New Ohio auto tax for nonresident buyers

If you happen to visit Ohio and run across the car of your dreams, depending on where you live, you might have to pay a bit more for the vehicle.

Under the state’s new budget, beginning today, Aug. 1, car dealers in the Buckeye State must collect sales taxes on purchases by some out-of-staters.

According to an Ohio Department of Taxation (ODT) letter sent to auto dealers last month, the tax applies to residents "of a state where that state charges sales tax to Ohio residents." Specifically, buyers from Arizona, California, Florida, Indiana, Massachusetts, Michigan, South Carolina and Washington will face the levy.

As is the case with many tax laws, there’s a bit of work involved to come up with the appropriate tax to charge affected out-of-state auto buyers.

First, the dealer must compute the amount of sales tax due using Ohio’s 6 percent sales tax rate. Then the other state’s sales tax rate (the percentages are included in the ODT letter) is used to figure the vehicle’s tax, taking into account certain adjustments such as a trade-in allowance. The buyer then owes the lesser of those two amounts.

If you’re a buyer from a state other than the eight listed in the letter, you won’t owe any sales tax on an Ohio-purchased auto. You will, however, have to complete an affidavit, Form STEC NR, for nonresident sales.

And even if you are from one of the now-taxed states, you still could escape the levy by leasing the vehicle. Those transactions remain untaxed regardless of where the lessee lives.