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Motor Vehicle Taxability - Casual Sale

Motor Vehicle Taxability - Casual Sale

“Consideration” or “price” means the aggregate value in money of anything paid or promised to be paid or delivered in exchange for the transfer of either title to or possession of a motor vehicle, all-purpose vehicle, off-highway motorcycle, watercraft, outboard motor or personal watercraft.  “Price” includes manufacturer’s rebates.

A trade-in allowance reduces the price only if you are purchasing a:

  1. New motor vehicle, all-purpose vehicle or off-highway motorcycle; OR
  2. New or used watercraft, outboard motor or personal watercraft from an Ohio licensed watercraft dealer. 

The sales or use tax is computed upon the total amount of consideration, whether in cash, by exchange (trade) or by any means whatsoever.

The tax base includes all amounts charged for the following:

  1. Base price of vehicle, watercraft or outboard motor.
  2. Accessories (floor mats, mud flaps, air conditioning, cruise control, radio, CD player, etc.).
  3. Freight or transportation charges from the manufacturer to the dealer.
  4. National advertising that may be charged on a unit basis.
  5. Service and handling prior to delivery (preparation charge).
  6. Documentary fees (does not include separately stated title and registration fees or fees associated with the documentation of a watercraft with the U.S. Coast Guard).
  7. Undercoating.
  8. Extended warranty, service or maintenance contracts sold with the vehicle, i.e., as part of the vehicle purchase agreement. (Note: Extended warranties, service or maintenance agreements sold  subsequent to the vehicle’s purchase are subject to sales tax, but tax is paid directly to the vendor of the contract, not through the clerks of courts.)
  9. Delivery charges from the dealer to the customer effective Aug. 2003.

**** Special Notes ****

Manufacturer’s rebates and cash down payments do not reduce the “price” for calculating sales or use tax.  However, “price” is reduced by any cash discount not reimbursed by a third party given at the time of sale.

The 12 percent federal excise tax (FET) levied by the federal government on the purchaser of a heavy truck is not included in the “price” since it is a federal tax on the consumer.

Examples include, but are not limited to the following:

(A) An item of tangible personal property; such as another vehicle, a boat, a horse, etc., given in exchange. The fair market value of the tangible personal property exchanged is the amount of consideration. If there is an even trade of motor vehicles between two individuals with no money exchanged, each individual must pay tax based on the fair market value of the motor vehicle.

(B) Real property, such as a lot, that is given in exchange. In this instance, the fair market value of the real property is the amount of consideration and tax must be paid on that amount.

(C) Shares of corporate stock, whether transferred to or from a corporation in exchange for a motor vehicle. For example, the transfer of a motor vehicle from an individual to a corporation of which the individual is sole owner or a stockholder constitutes a sale and the fair market value of the stock given in exchange is the tax base. If there is no established market value for the stock or securities, it is presumed that the stock’s value is equal to the fair market value of the vehicle or the value of the vehicle on the corporate books.

(D) Cancellation of debt owed to the purchaser or new titleholder.

(E) The transfer of a motor vehicle resulting from the assumption, by the transferee (new titleholder), of a mortgage through a “transfer of equity or interest agreement” wherein the transferor (previous titleholder) is relieved of its original principal liability and becomes a guarantor is a transfer for consideration and subject to tax. The tax base is the total amount of the mortgage assumed plus any other consideration given.

(F) The transfer of a motor vehicle as the result of the transferee (new titleholder) paying off the mortgage in the name of the transferor (previous titleholder) is a transfer for consideration. The tax base is the amount of the pay off plus any other consideration given either in trade or money.

Yes.  If consideration or payment is given to the family member, the amount paid is subject to Ohio sales tax.

Tax is calculated based on the fair market value of the item exchanged. If there is an even trade of motor vehicles between two individuals with no money involved, each individual must pay tax based on the value of the motor vehicle that is transferred to the other.

Most motor vehicle lease agreements prohibit the sale of a leased vehicle from the leasing company to anyone other than the lessee or to a motor vehicle dealer during the lease term. However, there are times when the leasing company will allow the lessee to sell the leased vehicle to a third party.  In that case, the lessee and the third party should, prior to the transfer of the vehicle, enter into a written agreement providing the following:

(1) The lessee has determined the amount required to purchase the leased vehicle from the leasing company;

(2) The third party agrees to provide the funds to purchase the vehicle from the leasing company and pay the sales and use tax due;

(3) The lessee and the third party understand that the leasing company will obtain the title in the lessee’s name, as required by the lease agreement, and that the sales and use tax payment will be in the name of the lessee; and

(4) The lessee agrees to immediately assign the vehicle over to the third party for a price of $0.00.

