TaxConnections

 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search


Tax Climate In Ohio – Aggressive On Technology Products For Sales Tax Purposes



Monika Milkes

Ohio is a Midwestern state in the Great Lakes Region of the United States. It is the 34th largest state by area, the seventh most populous and the 10th most densely populated. Ohio is historically known as the “Buckeye State” after its Ohio Buckeye trees and Ohioans are also known as “Buckeyes.”

Much of Ohio features glaciated till plains, with an exceptionally flat area in the northwest being known as the Great Black Swamp. This glaciated region in the northwest and central part state is bordered to the east and southeast by a belt known as the glaciated Allegheny Plateau, and then the unglaciated Allegheny Plateau. Most of Ohio is of low relief, but the unglaciated Allegheny Plateau features rugged hills and forests.

Business Climate

Ohio’s geographic location has proven to be an asset for economic growth and expansion because Ohio links the Northeast to the Midwest, much cargo and business traffic passes through its borders along its well-developed highways. Its border with Lake Erie has numerous cargo ports.

Ohio is an industrial state and is the second largest producer of automobiles behind Michigan.

The manufacturing and financial sectors are some of Ohio’s largest industries. The manufacturing sector is the third-largest of all the fifty states in terms of gross domestic product (GDP). Fifty-nine of the United States’ top 1,000 publicly traded companies (by revenue in 2008) are headquartered in Ohio, including Procter & Gamble, Goodyear Tire & Rubber, AK Steel, Timken, Abercrombie & Fitch, and Wendy’s.

Ohio has the third largest manufacturing workforce behind California and Texas. Ohio has the largest bioscience sector in the Midwest and is a national leader in the “green” economy. Ohio is the largest producer of in the country of plastics, rubber, fabricated metals, electrical equipment, and appliances.

Tax Climate

Ohio’s top individual income tax rate is 4.997%.

Rather than a state income tax, Ohio administers a commercial activity tax (“CAT”), which is an annual tax imposed on the privilege of doing business in Ohio measured by gross receipts from business activities in Ohio. Businesses with Ohio taxable gross receipts of $150,000 or more per calendar year must register for the CAT, file all applicable returns, and make all corresponding payments. For more information on the CAT tax, click here. (https://www.tax.ohio.gov/commercial_activities.aspx)

Sales Tax Structure

Ohio’s average sales tax rate is 5.75%, which ranks 27th in the nation.

Ohio has enacted economic nexus legislation, but it is interestingly combined with a “cookie nexus” law, insofar as an out-of-state vendor establishes nexus, or an obligation to collect and remit sales tax, when the seller “uses in-state software to sell or lease taxable tangible personal property or services to consumers” and “has gross receipts in excess of $500,000 in the current or preceding calendar year from the sale of tangible personal property for storage, use, or consumption in this state or from providing services the benefit of which is realized in this state.” This legislation went into effect on January 1, 2018.

Ohio is aggressive in its approach to the taxation of technology products for sales tax purposes. Digital books, digital audio works and digital audio visual works are taxable. However, digital magazines and digital newspapers are exempt from taxation. Prewritten computer software that is electronically downloaded is taxable. However, custom computer software that is electronically downloaded is exempt. Lastly, Software as a Service (SaaS) is taxable. How products are produced, sold and delivered is critical to determining their tax status.

Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies, emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. The sales tax holiday in Ohio begins on Friday, August 2 at 12 am and ends on Sunday, August 4 at 11:59 pm. During the holiday, the following items are exempt from sales and use tax:

  • Clothing priced at $75 per item or less;
  • School supplies priced at $20 per item or less; and
  • School instructional material priced at $20 per item or less.

Items not used in a trade or business are not exempt under the sales tax holiday.

For questions about Ohio’s sales tax holiday, click here. (https://www.tax.ohio.gov/sales_and_use/salestaxholiday/holidayfaq.aspx)

Random Facts
  • According to the Ohio state flag code, the flag is to be folded 17 times to represent Ohio as the 17th state.
  • Seven Presidents of the United States have been elected who had Ohio as their home state. These include Ulysses S. Grant, William McKinley, Rutherford B. Hayes, William H. Taft, James A. Garfield, Warren G. Harding and Benjamin Harrison.
  • The word “Ohio” is derived from the Iroquois Indian word, which means “Great River.”
  • John Glenn was the first American to orbit the earth. In 1998, at the age of 77, he became the oldest person to travel in space by serving as a payload specialist on STS-95 aboard the space shuttle Discovery.
  • The first permanent settlement in Ohio is Marietta. General Rufus Putnam founded the settlement in 1788. It was named in honor of the then French queen Marie Antoinette.

Have multi-state tax questions? Contact Monika Miles.

 

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

Leave a Reply