This guide clarifies Ohio sales tax obligations for vendors and consumers involved in motor vehicle Towing Services, based on Ohio Revised Code (R.C.) section 5739.01(B)(3)(t). Effective August 1, 2003, Ohio sales tax applies to transactions providing “motor vehicle towing service,” defined as towing or conveying wrecked, disabled, or illegally parked vehicles.
Licensing Requirements for Towing Service Providers
What License is Required to Provide Towing Services in Ohio?
Providers offering towing services within Ohio must secure a vendor’s license for each fixed business location. These licenses are obtained from the county auditor in the county where the business is situated. Application forms are accessible on the Ohio Department of Taxation website (tax.ohio.gov) under “FORMS.”
Out-of-state towing service providers operating in Ohio must establish a transient vendor’s license account directly with the Ohio Department of Taxation. The application for a transient license is also available on the Department of Taxation website.
Do I Need an Additional Vendor’s License if Towing Services are Part of My Existing Auto Repair Shop?
No. If you already possess a vendor’s license for your automobile repair shop, this license covers towing services as well. Report charges and collected taxes for towing services on your existing vendor’s license returns.
Defining Taxable Towing Services and Associated Charges
What Charges Are Included in Taxable Motor Vehicle Towing Services?
All charges integral to and essential for performing a towing service are considered part of the taxable price. Examples of taxable charges related to motor vehicle towing service include:
- Snow Removal Charges: Fees for digging snow to access a vehicle before towing.
- Trip Charges: To the extent a taxable towing service is performed, trip charges are taxable.
- Hook-up Charges: Charges for connecting the vehicle to the tow truck.
- Hourly Charges: Taxable when directly related to performing a taxable towing service.
- Drivetrain Disconnection Fees: Charges for disconnecting the drivetrain before towing.
- Dolly Charges: Fees for using a dolly during towing.
- Vehicle Righting Charges: Charges for uprighting overturned vehicles as part of the towing process.
Is Transporting Vehicles on a Flatbed Truck Considered Taxable Towing?
Yes. Ohio law taxes “the towing or conveyance” of specified motor vehicles. Transporting a wrecked, disabled, or illegally parked vehicle, regardless of the method (towing or flatbed), is a taxable service.
Is Transporting New Vehicles to Dealerships a Taxable Service?
No. Transporting new vehicles to dealers is classified as a non-taxable transportation charge. These vehicles are not “wrecked, disabled, or illegally parked,” and therefore, this service falls outside the definition of taxable motor vehicle towing.
Is Repossessing Vehicles and Occasional Towing Taxable?
No. Vehicle repossession for finance companies is the primary service, not towing. Furthermore, repossessed vehicles are not automatically “wrecked, disabled, or illegally parked.” Consequently, even if a third-party tow operator is contracted for vehicle pickup during repossession, it’s generally not taxable unless the vehicle meets the “wrecked, disabled, or illegally parked” criteria.
Is Towing a Vehicle into Ohio from Another State Taxable?
No. Taxability is determined by the service’s origin. Ohio tax is not required for towing services originating outside of Ohio. Conversely, towing services starting in Ohio and ending in another state are taxable in Ohio.
Is Pulling a Vehicle Out of a Ditch Considered Taxable Towing?
Yes. A vehicle stuck in a ditch is considered at least temporarily disabled, making the service of pulling it out a taxable motor vehicle towing service.
Is Transporting Broken Down Road Construction Machinery Taxable?
No. Construction machinery not designed for general highway operation is not classified as a “motor vehicle” under R.C. 4505.01(A). Therefore, transporting such equipment is not considered “motor vehicle towing service” and is not taxable.
Tax Implications for Roadside Assistance and Warranty Services
How is Tax Charged for Roadside Assistance Services Including Towing?
Roadside assistance services can include both taxable and non-taxable services. Services like jump-starting or unlocking doors are not taxable. However, tire changes or minor repairs are taxable as repair or installation services. For towing services provided under roadside assistance contracts with automobile clubs, tax must be collected from the automobile club for the portion they pay. If the club member pays for mileage exceeding the club’s coverage, tax must also be collected from the member on that additional towing charge.
How is Tax Applied to Towing Services Under New Vehicle Warranties?
When towing services are provided to automobile manufacturers as part of a new vehicle warranty’s roadside assistance, the towing service is considered provided to the manufacturer. Tax should be charged to the manufacturer for any towing performed under the warranty contract. Non-towing roadside assistance services within the warranty (like jump starts) remain non-taxable.
What are the Tax Procedures When a Repair Shop Pays for Towing and Rebills the Vehicle Owner or Warranty Provider?
In this scenario, the repair shop should provide the towing operator with a resale exemption certificate. The repair shop, acting as an intermediary, is then responsible for collecting sales tax from the vehicle owner (or their insurance) or the warranty provider when they rebill for the towing service.
Exemptions from Towing Service Sales Tax
Is Towing for a City Under Contract Taxable?
No. Sales to political subdivisions of the State of Ohio, such as cities, are exempt from sales tax. Therefore, towing services provided to a city under contract, like towing illegally parked cars to a city impound lot and paid for by the city, are not taxable.
Are Towing Charges Paid by a Vehicle Owner to a Municipality Taxable?
No. R.C. 5739.02(B)(22) provides an exemption for services sold by the State of Ohio or its political subdivisions. Thus, towing charges paid directly to a municipality by a vehicle owner are not subject to sales tax.
Is Tax Collected on Both Towing and Storage Fees When Towing to a Private Impound Lot?
Yes. Both towing fees and storage fees charged by private impound lots for illegally parked vehicles are taxable in Ohio, effective August 1, 2003. (Refer to R.C. 5739.01(B)(8) and the Department of Taxation’s Information Release titled Storage for more details on storage taxability).
Can Towing Service Providers Claim Exemption on Equipment Purchases?
Yes, under certain conditions. Tow truck operators regulated by the Public Utilities Commission of Ohio as for-hire motor carriers can claim exemption under R.C. 5739.02(B)(32) on purchases related to:
The sale, lease, repair, and maintenance of, parts for, or items attached to or incorporated in, motor vehicles primarily used for transporting tangible personal property by a person engaged in highway transportation for hire.
This exemption applies to equipment essential for their regulated towing services.
Is Towing Service Provided to a Trucking Company Engaged in Highway Transportation for Hire Taxable?
Yes. The exemption for highway transportation for hire pertains to the vehicle itself and its components (sale, lease, repair, maintenance, parts). Towing service provided to a trucking company does not fall under this or any other exemption and is therefore taxable.
Is “Tractor Swap” Service for Trucking Companies Taxable?
Yes. All aspects of a “tractor swap” service, including picking up a good vehicle, towing it to a disabled vehicle, transferring loads, and towing the disabled vehicle back, are considered taxable services.
For further questions, please contact 1-888-405-4039. For hearing or speech-impaired assistance, use the Ohio Relay Service at 1-800-750-0750.