The agreement should be in duplicate and signed by each party. Each party should retain a copy of the signed agreement. 

This information is based on the Board of Tax Appeals decision in Sarah B. Yocum v. Lindley, BTA 80-A-501 (July 27, 1981) regarding title transfers involving the Ford A-Plan situation.

Note: If the third party has agreed to pay more than the amount required by the leasing company with the additional amount going to the lessee, the additional amount paid by the third party must be shown as the “price” in the assignment portion of the title between the lessee and the third party. Further, if the lessee purchases the vehicle during the life of the lease or at the end of the lease term and then sells the vehicle, each transfer is a separate sale and sales or use tax is due at the time of each title transfer.

Generally, yes. Credit is given for the amount of sales or use tax legally paid to another state or jurisdiction. Proof of tax paid to the other jurisdiction must be provided to the clerk of courts. If the amount paid to the other jurisdiction equals or exceeds the Ohio use tax due, no additional tax is due.

For vehicles leased outside Ohio after February 1, 2002, and subsequently moved into Ohio, the balance of the lease charges due after the leased vehicle is brought into Ohio is subject to Ohio’s up front sales tax. If the other state taxed the lease up front, credit is given for the other state’s sales or use tax. If the other state’s tax equals or exceeds the Ohio tax, no additional tax is due. If the other state taxed the lease on the monthly payments, no credit is allowed for the tax paid to the other state for the months prior to the vehicle entering Ohio. Tax is due “up front” on the total of the balance of the remaining lease payments.  

No credit is given for sales, use or similar taxes paid to a foreign country, such as Mexico, Germany, etc.

 

Per Ohio Revised Code 5739.029(G)(2), "state," except in reference to "this state," means any state, district, commonwealth, or territory of the United States and any province of Canada.

If the vehicle was purchased at least six months prior to moving to Ohio, no additional Ohio sales tax is due. When the vehicle is titled, use the exemption code CV.   If the vehicle was purchased out of state less than six months prior to moving to Ohio, sales tax is due.  However, Ohio may allow a credit for the amount of sales tax paid to the other state.

A lease assumption is when a lessee has another person assume the lease payments and lease responsibilities.  This should not be done without the lessors’ knowledge or approval.

If the lease was consummated in Ohio after Feb. 1, 2002, and there are no changes to the original lease agreement, there is no sales tax due to the State of Ohio.

If an Ohio resident assumes an out of state lease, Ohio use tax may be due and payable up front on the remainder of the lease payments. If the other state required the tax to be paid on each monthly installment, Ohio tax is calculated on the remaining payments and paid up front to the leasing company. If the other state collected tax up front, Ohio tax is calculated on the payments remaining upon entry into Ohio. Credit is given for taxes legally paid to the other state and the leasing company must collect any additional tax due.

 

Generally, no.  Ohio law grants an exemption from sales tax when a vehicle is transferred based on a court order such as a divorce when there is no consideration or payment given in exchange for the vehicle.

However, if the court order requires that consideration be paid to the other party in exchange for the vehicle, tax must be paid on that amount.

If you received the vehicle without giving any consideration for the vehicle, no sales tax is due.  When the vehicle is titled, use exemption code IH.

If you assumed a loan or paid off a mortgage on the vehicle, tax must be paid on that amount.

If you were the Transfer on Death Beneficiary listed on the reverse side of the title, no tax is due.  When the vehicle is titled, use exemption code TD.

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 the vehicle’s value and the amount still owed on the loan.

If GAP is sold with the motor vehicle and included in the retail buyer’s agreement for the purchase of a motor vehicle, or in a retail lease agreement, it is subject to sales tax.  Conversely, if GAP is sold separately from the retail buyer’s agreement or lease agreement of a motor vehicle, it is not subject to sales tax.

R.C. 5739.01(B)(10) includes 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.

If the owner gives any form of consideration to the business for the transfer, the transfer is subject to sales or use tax.

