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Non-Resident Sales Tax Collection Begins August 1, 2007

Change in law only affects eight states. 

Please see the attached letter from the Ohio Department of Taxation

On June 30th, Governor Ted Strickland signed into law the state budget bill, Amended Substitute House Bill 119.  As dealers are aware, significant changes were made to this bill by the legislature which significantly changed the Governor’s original proposal. 

As it relates to non-resident sales tax, the Governor originally proposed to tax residents from nearly all fifty states on motor vehicle purchases made in Ohio as way to generate additional revenue for the State.  OADA worked with legislators to limit the proposal to only taxing residents from states that tax Ohioans on vehicle purchases.  Of our neighboring states, only Michigan and Indiana tax Ohioans.  As a result Michigan and Indiana will be our only neighbors subject to tax under this proposal.  Kentucky, West Virginia, and Pennsylvania residents will continue to be tax exempt and we will handle these transactions as we always have.  There are only a handful of other states that will be affected by this change.

Residents of these eight states will be required to pay the tax due in Ohio at a rate of 6% or the tax due in their state (computing that state’s tax rate and trade in credit(s)) whichever is less.  The tax applies to purchases only – lease transactions will continue to be processed as they are today.

Titling:

For transactions involving non-residents from the above states, and who are therefore subject to tax, dealers will be required to apply for a non-resident Ohio certificate of title on their behalf.  As with any purchase by a non-resident, the customer must complete an affidavit regarding a sale to an out-of-state resident.  Dealers will simply indicate the amount of tax collected on the title application, just as dealers do now for in state purchases.

Remitting sales tax for residents from these eight states:     

For a temporary time period from August 1, 2007 until June 30, 2008, until Ohio’s automated Title Processing System (ATPS) can be re-programmed by the BMV, the sales tax collected on these sales will be paid directly to the State of Ohio through the Ohio Business Gateway (OBG), instead of the Ohio Clerks of Court.  Dealers will be required to remit the sales tax directly to the State by the 10th day of each month, similar to how dealers pay sales tax now for parts and service transactions.  Dealers will continue to be eligible for a vendor discount.

The Department of Taxation is continuing to develop an Information Release that will include FAQs as well as examples to illustrate how collection of sales tax in these instances will take place.  As soon as this is available we will forward this information to the membership.  If you have additional questions, please contact Joe Cannon, Sara Bruce, or Charlie Howard at OADA, (800) 686-9100.