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Ohio Tax Information Release ST 2007-04 (Revised Oct. 1, 2011)

Ohio Tax Information Release ST 2007-04 (Revised Oct. 1, 2011)

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Published by Paul Masters
Ohio revises its requirement for Ohio car dealers to collect Ohio sales tax on non-resident purchases of cars to be taken out of state.
Ohio revises its requirement for Ohio car dealers to collect Ohio sales tax on non-resident purchases of cars to be taken out of state.

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Published by: Paul Masters on Nov 01, 2011
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11/01/2011

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11/1/11 Welcome to the Ohio Department of Taxation1/3tax.ohio.gov/divisions/communications/information_releases//st200802.stm
Ohio Department of TaxationInformation Release
ST 2008-02 - Motor Vehicles - Dealer Transfers for No Consideration, and Sales orGifts to Nonprofit Organizations  Issued March 2008
The purpose of this information release is to communicate the Departments policy with regard to sales or use tax whena motor vehicle dealer transfers a motor vehicle from inventory to a person or organization for no consideration, or makesa sale to a nonprofit organization.
Transfers for No Consideration
A motor vehicle dealer may give a motor vehicle for no consideration to another person or organization. No considerationmeans the dealer receives nothing of value (e.g. no money or property, tangible or intangible) for the transfer of thevehicle. When the title is transferred for no consideration, no sales or use tax is required to be paid to the Clerk of Courts.However, a dealer that transfers a vehicle for no consideration will owe use tax on the value of the vehicle in accordancewith Ohio Revised Code section (“R.C.”) 5741.01(C), which provides the definition of the term “Use”:“Use” means and includes the exercise of any right or power incidental to the ownership of the thing used.A thing is also “used” in this state if its consumer gives or otherwise distributes it, without charge, torecipients in this state.The tax due is computed by using the price paid for the vehicle when the vehicle was acquired by the dealer. If thedealer accepted the vehicle in trade, the amount the dealer allowed as a trade-in will be the amount on which tocompute the tax.Example 1: A new car dealership donates a new vehicle to the owner of a local mall. The mall owner is conducting araffle; the vehicle is subsequently going to the raffle winner. The dealer should convert the Manufacturers Certificate of Origin to a title in the name of the mall owner. The dealer should state on the application for title a purchase price of $0.00. The mall owner will transfer title to the vehicle to the raffle winner, also with a purchase price of $0.00. The rafflewinner owes no sales tax on the transfer of title. The dealer owes use tax on the price the dealer paid for the vehiclefrom the manufacturer. No tax will be paid to the Clerk of Courts in either of these transfers. See below on how thedealer will pay the use tax.Example 2: A used car dealership gives a used vehicle to a loyal employee. The dealer should transfer the title to thename of the employee. The dealer should state on the back of the title a purchase price of $0.00. The employee owesno sales tax on the transfer of title. When the dealer originally obtained and titled the vehicle, no tax was paid as thedealer claimed an exemption from the tax for resale. Since the dealer did not resell the vehicle, the dealer loses theclaim of exemption and owes use tax on the price the dealer paid to acquire the vehicle, or the amount the dealer allowed when taking the vehicle in on trade.The dealer should pay use tax on an Ohio Consumers Use tax account. An application for the account can be found inthe Tax Forms section of the Ohio Department of Taxations Web site,
ta.ohio.gov
. An account can also be obtainedthrough the Ohio Business Gateway,
obg.ohio.gov
. If no consumers account is held by the dealer, the tax should bepaid by voluntary payment on formVP USE, Ohio Use Tax Voluntary Payment Form, also available at
ta.ohio.gov
.
Gifts to a Qualifing Nonprofit Organiation or an Ohio Government Agenc
The use tax would not be due when the dealer donates a vehicle to a qualifying organization. R.C. 5741.02(C)(9)provides that use tax is not due for:Tangible personal property held for sale by a person but not for that persons own use and donated by that
 
