There is nothing like the feeling of driving off the dealership lot in a brand new or new to you vehicle. Very few things can take that feeling away, but nothing could take that smile off your face like the tax bill on that car, truck or SUV.
On this Legal with Leah, Ty Higgins, Ohio Farm Bureau Director of Media Relations and Leah Curtis, Ohio Farm Bureau policy counsel discuss what the ag sales tax exemption covers and what it doesn’t.
Listen to Legal with Leah, a podcast featuring Ohio Farm Bureau’s Policy Counsel Leah Curtis discussing topics impacting farmers and landowners.
Ty Higgins: Leah I know that you and Joe covered that ag does have an exemption on sales tax, but the question then becomes does the tax break apply for motor vehicles and trailer purchases as well. The answer?
Leah Curtis: Well generally it doesn’t apply to motor vehicles in particular. So keep in mind that the sales tax exemption is based on the use of the item, not who you are. So a lot of people think of it as the ‘farmer sales tax exemption.’ It’s actually the farm sales tax exemption. So for things like equipment that you are going to use in the actual production of an agricultural product like tractors and planters and combines, those things are clearly exempt from sales tax.
Motor vehicles, however, the tax department’s official line is that those are registered for use on the highway. And so they are mainly used for transport not for production. And so they are generally not exempt from sales tax.
Ty Higgins: Are there exceptions to the rule?
Leah Curtis: There are a couple exceptions. The one very specific one is if you have basically a spray truck that has a PTO-powered tank and it’s used for things like fertilizer, pesticide, herbicide. That is a vehicle that clearly has only the purpose to be used in production. And so if it is that type of vehicle it is exempt from sales tax. If there is not a PTO though, then the sprayer unit is exempt, the truck is not. And so the dealer would likely separate those two charges out so that there is only sales tax paid on the vehicle portion.
Leah Curtis: The other exemption is a pretty obscure one we don’t see it used very often or actually happen very often, but it’s vehicles or trailers that are primarily used to prevent illness to livestock such as for quarantine, transporting sick animals. If that is their sole purpose and that is their only purpose then that could be exempt from sales tax.
Now it’s a very difficult test and we don’t normally see people actually able to take advantage of that but there is some precedent for that. There’s also an exemption that’s very specific to eggs. Vehicles that are only used by egg producers to ship eggs from the farm to market under refrigerated conditions, those are specifically not subject to the sales tax.
Ty Higgins: Used to be growing up that if we were gonna buy something for the farm, we would just go up the road a piece or two and stay pretty close to our local economy. But now you see sites like Craigslist and Facebook. There are all kinds of marketplace pages on there to to buy things of this nature and a lot of times those sales now will be made across state lines. What does that mean for taxes on on that purchase?
Leah Curtis: So if it’s a Craigslist or a Facebook sale, it’s probably going to be treated similar to one inside the state would be where you probably wouldn’t pay sales tax on it. If you are buying from a typical dealer though outside the state and say maybe that state does have a sales tax exemption, once you bring it back into Ohio and you go to title it or license it, it’s very possible the tax department may send you a notice saying, ‘Hey you owe what’s called ‘use tax’ on this vehicle or trailer.’ Use tax is kind of the corollary to sales tax. If you buy it here you pay sales; you buy it someplace else you pay use.
So we’ve had some people have that happen. They bought it in Wisconsin and it was exempt they thought so they didn’t pay sales tax, brought it in here they got a note from the tax department that says, ‘Hey we’re aware that you have this trailer that had no tax paid on it. And so now you owe use tax.’ So it’s just something to keep in mind when you are looking outside of state for those kind of new trailers or at a dealership or it’s an official seller that would have a sales or use tax obligation.
Ty Higgins: This has been Legal with Leah. That’s Leah Curtis. She’s policy counsel with Ohio Farm Bureau. Thanks for listening. I’m Ty Higgins. We’ll see you down the road.