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Motor Vehicle Taxability - Dealers

Motor Vehicle Taxability - Dealers

“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.

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.

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.

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.

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.

No.  If the vehicle is purchased in Ohio by a member of the armed services who is a resident of Ohio, Ohio sales or use tax is due.

If the vehicle is purchased in Ohio by a member of the armed services who declares that he/she is a resident of another state or country, but will be registering the vehicle for use in Ohio while stationed here, Ohio sales or use tax is due.

If the vehicle is purchased in Ohio by a member of the armed services who declares that he/she is not a resident of Ohio and that the vehicle will be immediately removed from Ohio for titling and registration in the other state, Ohio sales or use tax is not due, unless the vehicle will be titled in one of the seven states where Ohio collects the sales tax (Arizona, California, Florida, Indiana, Massachusetts, Michigan and South Carolina). A nonresident affidavit must be provided by the purchaser. Use the ATPS exemption code “NR: Nonresident affidavit – immediate removal.”   

If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is to be driven in Ohio, Ohio sales or use tax is due.  

If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is to be driven outside Ohio, the Ohio Supreme Court has ruled that no Ohio sales or use tax is due. The Supreme Court did not indicate the amount of time that a vehicle had to be driven outside of Ohio to qualify, so the department has adopted the “six-month” rule in that the period of time must be more than six months (as evidenced by a copy of the individual’s military orders indicating out-of-state service for a period of at least six months after the purchase date). The vehicle must be titled in the name of the military person. Use the ATPS exemption code “CM: Conversion – military.”

If the vehicle is purchased outside of Ohio by a member of the armed services who is a resident of Ohio and the vehicle is or is to be driven outside of Ohio for less than six months (member of armed services being transferred to Ohio or is returning to Ohio upon separation from armed services), Ohio sales and use tax is due.

The clerk must obtain exemption certificates on all dealer title transfers of retail sales and forms T-610/T-615 on casual (non-dealer) title transfers if the purchaser claims one of the below exceptions/exemptions supported by an ATPS exemption code. Note: If taxes are paid on a title transfer, no exemption certificate or form T-610/T-615 is needed.

CF Commercial fishing – watercraft – commercial fishing license required
CH Church
CM Conversion – military (purchased out-of-state for use out-of-state)
CS Consolidation
DF Direct use – farming
DM Direct use – mining
DO Direct use – oil and gas
DR Research and development
DS Dissolution to stockholder with no consideration
FD Foreign diplomat – exemption card required
IS Sale of a motor vehicle as interstate commerce
IP Individual to partnership with no consideration
MO Manufacturing operation – i.e., cement mixer
MR Corporate merger with no consideration
NP Nonprofit, charitable
NR Nonresident affidavit
OD Sale of a motor vehicle/watercraft to an out-of-state dealer
PD Partnership, dissolution with no consideration
PT Non licensed production transportation
PU Direct use in a public utility service
RD Resale – demonstrator (dealer permit and VL required)
RI Resale – implement/equipment dealer
RM Remanufacturing – chassis or part
RS Redeemed – return sale
RV Resale – watercraft (VL required)
RW Resale – wholesale only
TH Highway transportation for hire (PUCO or ICC permit number required)
TS Transportation services (VL required)
UM Undisturbed mortgage
VF Volunteer fire department – contract basis
WH Warehousing – not licensed for highway use

Raffle or Contest Winner

The winner of a raffle or contest does not owe Ohio sales or use tax, as he/she has not paid a “price” for the item received.  The sponsor of the raffle or contest, however, may be subject to Ohio sales or use tax.  The Department of Taxation requires the local clerk of courts to provide a copy of the MSO/title assigned to the winner of the raffle or contest and a copy of the title issued in the name of the winner. The Department will determine if the sponsor or contributor must pay sales or use tax.

Ohio Lottery Winner

The winner of a motor vehicle, all-purpose vehicle, off-highway motorcycle, watercraft or outboard motor (or any other item of tangible personal property) through one of the lottery games must take possession of the item won. The Ohio Lottery Commission purchases the item in the name of the lottery winner and taxes will be paid on the purchase price. If the item is required to be titled, taxes will be paid to the local Clerk of Courts by the dealer (lottery commissioner will pay the dealer the price of the vehicle and the tax as part of lottery prize payment) at the time the title is issued.

