A late-breaking amendment adopted by Senate Republicans saved a tax break worth about $9 million for automobile dealers each year.
To help fund a proposed income tax cut for some of the state’s highest earners, Republicans proposed rolling back a series of longstanding tax breaks. Among them is Ohio’s “vendor discount,” which allows sellers to pocket .75% of the money they collect in sales taxes before passing the taxes on to the state. The discount is meant to reimburse businesses for their administrative costs in processing the tax. The tax break cost Ohio $102 million last year and $100 million the year before, according to the state tax department.
The Senate’s first budget proposal capped the discount at $750 per month for all sellers. But a late-breaking amendment removes auto dealers from the new limit.
In other words, every retailer from a mom and pop shop to Best Buy can only keep $750 per month as a vendor discount under the rule, while car dealers can keep the sum of .75% of all their sales revenue.
“It’s outrageous,” said Zach Schiller, an economist with Policy Matters Ohio, a progressive think tank, who has called attention to the apparently successful lobbying campaign.
Spokeswoman Andrea Lannom said the Ohio Tax Department does not maintain a specific record of the amount of vendor discount claimed from motor vehicle sales. But legislative budget analysts estimated that applying the cap to all vendors would mean $48 million in new revenue over two years, while exempting auto dealers reduces that to $30 million.
Ohio Auto Dealers Association say special deal is warranted
Unlike traditional legislation where bills and amendments come from a publicly identified member, the roughly 6,000-page budget legislation allows different means for members to slip in changes anonymously and with less oversight. Or as a Senate spokesman put it, “all amendments are in by caucus.”
But there’s a good reason for the special treatment, according to Zach Doran, president of the Ohio Automobile Dealers Association. He said dealers have legal obligations in securing customers’ titles at county clerks of courts and must pay the sales tax while waiting on reimbursement from the buyer’s lender, which creates a cash flow problem, he said.
More simply, car dealers must navigate legal hurdles on the back end, unique from other kinds of retailers. Senate Republicans, he said, recognized that.
“There’s a pretty significant expense associated with collecting and remitting the motor vehicle sales tax,” he said. “There is very real personnel and labor expense associated with doing this. It’s a very manual process. It’s not the same or similar to other retail transactions that you may be more familiar with.”
The Ohio Independent Automobile Dealers Association didn’t respond to inquiries.
Ohio Senate President Rob McColley, a Northwest Ohio Republican with outsize influence over the state budget, said the amendment flows from the complexity of a car sale transaction. Car dealers, he said, have so many legal obligations that they deserve to keep the money.
Sen. Lou Blessing, a Cincinnati-area Republican, offered mixed feelings on the final proposal. On the one hand, he said the vendor discount has cost Ohio too many millions of dollars over too many years for no good reason, and he’s happy to see it die.
On the other hand, it’s “upsetting” to see one special interest emerge victorious.
“I’m glad there’s reform on the vendor discount, but I’m upset about a potential carve out for this sort of thing,” he said.
