FY 2008 - 2009 Biennial Budget Forecast
March 20, 2007
Legislative Service Commission
Auto Sales and Use Tax
GRF Revenues from the Auto Sales and Use Tax
$ in millions
FY 2006 FY 2007 FY 2008 FY 2009
Estimate Forecast Forecast
The forecast for the auto sales and use tax is based primarily on a regression of
auto sales and use tax revenues against nationwide unit sales. Estimates were adjusted to
reflect actual performance in FY 2006. Auto sales and use tax revenues grew in FY 2003
and FY 2004 from legislative tax changes. Revenue growth in FY 2004 was due to the
increase in the tax rate to 6%, but the auto tax taxable base decreased. The auto tax
taxable base shrunk again in FY 2005 and FY 2006. The decline will continue in
FY 2007. (The auto tax taxable base in FY 2007 is expected to be just slightly above the
level recorded in FY 2001.) However, Ohio auto sales and registrations are expected to
stabilize in FY 2008 and improve in FY 2009.
Auto sales and use tax revenues are affected by incentives and gasoline prices.
Over the years, incentives from manufacturers and dealers have changed total unit sales
and the way consumers decide whether to purchase or lease their vehicles. As incentives
have varied over the years, the auto sales and use tax has become more volatile.
However, the effectiveness of those incentives to increase unit sales appears increasingly
limited in Ohio. Changes in gasoline prices mainly affect the sales mix of auto and light
trucks. Higher gasoline prices decrease the sale of light trucks, which in turn restrains the
growth of the auto tax taxable base.