Ohio Car Lease Tax

Car leasing in Ohio is a bit different than in most other states

The way that the state of Ohio applies sales tax to car leases is based on the sum of lease payments. Most states only tax individual monthly payments (and down payment).

For example, in Ohio, if lease payments are $300 a month and the lease term is 36 months, the total of all payment is 36 times $300 = $10,800. If the Ohio tax rate in a particular county is 6.0%, the sales tax due on this lease would be $10,88 times .06 = $648. This amount is due at the time the lease is signed, in addition to first month’s payment and down payment (if any). Tax is due on the down payment as well.

All fees associated with a lease are taxed, including any lease-end fees such as a disposition fee or excess mileage fees. Furthermore, if a customer decides to purchase his leased vehicle at lease-end, the purchase is taxed. This is not a duplication of tax since, in a lease, the lease-end purchase price is the residual amount not already paid by the lease.

If a customer trades a vehicle at the time of a lease, tax credit is given for the value of the trade, which reduces the tax amount owed on the new-car lease.

If a lease is ended early, there is no refund of sales tax paid at the beginning of a lease. Presumably, if a lessee decides to do an early buyout of his lease (payoff the lease and purchase the vehicle), he would have to pay sales tax on the purchase price. It’s a bit unfair since part of that tax has already been paid.

Sales tax laws on car leases such as those in Ohio, Texas, Illinois, and Georgia do not make the states particularly lease-friendly. Unfortunately, if you live in those states and will “garage” your leased vehicle there, there is no way to escape the tax — even if you lease from a dealer in another state.

Clearly, the only way to reduce the Ohio car lease tax is to make sure you make the best lease deal, with the lowest monthly payments.


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