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Motor Vehicle Taxability - Exemptions and Taxability

Motor Vehicle Taxability - Exemptions and Taxability

“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.

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.

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.

 

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.

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.

(A) Sales to an organization that has been granted and maintains 501(c)(3) status by the Internal Revenue Service or is a not-for-profit organization operated exclusively for charitable purposes in this state. (NP)
Note: A motor vehicle sold to any organization for use in the operation or carrying on of a trade or business is taxable.

(B) Sales in interstate commerce with delivery being made by the seller to a point outside this state for use outside this state or delivered to an interstate carrier for delivery outside of Ohio. (IS)

(C) Sale to a purchaser for one of the following uses: 

(a) As transportation equipment, except those licensed to operate on the public highways, to transport items in the process of production for sale by manufacturing, processing, assembling or refining within a plant. (PT) (See Rule 5703-9-21, Ohio Adm. Code) 
(b) Directly in production of tangible personal property for sale by mining. Used prior to the tipple or crusher, or in the construction, operation and maintenance of private power lines to distribute electric energy for use in mining, whether licensed or not for highway use. (Rule 5703-9-22, Ohio Adm. Code) (DM)
(c) Directly in the exploration for or production of crude oil or natural gas. (DO)
(d) Sale to a nonresident of this state upon presentation of an affidavit executed in this state by the nonresident purchaser affirming that:

    (1) the purchaser is not a resident of this state, 
    (2) that possession of the vehicle is taken in this state for the sole purpose of immediately removing it from the state,
    (3) the resident state provides a nonresident motor vehicle exemption from their sales and use tax law under which Ohio residents can purchase a vehicle and not be required to pay sales or use tax, and 
    (4) that the vehicle will be permanently titled and registered in another state and that it will not be used in the State of Ohio. (NR)

Note: The sale of a motor vehicle consummated in Ohio to a nonresident member of the Armed Forces stationed in Ohio is subject to Ohio sales or use tax. This type of transaction does not qualify under the nonresident exemption because the vehicle will be used in Ohio. Please see the Information Release.

Another exception to the nonresident exemption is the sale of a motor vehicle consummated in Ohio to a nonresident student attending school in Ohio. In this case, the vehicle would not be immediately removed from the state as required by law and is used in Ohio. 

(e) A motor vehicle that will be used as a “yard truck” to transport purchased inventory in a warehouse, distribution center or similar facility when the inventory is primarily distributed outside this state to retail stores of the person who owns or controls the warehouse, distribution center or similar facility. This exemption does not apply if the vehicle is licensed to operate on the public highways. (WH)

(D) Where the purchaser of the motor vehicle is:

(a) The State of Ohio or any political subdivision thereof. (SP)
(b) The federal government or any agency thereof. (FA)
(c) A motor vehicle dealer (new, used, leasing or salvage) obtaining title for “resale.” The clerk of courts will record on the title the valid dealer’s permit number and/or vendor’s license number. (RD, RL, RN, RO, or SR)
(d) A motor vehicle rental company having a valid vendor’s license (Resale – daily rental). (RR)
(e) A direct pay permit holder, in which case the direct pay number (98-XXXXXX) will be recorded on the title. (DP)
(f) A motor vehicle or watercraft dealer from another state or country and the vehicle, watercraft or outboard motor will be resold. (OD)

(E) Where evidence (court documents, Highway Patrol inspection report, etc.) obtained and retained by the clerk of courts is such that tax is not due as a result of: 

