Buying a used truck in Ohio tax question

[ws6guy]

Hey all I found a used truck at a dealer in Ohio that I'm working out a deal on. The dealer is telling me that I owe taxes on the full purchase amount of the truck instead of taking my trade off value. The only thing I can find in regards to Ohio is that on a used car purchase they don't take the trade amount off for taxes. However since I'm buying out of state I'd think that it should follow Indiana rules and take the trade amount off for taxes. Any idea on which is correct?

 

[Jaybird1980]

Hey all I found a used truck at a dealer in Ohio that I'm working out a deal on. The dealer is telling me that I owe taxes on the full purchase amount of the truck instead of taking my trade off value. The only thing I can find in regards to Ohio is that on a used car purchase they don't take the trade amount off for taxes. However since I'm buying out of state I'd think that it should follow Indiana rules and take the trade amount off for taxes. Any idea on which is correct?

As far as I know you follow Ohio tax scheme. If you pay under 7% though you will then get to pay the difference in Indiana, if you pay over 7% though you will not get any kind of credit.

Shenanigans I know.

 

[indyblue]

Looks like you'd owe taxes on the amount you paid over the trade-in. I've never done a trade-in so I have no actual experience.

Does a Trade-In Reduce Sales Tax? - NerdWallet

A trade-in will almost always reduce the amount of sales tax you pay on a car.

www.nerdwallet.com

How does a trade-in reduce sales tax?​

Let’s say there’s a 7% sales tax in your state and you want to buy a $45,000 car at a dealership. You also want to trade in your old car. If the dealer offers you $25,000 for it, you now owe the dealer the $20,000 balance for the new car.
That means you’ll be taxed only on $20,000, instead of being taxed on $45,000. That’s a sizable difference: A 7% sales tax on $20,000 is $1,400, while a 7% sales tax on $45,000 is $3,150.
Meanwhile, if you sell your car on your own elsewhere, you’ll essentially walk into the dealership as a cash buyer — and be liable for sales taxes on the whole amount.
Bear in mind that while most states credit your trade-in for sales taxes owed, there are exceptions. Some states do not offer any tax credit for trade-ins or limit how much a trade-in can reduce your sales taxes. Information on any trade-in restrictions in your state should be available on the state comptroller’s website.

How to Sell Your Used Car to a Dealer (Trade In)

States That Allow Trade-in Tax Credit​

One major benefit to trading-in your used car is most States give you a tax credit when purchasing a new car.
For example, if your new car costs $20,000 and you have a trade-in worth $5,000, then you only have to pay sales tax on $15,000. If your sales tax rate is 10%, you're looking at savings of $500 in this particular case.

The following states currently allow a tax credit on your trade-in as of January 2011:

 

[Ingomike]

As far as I know you follow Ohio tax scheme. If you pay under 7% though you will then get to pay the difference in Indiana, if you pay over 7% though you will not get any kind of credit.

Shenanigans I know.

This so sucks, if I buy stuff from a Ohio retailer online I pay Indiana sales tax not Ohio, I wonder why this gets treated differently?

 

[ws6guy]

The sales guy says I pay taxes for where I live which is the 7% but I still don't think I should be taxed on my trade value. This is about a $1000 difference in price and could be a deal breaker for me.

 

[Ingomike]

This link says you pay for Ohio tax for the first $5000 then amounts over $5000 are not taxed.

“If you plan on trading in your vehicle, you need to know that the sales tax applies to $5000 of your vehicle. This means that you're saving money since there is no sales tax on your vehicle's trade-in value over $5000.”

Ohio's New Car Sales Tax Calculator: Quick Guide

You need to understand Ohio's sales tax calculator if you're an Ohio resident or if you're moving to Ohio. Knowing the state's sales tax calculator is useful for calculating how much you'll spend on sales taxes after you buy a product.

www.caranddriver.com

 

[Ingomike]

It also looks like Ohio may vary by county…

 

[JettaKnight]

Looks like you'd owe taxes on the amount you paid over the trade-in. I've never done a trade-in so I have no actual experience.

Does a Trade-In Reduce Sales Tax? - NerdWallet

A trade-in will almost always reduce the amount of sales tax you pay on a car.

www.nerdwallet.com

How to Sell Your Used Car to a Dealer (Trade In)

Same. I've never had a vehicle worth trading in. Lot easier with no trade and cash in hand. My vehicles aren't fancy, but they're mine.

I've bought several vehicles in Ohio. I guess they don't care where you're taking it, so they just want to get their taxes in Ohio. I've always had to pay the difference at the BMV.

 

[dieselrealtor]

I believe but I can be wrong, Indiana will require sales tax less the trade in value. It was my understanding some time ago that some surrounding states may collect. I went with my son to Louisville, the dealer there did not charge tax & Indiana only charged tax on the sale price less trade value.