Generally no, if the court ordered the transfer of title without consideration (divorce, dissolution, estate settlement, etc.).  If, however, the court orders the transfer of title and requires the new titleholder to give consideration (including cancellation of debt), the transfer is subject to sales or use tax.  The tax base is the actual amount paid. If no consideration and a court order, use ATPS exemption codes “CO: Court-ordered transfer with no consideration” or “DV: Divorce – court-ordered transfer with no consideration” or “IH: Inheritance with no consideration, includes surviving spouse.”

No. The exemption applies to the church, not the clergy. To be exempt, the vehicle needs to be purchased by and titled in the name of the church.

Generally, no.  Farmers are only exempt on equipment that is primarily used in farming, such as tractors, planters or combines that plow the fields, plant or harvest the crops. Motor vehicles (automobiles, trucks, etc.) registered for use on the highways and used to transport seed, fertilizers, chemicals or finished products are taxable. APV’s qualify for exemption only if used primarily (more than 50 percent of the time)in farming (similar to the way a tractor is used). 

An exception is the purchase of a specially designed vehicle with a tank operated with a power take-off unit (PTO) and used primarily to spray liquid fertilizers, pesticides, herbicides, etc., on farm lands and crops. This vehicle is owned by a company hired by a farmer to provide a farming service and must operate on the highways since it travels from farm to farm. If the tank/sprayer is not operated by a power take-off unit, the vehicle is subject to the tax but the tank/sprayer unit is not.  In this case, the dealer must separate the charges for the vehicle and the tank/sprayer unit.

Another exception is vehicles and trailers that are primarily used to prevent illness to farm livestock for sale, or to prevent contamination of livestock products for sale. For example, a trailer primarily used to inoculate swine and cattle for sale, or transport sick animals to and from quarantine areas are not subject to the tax. Also, a trailer owned by the farmer to primarily transport feed to the farm that would otherwise be contaminated if shipped commercially may be exempt. Vehicles owned and used by egg producers to ship eggs from the farm to market under refrigerated conditions are also not subject to tax.

Persons who transport personal property belonging to others for consideration over the highways are engaged in highway transportation for hire. These persons must be regulated by the Public Utilities Commission of Ohio (PUCO) or the Interstate Commerce Commission (ICC) and must provide the permit number issued by PUCO (PUCO XXXXXX) or the ICC (ICC XXXXXX or MC XXXXXX) on the exemption certificate.

Generally, the owner of the motor vehicle is the one who holds the PUCO or ICC/MC permit. However, the owner of the motor vehicle may contract with the PUCO/ICC/MC permit holder.  If the owner of a motor vehicle used in highway transportation for hire is not the permit holder, the owner must provide a copy of the contract that authorizes the owner to operate the vehicle under the PUCO/ICC/MC permit number.

Any motor vehicle (tractor/trailer rig, pick-up truck, automobile, van, sport utility vehicle and/or motorcycle) may qualify for the TH exemption if it is primarily used in highway transportation for hire. If the motor vehicle is used primarily as a parts vehicle or a vehicle used to transport drivers, it does not qualify for the exemption.

Effective July 1, 2003, tow-truck operators are required to be registered with the PUCO. Therefore, if they are transporting goods that belong to others, they may use the highway transportation for hire (TH) exemption code. They need to provide their PUCO number or their ICC/MC permit on the exemption certificate.

The highway transportation for hire exemption does not apply to those in the business of transporting people. For example, it does not cover bus companies, taxicab companies or limousine services.

This exemption does not apply to all-purpose vehicles, off-highway motorcycles, watercraft and outboard motors since they cannot be used to transport items over the highway.

The USDOT number cannot be used to qualify for the TH exemption as these individuals are hauling their own inventory/personal property and are not engaged in highway transportation for hire.

Yes. A motor vehicle dealer may claim “Resale – watercraft” (RV) when the dealer acquires a watercraft, if it is acquired for purposes of resale. The dealer must provide a valid vendor’s license for the dealership’s location (not the motor vehicle dealer’s permit number). If the dealer uses the watercraft for personal use, it cannot claim resale and must pay tax on the price paid or the value given in trade for the watercraft.

When the dealer, who is not a licensed watercraft dealer, sells a watercraft, it must obtain title in the customer’s name and collect sales tax on the sale. If the sale is to an Ohio resident, the tax rate is the rate in effect in the customer’s county of residence.  The dealer must pay the tax to the clerk of courts when title is obtained. If the sale is to a nonresident of Ohio, the dealer must collect tax at the lesser rate in effect at the Ohio dealer’s location or the rate in the customer's state. The customer must complete form ST WC AFF.  The dealer must remit the tax directly to the Department of Taxation on form ST WC NR, along with the completed ST WC AFF. A nonresident title may be obtained from the clerk of courts.