(a) Transfer of title pursuant to a divorce decree. (DV)
(b) Transfer of title to a beneficiary through inheritance in the administration of an estate by Probate Court where there is no clear consideration. (IH)
(c) Where a finance company or lending institution takes constructive possession of a mortgagor’s car to protect its loan and thereafter the same mortgagor makes definite arrangements with the company to regain the car, it shall be titled back to the original mortgagor as “Redeemed.” (RP)
(d) The issuance of title to an unclaimed motor vehicle when the proper affidavit has been executed. (UC)
(e) The transfer of a pre-ATPS (gold) title to an ATPS title without a change of ownership. (HE)
(f) A resident of another state that  purchased (not including rentals or leases) in their home state a motor vehicle for use in that state, but then moves to Ohio. If the individual takes up residence in Ohio at least six months after purchase of the vehicle, they may obtain an Ohio title without paying use tax. Purchaser must prove to the satisfaction of the clerk of courts that the vehicle was purchased outside Ohio and used outside Ohio for at least six months. (CV) 
(g) Insurance company taking title as result of a claim settlement may use the term “Resale – insurance claim.” (IC)
(h) All-purpose vehicle (APV) purchased prior to July 1, 1999; clerk of courts must have confirmation of the purchase date. (AP)
(i) Off-highway motorcycle (OHM) purchased prior to July 1, 1999; clerk of courts must have confirmation of the purchase date. (OH)
(j) New or used manufactured home or mobile home purchased on or after Jan. 1, 2000. (MH)
(k) Personal watercraft sold before Jan. 1, 2000. (WP)
(l) Transfer of a motor vehicle into the name of a franchised motor vehicle dealer for purposes of demonstration to prospective purchasers. When issuing title, the word “Demonstrator” must be on the title. (RD)
(m) Sales of emergency and fire-protection vehicles to volunteer fire departments that are under contract with a political subdivision of this state (county, township or municipality) to provide fire protection and emergency services. (VF)
(n) Effective January 2013, the United States Department of State, Office of Foreign Missions, has informed the Department of Taxation that foreign diplomats and their members and dependents must have a Motor Vehicle Tax-Exemption Letter issued by the Office of Foreign Missions in order to purchase or lease a motor vehicle without paying use tax.  The Diplomatic Tax Exemption Cards previously used by such persons to make tax-exempt purchases cannot be used to purchase motor vehicles exempt from use tax. (FD) 
(o) The transfer of title to a motor vehicle that was purchased outside of Ohio for use outside of Ohio by a member of the Armed Services. The titleholder must be able to establish the fact that the vehicle has been or will be used outside of Ohio for at least six months after it is acquired. (CM)
(p) The purchaser of a motor vehicle is using the vehicle (through a power take-off unit) in the production of a product for sale by manufacturing, processing or refining (i.e., cement mixer where the mixing unit is operated through a power take-off unit instead of a separate power source). (MO)
(q) The purchaser of a motor vehicle is purchasing a specially designed and equipped motor vehicle for use in rendering a public utility service. (PU)

Note: The PU exemption will cover ambulance services if the following conditions exist: 

(1) the purchaser has a certificate of public convenience and necessity; , and 2) the vehicle is directly and primarily used in providing the ambulance service. The purchaser must provide a motor vehicle exemption certificate indicating that the vehicle is “used directly in the rendition of a public utility service.”  Note—Private ambulance companies do not qualify for the public utility exemption unless they hold a certificate of public convenience and necessity.  

(r) The transfer of title to the beneficiary or beneficiaries stated on a title that is in the name of a sole owner with transfer-on-death designation. (TD)

(F) Where there is no “good and valuable consideration” given in exchange for the transfer of title to the motor vehicle, watercraft or outboard motor:

