FAQs - Sales & Use Tax: Motor Vehicles & Watercraft

Can a dealer donate an item (motor vehicle, watercraft and/or outboard motor) to a nonprofit, charitable organization and avoid payment of tax?

Effective Sept. 21, 2006, a dealer may donate a motor vehicle, watercraft, and/or outboard motor to a nonprofit, charitable organization and not have to pay tax.

Prior to Sept. 21, 2006, when a dealer acquired an item without payment of tax under the “resale” exception and later transferred ownership for no consideration (donation), the dealer owed tax on the dealers’ cost of acquiring the item. Since the dealer did not sell the donated item, the dealer lost the “resale” exception and was required to pay tax under a consumer’s use tax return or through the voluntary payment procedures.

This change was enacted in 5741.02 (C)(9):

(C) The tax does not apply to the storage, use, or consumption in this state of the following described tangible personal property or services, nor to the storage, use, or consumption or benefit in this state of tangible personal property or services purchased under the following described circumstances:

(9) 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.

For the purposes of division (C)(9) of this section, "charitable purposes" has the same meaning as in division (B)(12) of section 5739.02 of the Revised Code.

This change applies to donations made on or after September 21, 2006, regardless of the date the property was acquired by the donor.

If a dealer transfers a vehicle for no consideration to a consumer that is not exempt according to R.C. 5741.02(C)(9), use tax is due on the value of the vehicle. 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.

For more information, please see the Information Release entitled Motor Vehicles - Dealer Transfers for No Consideration, and Sales or Gifts to Nonprofit Organizations.