Yes. Pawnbrokers taking title to a vehicle pursuant to Section 4505.102 of the Ohio Revised Code to protect a loan may use the term “Resale – financial institution” (RF).

Yes. When a manufacturer is required to buy back a motor vehicle, all-purpose vehicle or off-highway motorcycle from the consumer pursuant to the lemon law, it can obtain title without paying sales or use tax. The clerk of courts must obtain proof that the buy-back is pursuant to the lemon law.  The ATPS sales and use tax exemption code is “MB: Manufacturer buy-back – lemon law.”

Yes. According to the lemon law, the manufacturer is required to refund to the purchaser the entire purchase price plus the sales tax. That refund is used to purchase the second motor vehicle, watercraft or outboard motor. Therefore, sales tax must be paid to the clerk of courts when titling the replacement vehicle.

If the manufacturer has refunded the entire purchase price and sales tax, it can apply for a refund of the sales tax on the first purchase.

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 titled Motor Vehicles - Dealer Transfers for No Consideration, and Sales or Gifts to Nonprofit Organizations.

No. A rebate is money that is or will be paid to the purchaser by the manufacturer after the sale is complete as an incentive to make the purchase. Typically, however, the purchaser assigns the rebate over to the dealer and it is used as all or part of the down payment. Therefore, the rebate amount that is part of the consideration received by the dealer and is part of the price paid upon which the tax is based.

YES

NO

If a motor vehicle is traded for a new motor vehicle, all-purpose vehicle or off-highway motorcycle in a purchase or lease agreement.

If a motor vehicle is traded for a used motor vehicle, all-purpose vehicle or off-highway motorcycle in a purchase or lease agreement.

If a watercraft, outboard motor or personal watercraft is traded for a new/used watercraft, outboard motor, and/or personal watercraft and the seller (located in-state or out-of-state) is, at the time of sale, licensed as a watercraft dealer through the Ohio Department of Natural Resources, Watercraft Division. License format is OH NNNN ZZ.   

If a watercraft, outboard motor or personal watercraft is traded for a new or used motor vehicle, all-purpose vehicle or off-highway motorcycle.

 

If a vehicle is under a valid lease and the lessee is attempting to trade-in the vehicle that is titled in the name of the leasing company. Under the terms of most lease agreements, the leasing company (during the life of the lease) can only sell (transfer title for consideration) the leased vehicle to the lessee or to a dealer. If the leasing company sells the vehicle to a dealer, it is no longer available to be used as a trade-in by the lessee.  Note: The answer would be yes if the lessee purchased the leased vehicle, paid sales tax on the purchase to the leasing company, titled it in the lessee’s name, and then traded it in on the purchase of a new motor vehicle.

 

If a watercraft, outboard motor, or personal watercraft is traded for a new/used watercraft, outboard motor or personal watercraft and the seller (located in-state or out-of-state) is not, at the time of sale, licensed as a watercraft dealer through the Ohio Department of Natural Resources, Watercraft Division.    

 

If a motor vehicle is traded for a watercraft, outboard motor or personal watercraft.

These charges are NOT taxable for leases:

Credit life and disability insurance premiums

Late charges for payments made after the due date

Collection/repossession fees

Assumption fees billed a lessee when the lease is assumed by another lessee

Legal fees incurred by a lessor for collection proceedings against the lessee

Interim interest billed the lessee on a loan granted by the lessor prior to lease inception

Motor vehicle registration fees

“Noninsurance” fees charged to a lessee that fails to document adequate insurance

NSF (bad check) fees

ACH Debit fees

Parking ticket fees assessed on the leased vehicle and billed to the lessee

 

These charges are taxable for leases:

Luxury taxes

Acquisition fees

“GAP” or “reverse equity” fees

Disposition fees determined at lease termination

Property taxes

Payment or lease extension fees

Rewrite fees

Federal excise taxes levied on the lessor

Administration fees

Maintenance fees

UCC search fees

Title search fees

Excess wear or mileage fees

Turn in fees

Other or miscellaneous fees

Federal highway use tax levied on the lessor

Lien fees, fees for filing a lien against the leased property, when contractually levied on and paid by the lessor but passed on to the lessee

Cash down payments are subject to the sales tax.   

