease, repair, and maintenance of, parts for, or items attached to the motor vehicle. Towing service would not be included under this or any other exemption.

I provide a "tractor swap" service for a trucking company. That is, a vehicle is disabled on the road. I go to trucking company, pick up a good vehicle, and tow it to the site of the disabled vehicle. I transfer the load from the disabled vehicle to the good vehicle (hourly charge), and tow the disabled vehicle back to the trucking company. Is any of this service taxable?

Yes, all charges mentioned in the question would be subject to the tax.

If you have questions regarding any matter covered in this release, please call 1-888-405-4039.

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