11/1/11 Welcome to the Ohio Department of Taxation2/3tax.ohio.gov/divisions/communications/information_releases//st200802.stm
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 netincome of which inures to the benefit of any private shareholder or individual and no substantial part of theactivities of which consists of carrying on propaganda or otherwise attempting to influence legislation; or (b) This state or any political subdivision of this state, but only if donated for exclusively public purposes.Example 3: A new car dealership donates a new vehicle to a local church. The church is conducting a raffle; the vehicleis subsequently going to the raffle winner. The dealer should convert the Manufacturers Certificate of Origin to a title inthe name of the church. The dealer should state on the application for title a purchase price of $0.00. The church willtransfer title to the vehicle to the raffle winner, also with a purchase price of $0.00. The raffle winner owes no sales taxon the transfer of title. The dealer does not owe use tax on the price the dealer paid for the vehicle from themanufacturer. No tax will be paid to the Clerk of Courts in either of these transfers.Example 4: A used car dealership donates a used vehicle to the city for use by a city employee for city business. Thedealer should transfer the title to the name of the city. The dealer should state on the back of the title a purchase priceof $0.00. The city owes no sales tax on the transfer of title. The dealer does not owe use tax on the price the dealer paidfor the vehicle, or the amount the dealer allowed when taking the vehicle in on trade.
Sales to Nonprofit Organiations
A dealer may sell a vehicle to a nonprofit organization. The vehicle may be kept by the organization, or transferred bythe organization to someone by means of a raffle, charitable gift, or other promotion.Not all nonprofit organizations are exempt from the sales tax on purchases made by the organization. To be exempt, thenonprofit organization must be operated exclusively for charitable purposes in this state.
()
If a vehicle is sold to a nonprofit organization that is operated exclusively for charitable purposes in this state, theBureau of Motor Vehicles requires the dealer to obtain a title in the name of the organization. The title can be transferredto the organization without collection of the tax. The Clerk of Courts will use the exemption code “NP”.When a vehicle is sold to a nonprofit organization that is not operated exclusively for charitable purposes in this state,such as a fraternal organization or a trade association, the Bureau of Motor Vehicles requires the dealer to obtain a titlein the name of the organization. If no other exemption applies, the tax must be collected by the dealer on the sellingprice of the vehicle and paid to the Clerk of Courts when the title is obtained.Example 5: A new car dealership sells a new car to a nonprofit fraternal organization that is not operated exclusively for charitable purposes within the meaning of R.C. 5739.02(B)(12). The organization is conducting a raffle; the vehicle issubsequently going to the raffle winner. The dealer must convert the Manufacturers Certificate of Origin to a title in thename of the organization. The dealer will collect the sales tax based on the selling price of the vehicle and the rate in thecounty of residence of the organization. The tax will be paid to the Clerk of Courts when title is obtained. Theorganization will transfer ownership of the vehicle to the raffle winner, with a purchase price of $0.00. The raffle winner owes no sales tax on the transfer of title. The dealer does not owe use tax on the price the dealer paid for the vehiclefrom the manufacturer.If the sale is to a nonprofit organization that is operated exclusively for charitable purposes as defined in R.C. 5739.02(B)(12), the organization must provide the dealer with a fully completed exemption certificate. The dealer would still obtain atitle in the organizations name, but no sales tax would be collected. The title can be transferred to the organizationwithout collection of the tax. The Clerk of Courts will use the exemption code “NP”.Example 6: A used car dealership sells a used car to a nonprofit, charitable organization. The organization will donatethe vehicle to a family in need. The dealer is required to obtain a title in the organizations name, but no sales tax wouldbe collected. The title can be transferred to the organization without collection of the tax. The Clerk of Courts will use theexemption code “NP”. The organization will transfer ownership of the vehicle to the family, with a purchase price of $0.00. The family owes no sales tax on the transfer of title. The dealer does not owe use tax on the price the dealer paid

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