Prior to Feb. 1, 2002, if a down payment was collected by the leasing dealer, the leasing dealer would also collect the sales tax. The leasing dealer would then remit the tax to the State of Ohio, like any other sales tax payment.

If a down payment is paid to the motor vehicle dealer, the motor vehicle dealer will also collect the sales tax and either remit it directly to the State of Ohio on the dealer's transient sales tax return or forward it to the leasing dealer so that the leasing dealer can remit it to the State of Ohio.

Note:  In either of these situations, tax is not remitted to Clerks of Courts because the motor vehicle will be titled in the leasing company’s name under the "Resale - leasing" exemption.

As of Feb. 1, 2002, the dealer collects the cash down payment as part of the price paid for the lease of the motor vehicle, watercraft or outboard motor. It is charged at the rate in the lessee’s county of residence, and remitted to the State of Ohio on the dealer’s transient vendor’s license.

Yes. Out-of-state leasing dealers/companies are required to be registered with the Department of Taxation, but they may not be required to have a leasing dealer’s permit (LD#) from the Bureau of Motor Vehicles. To title these vehicles in the leasing dealer’s name, use the ATPS exemption code: “RO: Resale – out-of-state leasing.” ATPS will require a valid Ohio use tax account number (99-XXXXXX) before it will proceed with issuing a title without collecting use tax.

Note: This could apply to watercraft and outboard motors.

If the out-of-state leasing dealer has a leasing dealer’s permit issued by the Bureau of Motor Vehicles, you would use the exemption code “RL: Resale – leasing” and you would use the leasing dealer’s permit number and the Ohio use tax account number (99-XXXXXX).

For information on obtaining an out-of-state seller’s vendor license, please visit our website at License and Filing Requirements.

An out of state dealer would charge and collect the tax on the basis as an in-state dealer, that is, on the entire amount the customer would pay over the term of the lease. The tax can be remitted to Ohio in one of two ways.

If the out of state dealer makes frequent leases to Ohio customers, the dealer should register for an Ohio Seller’s Use Tax account on form UT-1000. The tax will be paid when filing sales tax return UST-1.  The registration and filing of returns may be completed using the Ohio Business Gateway.

If the dealer seldom leases a vehicle to Ohio residents, the dealer may submit a copy of the lease agreement, and a check for the tax made payable to Treasurer, State of Ohio.

Send both to:

Ohio Department of Taxation

Sales Tax Division

P.O. Box 530

Columbus, OH 43216-0530

Pursuant to Ohio Admin. Code 5703-9-36(B) negative equity is subject to sales tax if the dealer includes it in the total vehicle price on the retail purchase agreement.  However, negative equity is not subject to sales tax if the dealer does not include it in the total vehicle price on the retail purchase agreement.

Questions regarding whether a motor vehicle is considered new or used, should be addressed  to the Bureau of Motor Vehicles (BMV), Title Division. The sales and use tax law does not provide a definition of new or used motor vehicle so the Department defers to the BMV’s determination. If BMV finds that a “new” vehicle is purchased, the tax base is reduced by the trade-in allowance. If BMV determines that a “used” vehicle is purchased, the tax base is not reduced by the trade-in allowance.

If the dealership arranges for and ships the vehicle, no Ohio sales tax is due because the transaction is in interstate commerce.  When the vehicle is titled, use exemption code IS.

If the vehicle is shipped out of the country by the purchaser, Ohio sales tax is due.

If the vehicle is shipped out of the state by the purchaser who is not a resident of Ohio, sales tax is due only if shipped to Arizona, California, Florida, Indiana, Massachusetts, Michigan, or South Carolina.  See Motor Vehicles - Sales of Motor Vehicles to Nonresidents of Ohio  for more information.

Yes, if a customer returns a vehicle and the dealer refunds the entire purchase price, including sales tax.  If the vehicle is returned before the dealer files the tax return for the month in which the sale occurred, the dealer does not report the sale on its tax return.  Otherwise, the dealer must file a refund claim on form ST-AR, available on our website at Tax Forms.

Dealers and sellers licensed with the Department of Taxation as a vendor selling motor vehicles, watercraft and/or outboard motors may pay the tax collected to the clerks of courts net of the allowable vendor discount. The vendor must provide a valid vendor’s license number (01-XXXXXX through 89-XXXXXX or 99-XXXXXX) when obtaining the title for the purchaser.

