ST 2008-02 - Motor Vehicles - Dealer Transfers for No
Consideration, and Sales or Gifts to Nonprofit Organizations
– Issued March 2008
The purpose of this information release is to communicate the
Department’s policy with regard to sales or use tax when a
motor vehicle dealer transfers a motor vehicle from inventory
to a person or organization for no consideration, or makes a
sale to a nonprofit organization.
Transfers for No Consideration
A motor vehicle dealer may give a motor vehicle for no
consideration to another person or organization. No
consideration means the dealer receives nothing of value
(e.g. no money or property, tangible or intangible) for the
transfer of the vehicle. When the title is transferred for no
consideration, no sales or use tax is required to be paid to
the Clerk of Courts.
However, a dealer that transfers a vehicle for no
consideration will owe use tax on the value of the vehicle in
accordance with Ohio Revised Code section (“R.C.”)
5741.01(C), which provides the definition of the term “Use”:
“Use” means and includes the exercise of any right or power
incidental to the ownership of the thing used. A thing is
also “used” in this state if its consumer gives or
otherwise distributes it, without charge, to recipients in
this state.
The tax due is computed by using the price paid for the
vehicle when the vehicle was acquired by the dealer. If the
dealer accepted the vehicle in trade, the amount the dealer
allowed as a trade-in will be the amount on which to compute
the tax.
Example 1: A new car dealership donates a new vehicle to the
owner of a local mall. The mall owner is conducting a raffle;
the vehicle is subsequently going to the raffle winner. The
dealer should convert the Manufacturer’s Certificate of
Origin to a title in the name of the mall owner. The dealer
should state on the application for title a purchase price of
$0.00. The mall owner will transfer title to the vehicle to
the raffle winner, also with a purchase price of $0.00. The
raffle winner owes no sales tax on the transfer of title. The
dealer owes use tax on the price the dealer paid for the
vehicle from the manufacturer. No tax will be paid to the
Clerk of Courts in either of these transfers. See below on
how the dealer will pay the use tax.
Example 2: A used car dealership gives a used vehicle to a
loyal employee. The dealer should transfer the title to the
name of the employee. The dealer should state on the back of
the title a purchase price of $0.00. The employee owes no
sales tax on the transfer of title. When the dealer
originally obtained and titled the vehicle, no tax was paid
as the dealer claimed an exemption from the tax for resale.
Since the dealer did not resell the vehicle, the dealer loses
the claim of exemption and owes use tax on the price the
dealer paid to acquire the vehicle, or the amount the dealer
allowed when taking the vehicle in on trade.
The dealer should pay use tax on an Ohio Consumer’s Use tax
account. An application for the account can be found in the
Tax Forms section of the Ohio Department of Taxation’s Web
site, tax.ohio.gov. An account can also be
obtained through the Ohio Business Gateway,
obg.ohio.gov. If no consumers account is
held by the dealer, the tax should be paid by voluntary
payment on form VP USE, Ohio
Use Tax Voluntary Payment Form, also available at
tax.ohio.gov.
Gifts to a Qualifying Nonprofit Organization or an
Ohio Government Agency
The use tax would not be due when the dealer donates a
vehicle to a qualifying organization. R.C. 5741.02(C)(9)
provides that use tax is not due for:
Tangible personal property held for sale by a person but
not for that person’s own use and donated by that person,
without charge or other compensation, to either of the
following:
(a) A nonprofit organization operated exclusively for
charitable purposes in this state, no part of the net
income of which inures to the benefit of any private
shareholder or individual and no substantial part of the
activities of which consists of carrying on propaganda or
otherwise attempting to influence legislation; or
(b) This state or any political subdivision of this state,
but only if donated for exclusively public purposes.
Example 3: A new car dealership donates a new vehicle to a
local church. The church is conducting a raffle; the vehicle
is subsequently going to the raffle winner. The dealer should
convert the Manufacturer’s Certificate of Origin to a title
in the name of the church. The dealer should state on the
application for title a purchase price of $0.00. The church
will transfer title to the vehicle to the raffle winner, also
with a purchase price of $0.00. The raffle winner owes no
sales tax on the transfer of title. The dealer does not owe
use tax on the price the dealer paid for the vehicle from the
manufacturer. No tax will be paid to the Clerk of Courts in
either of these transfers.
Example 4: A used car dealership donates a used vehicle to
the city for use by a city employee for city business. The
dealer should transfer the title to the name of the city. The
dealer should state on the back of the title a purchase price
of $0.00. The city owes no sales tax on the transfer of
title. The dealer does not owe use tax on the price the
dealer paid for the vehicle, or the amount the dealer allowed
when taking the vehicle in on trade.
