‘Motor Vehicle’ Now Means Something Different Regarding Ohio State & Local Taxes

The Ohio Department of Taxation recently released a statement explaining a change in the definition of the phrase “motor vehicle.” Effective January 1, 2017 and as it relates to State and Local Taxes in the state of Ohio, a motor vehicle no longer refers to an under-speed vehicle or a mini-truck.

Please note that an "under-speed vehicle" is one with three or four-wheels (including a vehicle commonly known as a golf cart), with an attainable speed on a paved level surface of not more than twenty miles per hour and with a gross vehicle weight rating of less than three thousand pounds. "Mini-truck" refers to a vehicle with four wheels, which is propelled by an electric motor with a rated power of seven thousand five hundred watts or less (or an internal combustion engine with a piston displacement capacity of six hundred sixty cubic centimeters or less), has a total dry weight of nine hundred to two thousand two hundred pounds, contains an enclosed cabin and a seat for the vehicle operator, and was not originally manufactured to meet federal motor vehicle safety standards. Also, a “mini-truck” resembles a pickup truck or van with a cargo area or bed located at the rear of the vehicle.

This new definition is significant because casual motor vehicle sales are usually exempt from sales tax if a transaction tax has been applied. However, Ohio law specifically excludes the title transfer of a motor vehicle, any watercraft or outboard, any U.S. Coast Guard-documented watercraft, a snowmobile, and an all-purpose vehicle as a casual sale. As a result, each one of these, if purchased in a casual sale, is subject to sales or use tax which must be paid to the clerk of courts at the time of title transfer.

With regard to the process of trading-in motor vehicles, Ohio law provides that, in any new motor vehicle sale (by an authorized new motor vehicle dealer), when the motor vehicle is accepted by the dealer as part of the consideration received, the sale “price” is reduced by a credit afforded to the consumer by the dealer for the motor vehicle received in the trade.

The change in the definition of “motor vehicle” also results in the trade in of under-speed vehicles or mini-trucks no longer qualifying for reduced pricing of a new motor vehicle sold by a new motor vehicle dealer. (Ohio Tax Information Release No. ST 2017-01, , 01/01/2017 .)

For more information and further details on how the changes to the definition of the term “motor vehicle” now exempt sales of under-speed vehicles and mini-trucks as casual sales, please contact HBK Dealership Industry Leader Rex Collins at rcollins@hbkcpa.com or 317-886-1624.

About the Author(s)
Rex is a Principal of HBK CPAs & Consultants and directs the firm’s Dealership Group. He has worked extensively in the dealership industry since 1984 as a department manager, a general manager and an owner, as well as providing tax, accounting and operational consulting services exclusively to dealers as an independent CPA. This experience includes working closely with hundreds of dealers from coast-to-coast since 1987 on creative tax planning and financial statements issues. He provides clients with a wide range of transaction work services, and consults for them in specialty areas such as operations, government regulatory compliance, valuations and M&A feasibility studies. Rex is active in many professional associations. He is the current Chairman of the BDO Dealership Industry Group, contributes articles and commentary to dealership industry publications, is frequently called upon to speak to industry associations and conferences, provides expert testimony, and is regularly quoted by industry and the general media.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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