10/23/2012

Purchase of Limousine May be Tax Free

By T. Scott Gilligan, OFDA General Counsel

PURCHASE OF LIMOUSINE MAY BE TAX-FREE

By:  T. Scott Gilligan, OFDA General Counsel

Ohio funeral homes have been aware that since August 1, 2003, the funeral home has had to collect Ohio sales tax on services they have sold to families involving the intrastate transportation of individuals by motor vehicles.  Therefore, limousine transportation, clergy cars and family car services when purchased by a family are subject to Ohio sales tax.  Of course, no sales tax is imposed on transportation services by the hearse, service vehicles or flower vans as long as they are not used to transport funeral home clientele.  Likewise, the sales tax would not apply if the transportation crossed state lines.

While the 2003 law imposes yet another tax collection burden on funeral homes and the families they serve, it also provides a tax benefit that not all Ohio funeral homes may be claiming.  Section 5739.02(B)(42) of the Ohio Revised Code exempts from sales tax the purchase of tangible personal property and services that are used directly and primarily in providing intrastate transportation of persons by motor vehicle.  Therefore, if a limousine or a sedan utilized as a family car is purchased to be used primarily in providing intrastate transportation services to funeral home clientele, the funeral home would not have to pay sales tax on the purchase of the vehicles.

The vehicle sales tax exemption provided by this section applies to any purchases made on or after August 1, 2003.  In order to claim the exemption, funeral homes should use the TS exemption code when filing the vehicle title at the title clerk’s office.

Funeral homes that purchase limousines generally do not use those vehicles for anything other than the paid transportation of family members.  Therefore, it will not be difficult to justify that those vehicles are used “directly and primarily in providing paid transportation services that are subject to sales tax.  In the case of a sedan, there may be a question as to whether the funeral home is utilizing the sedan for purposes other than transportation of funeral home clientele.  While some incidental use is permitted, the funeral home claiming the tax exemption should be prepared to demonstrate that the vehicle is used directly and primarily in providing paid transportation services to funeral home clientele. 

OFDA members with questions regarding this matter should contact Scott Gilligan at (513) 871-6332.