Sales to Nonprofit
Organizations
A dealer may sell a vehicle to a nonprofit organization. The
vehicle may be kept by the organization, or transferred by
the organization to someone by means of a raffle, charitable
gift, or other promotion.
Not all nonprofit organizations are exempt from the sales tax
on purchases made by the organization. To be exempt, the
nonprofit organization must be operated exclusively for
charitable purposes in this state.(1)
If a vehicle is sold to a nonprofit organization that is
operated exclusively for charitable purposes in this state,
the Bureau of Motor Vehicles requires the dealer to obtain a
title in the name of the organization. The title can be
transferred to the organization without collection of the
tax. The Clerk of Courts will use the exemption code “NP”.
When a vehicle is sold to a nonprofit organization that is
not operated exclusively for charitable purposes in this
state, such as a fraternal organization or a trade
association, the Bureau of Motor Vehicles requires the dealer
to obtain a title in the name of the organization. If no
other exemption applies, the tax must be collected by the
dealer on the selling price of the vehicle and paid to the
Clerk of Courts when the title is obtained.
Example 5: A new car dealership sells a new car to a
nonprofit fraternal organization that is not operated
exclusively for charitable purposes within the meaning of
R.C. 5739.02(B)(12). The organization is conducting a raffle;
the vehicle is subsequently going to the raffle winner. The
dealer must convert the Manufacturer’s Certificate of Origin
to a title in the name of the organization. The dealer will
collect the sales tax based on the selling price of the
vehicle and the rate in the county of residence of the
organization. The tax will be paid to the Clerk of Courts
when title is obtained. The organization will transfer
ownership of the vehicle to the raffle winner, with a
purchase price of $0.00. The raffle winner owes no sales tax
on the transfer of title. The dealer does not owe use tax on
the price the dealer paid for the vehicle from the
manufacturer.
If the sale is to a nonprofit organization that is operated
exclusively for charitable purposes as defined in R.C.
5739.02(B)(12), the organization must provide the dealer with
a fully completed exemption certificate. The dealer would
still obtain a title in the organization’s name, but no sales
tax would be collected. The title can be transferred to the
organization without collection of the tax. The Clerk of
Courts will use the exemption code “NP”.
Example 6: A used car dealership sells a used car to a
nonprofit, charitable organization. The organization will
donate the vehicle to a family in need. The dealer is
required to obtain a title in the organization’s name, but no
sales tax would be collected. The title can be transferred to
the organization without collection of the tax. The Clerk of
Courts will use the exemption code “NP”. The organization
will transfer ownership of the vehicle to the family, with a
purchase price of $0.00. The family owes no sales tax on the
transfer of title. The dealer does not owe use tax on the
price the dealer paid for the vehicle, or the amount the
dealer allowed when taking the vehicle in on trade.
Questions?
If you have any questions regarding this matter, you should
direct your questions to one of our taxpayer service centers
or call 1-888-405-4039.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750
FOOTNOTE:
(1) Sales of tangible personal property or services
to churches, to organizations exempt from taxation under
section 501(c)(3) of the Internal Revenue Code of 1986, and
to any other nonprofit organizations operated exclusively for
charitable purposes in this state, no part of the net income
of which inures to the benefit of any private shareholder or
individual, and no substantial part of the activities of
which consists of carrying on propaganda or otherwise
attempting to influence legislation; sales to offices
administering one or more homes for the aged or one or more
hospital facilities exempt under section 140.08 of the
Revised Code; and sales to organizations described in
division (D) of section 5709.12 of the Revised Code.
"Charitable purposes" means the relief of poverty; the
improvement of health through the alleviation of illness,
disease, or injury; the operation of an organization
exclusively for the provision of professional, laundry,
printing, and purchasing services to hospitals or charitable
institutions; the operation of a home for the aged, as
defined in section 5701.13 of the Revised Code; the operation
of a radio or television broadcasting station that is
licensed by the federal communications commission as a
noncommercial educational radio or television station; the
operation of a nonprofit animal adoption service or a county
humane society; the promotion of education by an institution
of learning that maintains a faculty of qualified
instructors, teaches regular continuous courses of study, and
confers a recognized diploma upon completion of a specific
curriculum; the operation of a parent-teacher association,
booster group, or similar organization primarily engaged in
the promotion and support of the curricular or
extracurricular activities of a primary or secondary school;
the operation of a community or area center in which
presentations in music, dramatics, the arts, and related
fields are made in order to foster public interest and
education therein; the production of performances in music,
dramatics, and the arts; or the promotion of education by an
organization engaged in carrying on research in, or the
dissemination of, scientific and technological knowledge and
information primarily for the public.
Nothing in this division shall be deemed to exempt sales to
any organization for use in the operation or carrying on of a
trade or business, or sales to a home for the aged for use in
the operation of independent living facilities as defined in
division (A) of section 5709.12 of the Revised Code.