Yes.  If the vehicle was separately listed in the agreement, tax is owed on the value stated in the agreement.  If there is no assigned value, tax is due on the fair market value of the vehicle.

Ohio law provides a sales tax exemption for sales of mobility-enhancing equipment, when made pursuant to a prescription and when such devices or equipment are used by a human being. “Mobility-enhancing equipment” means equipment, including repair and replacement parts for such equipment, that is primarily and customarily used to provide or increase the ability to move from one place to another and is appropriate for use either in a home or a motor vehicle, that is not generally used by persons with normal mobility, and that does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

The price for mobility-enhancing equipment sold with  a new motor vehicle MUST be separately stated from the price of the motor vehicle and other vehicle options. If not separately stated, the entire price of the motor vehicle is subject to tax.

If a mobility-enhanced modified motor vehicle is sold by a used vehicle dealer or as a casual sale (non-dealer sale), the price for the entire vehicle is subject to tax because the price of the mobility-enhancing equipment is not separately stated.

Most auto auctioneers are only allowed to sell motor vehicles to other licensed motor vehicle dealers. Therefore, all sales should be for “resale” and exempt from Ohio sales and use tax.

However, individuals are allowed to attend and purchase repossessed vehicles at auctions. At the time of auction, the vehicles are titled in the name of the financial institution. Titles are assigned to the winning bidder. The bidder is required to obtain title at any Ohio clerk of courts office. Tax must be paid at the time of titling at the rate of the bidder’s county of residence. Tax is computed on the amount of the winning bid and any fees or commissions added by the auction.

Generally, golf carts cannot be used on public highways and are not titled as motor vehicles. However, a municipality may pass an ordinance that allows the use of golf carts on public streets. A chief of police or county sheriff may designate certain public highways under their jurisdiction as eligible for golf cart use. If so, the chief of police or county sheriff sends notification to the Bureau of Motor Vehicles (BMV) and the BMV would provide a letter of authority to the clerk of courts with jurisdiction over the affected area. 

In such cases, the owner of a golf cart that is not currently used on public highways may want to obtain a title. The clerk of courts may issue the title without payment of the sales tax if the owner of the golf cart provides proof of tax paid at the time of the initial purchase.

Golf cart dealers are not required to have a dealer permit from the Ohio Department of Public Safety.  Such dealers must collect the tax and remit it to the state on their Ohio sales tax return, unless the purchaser has a statutory basis for claiming exception or exemption. If a title is requested, the clerk of courts may allow credit for the tax paid to the dealer, and collect the difference due, if any.

Trailers that weigh 4,000 pounds or more must be titled as a motor vehicle and are taxed as any other motor vehicle.

Trailers that weigh less than 4,000 pounds are not titled as motor vehicles. While they are still subject to sales or use tax, the tax must be collected by the Ohio vendor or registered out-of-state seller and remitted directly to the State of Ohio.  If the seller is not a vendor in Ohio and is not registered as an out-of-state seller, the consumer must pay consumer’s use tax.  The use tax can be remitted as a voluntary payment using our VP-USE form found on our website at Tax Forms, or the use tax can be paid on the state income tax return.

An application for sales or use tax refund, form STAR, must be submitted to the Department for review. Supporting documentation must accompany your application for refund. Examples of supporting documentation include, but are not limited to, receipts issued by the clerk of courts, titles issued by the clerk of courts, retail buyer’s agreements or invoices, and proof that the entire purchase price was returned. For additional guidance, refer to the STAR C, Refund Checklist, form. Both of these forms are available on our website at Tax Forms (search under "Sales Tax"). The completed STAR form and the supporting documentation may be submitted any one (please only use one method of submission) of the following methods: via email to sutref@tax.state.oh.us, fax to 206-333-1087 or electronically via Online Notice Response Service (ONRS). Supporting documentation must be formatted as JPG, JPEG, PDF, PNG, Word, Excel or TIFF for a successful upload via ONRS.

***Special Note on Leased Vehicles Moved Out of State***

There is no refund allowed for sales tax paid upfront on a motor vehicle when the lessee subsequently removes the vehicle from Ohio. Refunds are allowed on tax paid on leased motor vehicles only if the lessee returns the vehicle and is reimbursed for all amounts paid on the transaction, or the vehicle is otherwise used in an exempt manner.
 

 

 

Additional Resources

Additional Resources