Non-Resident Sales Tax Changes
July 25, 2007
Non-Resident Sales Tax Changes
Non-Resident Sales Tax Changes Effective August 1st
In a recent GCADA memo distributed on June 24, 2007, your Association briefly explained the effects of the recently passed budget bill on your dealership. The changes include two modifications to sales tax code and a clarification of the documentary service fee. Specifically, the non-resident motor vehicle sales tax change, which is effective August 1, 2007, has raised some additional questions.
The Ohio Department of Taxation (ODT) has released a guidance memo on the non-resident sales tax issue including a list of states and applicable tax rates (please click here for the ODT memo). The follow items and example transaction should be considered when applying the new rules:
ü Tax Rate – In short, if the applicable non-resident state tax rate is higher than 6% (e.g. California & Washington), then you can only charge a maximum of 6% to the customer purchasing the vehicle. On the other hand, if the non-resident state tax is lower than 6% (e.g. Arizona & Massachusetts), you may not charge more than that state’s tax rate to the customer. *** If the customer is from South Carolina the applicable tax rate is applied, however the maximum tax that may be charged is $300. Otherwise, the other affected states are equal to the Ohio rate of 6% and should be charged as such.
ü Payment of the Non-resident Sales Tax – Effective August 1, 2007, all payments for non-resident sales tax will be made through the Ohio Business Gateway and will not be remitted to the Ohio Clerk of Courts until July 1, 2008. This procedure does not change any other current processes for remitting sales tax.
ü Trade Allowance – The states indicated on the ODT chart allow for a trade-in allowance on the purchase of a new and used car.
ü Example Transaction – A customer from one of the affected state comes to your dealership to purchase a new/used vehicle for $20,000 and has a trade-in vehicle worth $10,000. What are the sales tax ramifications for the affected states?
| |
Rate
|
Trade-In
|
Tax Due
|
|
|
Arizona
|
5.60%
|
Yes
|
$560
|
(.056x$10,000)
|
|
California
|
7.25%
|
No
|
$1,200
|
(.06x$20,000)
|
|
Florida
|
6.00%
|
Yes
|
$600
|
(.06x$10,000)
|
|
Indiana
|
6.00%
|
Yes
|
$600
|
(.06x$10,000)
|
|
Massachusetts
|
5.00%
|
Yes
|
$500
|
(.05x$10,000)
|
|
Michigan
|
6.00%
|
No
|
$1,200
|
(.06x$20,000
|
|
South Carolina
|
6.00%
|
Yes
|
$300**
|
(.06x$10,000)
|
|
Washington
|
6.50%
|
Yes
|
$600
|
(.06x$10,000)
|
**Due to the South Carolina tax cap, only $300 sales tax is due.
If there are any additional updates, we will certainly forward them to your attention. If you have any questions, please contact Lou Vitantonio at (440) 746-1500 lvitt@gcada.org. This memo and its contents should not be construed as legal and/or tax advice.
<< Back
|