(a) The transfer of a corporate  asset to the surviving corporation as a result of a merger or to a new corporation as a result of a consolidation. (MR or CS)
(b) The transfer of title from a corporation to one of its stockholders upon dissolution of the corporation. (DS)
(c) The transfer of title due to a corporate name change only. (NC)
(d) Transfer of title from an individual to a partnership of which the individual is a member if no clear consideration is given by the partnership for the transfer. (IP)
(e) Transfer of title from a partnership to a partner (individual) upon dissolution of the partnership. (PD)
(f) Transfer of title from an employee to an employer for the sole purpose of insuring the vehicle as a part of the employer’s insurance. (PRICE OF $0.00)
(g) Transfer of title from an employer to an employee for the sole purpose of insurance. (PRICE OF $0.00)
(h) Where a trade-in is titled by a dealer for resale pursuant to the sale of another vehicle and that sale is not consummated, the trade-in title may be transferred back to the original titleholder as “Redeemed.” (RS)
(i) The transfer of title where an undisturbed mortgage is involved and the transferor is not relieved of his original principal liability and there have been no changes in the original mortgage paper filed or any other consideration given. Also, title transfers from two names to only one of the original names and the mortgage remains in both names or the title transfers from two names to only one of the original names and the mortgage also changes from two names to only one of the original names. (UM)
(j) The transfer of title between parents and their children, husband and wife, or between two unrelated parties in the absence of any clear consideration. (PRICE OF $0.00)
(k) The transfer of an unencumbered title from a sole owner, partnership or corporation to a limited liability partnership (LLP) or limited liability company (LLC), and there is no clear consideration. Or, the transfer of title and there is an outstanding loan or lien on the title, and there is no change to the loan agreement as a result of the transfer (undisturbed mortgage). (PRICE OF $0.00) 

(G) Where title to a vehicle is  transferred to an individual who is not a motor vehicle dealer but the vehicle is to be resold.

(a) A finance company or bank repossessing a vehicle to protect the loan may use the term  “Resale – financial institution.” (RF)effective June 9, 2000.
(b) Pawnbroker 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) effective June 9, 2000.
(c) Insurance company taking title as result of a claim settlement may use the term “Resale – insurance claim.” (IC)
(d) Any licensed dealer taking a salvage title to a vehicle that is to be dismantled and sold as parts, or to sell the salvage vehicle on a salvage title to a new or used dealer or an individual may use the term “Salvage – resale.” (SR)
(e) Manufacturer taking title to a chassis which will become part of a manufactured item that will be titled as a motor vehicle when sold to the ultimate consumer must accompany the application for title with an exemption certificate setting forth the statutory reason for exemption of “use or consumption as a material or part for incorporation into personal property to be produced for sale by manufacturing, assembling or processing.” (RM)
(f) Financial institution taking title to a motor vehicle for the sole purpose of selling the motor vehicle to a licensed motor vehicle dealer may use the term “Resale – wholesale.” (RW) 
(g) Farm implement or construction equipment dealers sometimes purchase and resale a horse, utility or equipment “trailer” with a gross weight in excess of 4,000 pounds that requires a title.  If the implement or construction equipment dealer is in the business of regularly selling such trailers, they must be licensed as a motor vehicle dealer by the Bureau of Motor Vehicles.  However, if they only occasionally sell trailers that must be titled, the BMV does not require them to obtain a license. Nevertheless, the implement or equipment dealer must have a vendor’s license as they are making retail sales. The implement or equipment dealers can claim the resale exemption on these trailers, if they are acquired for the purposes of resale. Such dealers MUST submit an exemption certificate with the application for certificate of title using the term “Resale – implement/equipment dealer.” (RI)

Special Note: A farm implement or construction equipment dealer cannot use this exemption to purchase trailers that are used by the dealers to transport other tangible personal property that it sells (tractors, plows, disc harrows, fertilizer spreaders, combines, bulldozers, backhoes, motor vehicles, etc.).

No, since the vehicle will not be immediately removed from Ohio, Ohio sales or use tax applies to the vehicle purchase.

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).

Taxicab companies are licensed by a local government entity (county, township or municipality) to provide pick-up and delivery of individuals. These companies must provide their service as demanded by the general public. If they refuse to provide their service when demanded and a complaint is filed with the regulating entity, they could lose their authority to operate. Also, as part of the general local government regulations, these companies are only allowed to pick-up individuals within a specified geographical area and their service fees are negotiated and set by the regulating entity. Taxis in the name of the taxicab company should use the PU (public utility) code.

While limousines services may be somewhat regulated by a local government entity (county, township or municipality) to provide safe and reliable pick-up and delivery service of individuals, they are not regulated to the same extent as are taxicab companies. There is no requirement that they must provide their services as demanded by the general public. Also, they are free to pick up individuals almost anywhere and they can charge any service fee that the public is willing to pay. Therefore, they are not considered to be rendering a public utility service and are not entitled to claim the sales/use tax exemption code PU. However, see below for an exemption that may be available.