Yes.  When a dealer removes a vehicle from inventory (or purchases a vehicle from another dealer) and utilizes the vehicle as a parts vehicle, the dealer must title the vehicle in the dealer’s name and remit sales or use tax on the dealer’s acquisition cost. If the dealer purchased the vehicle, the “price” upon which sales tax is calculated is the purchase price. If the dealer acquired the vehicle through trade, the “price” upon which tax is calculated is the value of the trade-in allowance granted when the vehicle was acquired.

Yes. The combined value of the vehicles given in trade reduces the “price” of the new motor vehicle purchased from a new motor vehicle dealer. If the value of the trade-ins is less than the “price” of the new vehicle, tax is due on the difference. If the value of the trade-ins equals or exceeds the “price” of the new vehicle, no tax is due as the “price” is zero. (Note: The “price” for calculating sales tax on the new vehicle cannot be less than zero.)

 If all of the following apply, then no sales or use tax is due:

(1)    The dealer pays the owner of the rented vehicle for its use; 

(2)    The dealer is providing the rented motor vehicle because the customer’s motor vehicle is being repaired or serviced pursuant to an agreement of the manufacturer, warrantor, administrator, or other obligor; and

(3)    The dealer receives reimbursement for the cost of the rental vehicle from the manufacturer, warrantor, administrator, or other obligor.

Under Ohio tax law, any person making retail sales may acquire items (including motor vehicles) excepted from sales or use tax based on the “resale” exception.  However, the motor vehicle law does not allow a used motor vehicle dealer to acquire a new motor vehicle for purposes of resale. 

If a used motor vehicle dealer purchases a new motor vehicle, pays Ohio sales and use tax when the Ohio title is obtained, and subsequently sells the vehicle with few, if any, additional miles, the Department will consider an application for refund of the taxes paid by the dealer.

If the used motor vehicle dealer traded in a used vehicle on the new motor vehicle, tax is due on the price of the new vehicle, less the trade-in allowance.

The law does not require any specific type of reimbursement.  The repairer will need to retain sufficient evidence to substantiate the amount is being reimbursed specifically for the rental of a motor vehicle in order to qualify for the exemption.

Titled motor vehicles, watercraft or outboard motors are subject to tax at the rate in effect in the county of the purchaser’s residence.

A lease of titled motor vehicles, watercraft or outboard motors, whether the lease is paid in one upfront payment, (no monthly payments), or by a stream of payments, is taxed at the rate in effect in the county of the primary property location of the vehicle(s) or watercraft. This may be the county of the lessee’s residence, or in the case of multiple vehicles leased to one person but used in several counties, the county where the vehicles are garaged overnight.

A sale or lease of a documented watercraft is taxed at the rate in effect where the customer takes possession of the watercraft. Any subsequent taxable charges on the lease will be sourced to the primary property location for the period in which the charges are incurred.

“Primary property location” means an address for tangible personal property provided by the lessee or renter that is available to the lessor or owner from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith.

There are some sales of titled or untitled vehicles, watercraft, outboard motors or other items of tangible personal property made by vendors or dealers that are not “licensed” dealers under sections 4517 or 1547 of the Ohio Revised Code. An example would be a vendor of all purpose vehicles or off-road motorcycles that is “registered” with the Bureau of Motor Vehicles, or a vendor that sells boats less the 14 feet in length. The tax would be collected by the vendor/dealer and reported and paid to Ohio on the vendor’s sales tax return.

No tax is owed for use of the vehicle if a loaner vehicle is included in the warranty document given to the customer, or if a service contract, maintenance agreement, or other contract or agreement between the dealer and the manufacturer states that the customer is entitled to a loaned vehicle while the repair or service is taking place.  The dealer would determine when the vehicle was being used for warranty work, or other covered repairs such as those covered by an extended service contract or maintenance agreement. For more information, refer to Information Release ST 1995-06 - 5741.01(G)(4) - Price Temporary Taxable Use of Inventory Items.

Yes. Cash discounts allowed at the time of sale reduce the price for calculating sales or use tax. Discounts allowed after the sale do not reduce the price.

No. This is a 12 percent federal excise tax, which is required to be collected by a motor vehicle dealer when the dealer sells a heavy truck. Since it is a direct tax on the purchaser, it is not part of the tax base for collecting sales tax.

Additional Resources

Additional Resources