You could always call the BMV, wait 30+ minutes on hold & get an answer that may be correct, or not. I typically go into the local branch when I have questions.

 

[ws6guy]

This link says you pay for Ohio tax for the first $5000 then amounts over $5000 are not taxed.

“If you plan on trading in your vehicle, you need to know that the sales tax applies to $5000 of your vehicle. This means that you're saving money since there is no sales tax on your vehicle's trade-in value over $5000.”

Ohio's New Car Sales Tax Calculator: Quick Guide

You need to understand Ohio's sales tax calculator if you're an Ohio resident or if you're moving to Ohio. Knowing the state's sales tax calculator is useful for calculating how much you'll spend on sales taxes after you buy a product.

www.caranddriver.com

I think that is if you live there. I'm sure Ohio needs it's tax from somewhere I'm just not following and the sales guy hasn't been that helpful. I'm currently waiting for him to get some more details before going forward.

I thought about selling my current truck myself instead of trade but then I'd have to drag the wife and kids to Toledo so I'd rather just trade it. This also keeps from having to deal with craigslist people.

 

[ws6guy]

I believe but I can be wrong, Indiana will require sales tax less the trade in value. It was my understanding some time ago that some surrounding states may collect. I went with my son to Louisville, the dealer there did not charge tax & Indiana only charged tax on the sale price less trade value.

You could always call the BMV, wait 30+ minutes on hold & get an answer that may be correct, or not. I typically go into the local branch when I have questions.

I purchased a new vehicle in Ohio 20 years ago but no trade was involved but I do remember something was different in regards to tax.

 

[Ingomike]

Maybe call a reputable dealer nearby the dealer you are talking to and ask how the taxes are done with trade in…

 

[HoughMade]

Seems like a call to the Ohio BMV is in order.

 

[gassprint1]

When buying a vehicle in a bordering state, you pay your states sales tax. Trade in has nothing to do with it until after the fact. I think it's bs getting rebates and such off the price of cars, but the bastards make you pay taxes on the before price full price. For the trade in, get them to issue you a separate check for it. Also, depending on when your trade in was plated for the year, you can reclaim some of the excise tax you paid during plate renewale.

 

[patience0830]

This so sucks, if I buy stuff from a Ohio retailer online I pay Indiana sales tax not Ohio, I wonder why this gets treated differently?

You still pay Indiana's sales tax on the vehicle but they're kind enough to credit you for the 6% you already paid in Ohio. You're gonna pay 7% either way

 

[patience0830]

I think that is if you live there. I'm sure Ohio needs it's tax from somewhere I'm just not following and the sales guy hasn't been that helpful. I'm currently waiting for him to get some more details before going forward.

I thought about selling my current truck myself instead of trade but then I'd have to drag the wife and kids to Toledo so I'd rather just trade it. This also keeps from having to deal with craigslist people.

You're always better off selling to a private individual and negotiating the price of the new vehicle w/o the trade when it comes to $. Time and inconvenience, maybe not so much.

 

[Ingomike]

You still pay Indiana's sales tax on the vehicle but they're kind enough to credit you for the 6% you already paid in Ohio. You're gonna pay 7% either way

But if I buy an item from a Ohio online retailer I do not pay the OH tax at all, just Indiana. Why is it different on a vehicle?

 

[HoughMade]

But if I buy an item from a Ohio online retailer I do not pay the OH tax at all, just Indiana. Why is it different on a vehicle?

You physical presence in the state at the time of purchase?

That the dealer is licensed by the state?

Not saying they are good reasons, but they are probably the reasons.

Oh, and that paying sales tax on catalog (and internet) sales is a relatively recent thing- South Dakota v. Wayfair, Inc., and therefore has specific statutes that apply to it which are different from general sales tax laws.

 

[Denny347]

But if I buy an item from a Ohio online retailer I do not pay the OH tax at all, just Indiana. Why is it different on a vehicle?

Because you are in person for the vehicle? Like buying merchandise in OH but showing the cashier your Indiana DL so you only have to pay IN taxes.... Good luck with that. Online, you are physically in Indiana.

 

[firecadet613]

When buying a vehicle in a bordering state, you pay your states sales tax. Trade in has nothing to do with it until after the fact. I think it's bs getting rebates and such off the price of cars, but the bastards make you pay taxes on the before price full price. For the trade in, get them to issue you a separate check for it. Also, depending on when your trade in was plated for the year, you can reclaim some of the excise tax you paid during plate renewale.

Not true. I just bought a truck in Illinois and they collected Indiana tax on the trade difference only (as it should be), not the full sales price of the truck.