Effective Aug. 1, 2003, House Bill 95 enacted a new exemption for transportation services under 5739.02 (B)(41). It states that the tax does not apply to “sales to a person providing services under division (B)(3)(r) of section 5739.01 of the Revised Code of tangible personal property and services used directly and primarily in providing taxable services under that section.” The new exemption is available for purchases made on or after Aug. 1, 2003. Examples of the types of vehicles that could be using this code are taxis, limousines and charter buses. Taxis that are titled in the name of a person should use the TS code. The TS code should be used when you are provided a properly completed exemption certificate that states, “Used directly and primarily in providing taxable intrastate transportation services as provided in 5739.01 (B)(3)(r).” A vendor license number must be provided on the exemption certificate and in ATPS.

No, if the purchaser shows proof that he or she paid sales tax on all parts used to assemble the vehicle or watercraft, then no sales or use tax is due.  The self-assembled exemption code is SA.

Yes, if the purchaser fails to prove that sales tax was paid on all or some of the parts, then sales and/or use tax is due.  In that case, the tax due is based on the total amount paid for all parts, with credit given for any tax paid. The clerk must collect the balance due when the title is issued.

Yes, per the Ohio Department of Natural Resources, Watercraft Division.

If a resident of another state purchases a watercraft, outboard motor or personal watercraft in Ohio for use in Ohio, an Ohio title must be issued. The title can be obtained at any office of the Ohio clerk of courts, but the tax charged is the rate in effect in the county of the watercraft’s or outboard motor’s primary use.

Note: If the watercraft, outboard motor or personal watercraft was first purchased outside of Ohio, credit is given for any sales or use taxes legally paid to another state (not country) up to but not exceeding the amount due in Ohio. If the Ohio tax liability is greater than the amount paid to the other state, the balance would be due Ohio when the Ohio title is issued.

The Department of Taxation has reviewed an assessment appeal and determined that under certain circumstances an ambulance service is entitled to claim exemption from sales and use tax under the “used directly in the rendition of a public utility service” exemption.

Specifically, an ambulance service is eligible for the exemption if:

(a) The service is provided without discrimination,

(b) The territory that the service provider services is restricted and it services that territory exclusively,

(c) The service is highly regulated at both the state and local level, and

(d) The service of providing emergency medical care and transportation of the sick and injured is a service of public consequence or need.

For this exemption, the purchaser must provide two copies of a motor vehicle exemption certificate indicating that the vehicle is "used directly in the rendition of a public utility service.” The clerk will retain one copy and forward one copy to the Department of Taxation’s district office for review. The clerk would issue the title using the ATPS exemption code: “PU: Direct use in a public utility service.”

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.

 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.

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.

When a nonresident purchases a motor vehicle from an Ohio dealer, the Ohio dealer is required to obtain an Ohio title in the name of the purchaser. The purchaser may claim exemption from Ohio sales and use tax by executing the nonresident affidavit. Under Ohio law, the purchaser must immediately remove the vehicle from Ohio and title and register the vehicle in the purchaser's resident state.

If the purchaser fails to remove the vehicle from Ohio or does not title and register the vehicle in another state, Ohio tax is due.  Credit is allowed for tax legally paid to another state.

**** Special Note ****

If the purchaser complied with these requirements and later returns to Ohio (more than six months after date of purchase), the non-Ohio title should be converted to an Ohio title under the ATPS exemption code of CV or CM.

If the purchaser has complied with these requirements and later returns to Ohio (less than six months after date of purchase), the non-Ohio title should be converted to an Ohio title but Ohio tax is due.  Credit is given for any sales or use tax legally paid to another state. (Note: No credit is given for sales or use or similar tax paid to a foreign country.)

A rented motor vehicle is a motor vehicle for which the possession is transferred for a fixed or indefinite term, for consideration.  See R.C. 5739.01(UU). 

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.

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.

Additional Resources

Additional Resources