SALES TAX TUESDAY 2018: Ohio

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"On the Sales Tax Road Again...." First stop, Ohio.

Can you believe this is in Ohio? You know, Ohio, the politically bellwether Midwestern state that spans from the southern Ohio River and Appalachian Mountains to Lake Erie in the north. Ohio that produced the world’s first billionaire, oil tycoon John D. Rockefeller in 1884. Ohio, the state that has voted the way the nation in every presidential election since 1964, be it either a Republican or Democratic winner. Ohio, sometimes called the "Mother of Modern Presidents, as seven Ohioans have occupied the White House.

Thanks to Avalara, the 'tax people', this article is one in a new (2018) 50 part series, covering sales tax issues associated with each and every state tax jurisdiction in the United States. Insightful Accountant is publishing Sales Tax Tuesday 2018" articles every Tuesday to give you updated information as well as another look at some of the key information from our 2015 series. So come take a ride with me in my big RV as we journey from state-to-state looking for what's great, and paying sales taxes all along the way.

At this point I would be remiss if I didn’t tell you why Ohio was selected as our first state in the Sales Tax Tuesday 2018 series.  Reason is, Ohio is providing a tax amnesty program January 1 through February 15, 2018.  I realize we are not giving you much in the way of notice, but still the same we wanted to let you know that you might be eligible for amnesty for taxes like Sales Tax, Use Tax, Alcoholic beverage tax, Cigarette or other tobacco tax and Commercial activities tax. For more details on this tax amnesty program see the special website for the Ohio Department of Revenue.

Besides their political acumen the state is also known for their many ‘firsts’ in history including the traffic light, cash register, incandescent light bulb, phonograph, motion picture, and both the airplane and automobile. You might guess that a lot of these firsts have to do with the fact that both Thomas Edison and the Wright Brothers called Ohio home.

Another tremendous first, America’s first baseball team, the Cincinnati Reds….“take me out to the ballpark.” Did you know that the novelist Charles Dickens once dubbed Cincinnati “one of the most interesting [cities] in America.”

By the way, you will pay ‘admission tax’ when you take in one of those ballgames. And what goes better with baseball than All-American Hot Dogs, which are also another Ohio first. You guessed it, sales tax applies to your hot dog and soft drink consumed at the ball park.

But baseball wasn’t the only ‘first ball game’, Ohio is also home to the first game in the National Football League. Perhaps that’s why the Pro Football Hall of Fame is in Canton.

Don’t you just love going on a long RV trip and stopping and taking a picture every time you see one of those signs saying ‘Historical Marker Ahead’? I hope so, because you will be seeing a lot of them as I go on this Sales Tax Tuesday 2018 road trip.

In my first round of Sales Tax Tuesday: Ohio I mentioned that both Neil Armstrong, the first man to walk on the Moon, and John Glenn, the first American to orbit the earth, were both from Ohio. But did you know that a total of 24 Ohio natives have, or are presently serving, as NASA astronauts?  And another 10 astronauts have lived in the Buckeye State at one time or another. You might want to visit Dayton’s National Museum of the Air Force, just be aware there will be sales tax applied to that admission too.

Similarly, you will shell out sales taxes on your admission to Cleveland’s Rock and Roll Hall of Fame. Who would have thought, Rock-n-roll in Ohio?

First settled by French fur traders, Ohio became a British colony in 1754 after the French and Indian War. Great Britain ceded Ohio to the U.S. after the American Revolution, and it was incorporated into the Northwest Territory in 1787. From then until well afterward, Ohio became the 17th state in 1803 even as bloody clashes between white settlers and Native Americans continued in the region.

During the Civil War, the state played a key role in providing the Union Army with troops and supplies, and it was Ohio that produced Ulysses S. Grant, the general who led the Union to victory over the Confederate Army.

Industrialization in Ohio boomed upon the discovery of coal, and Cleveland, one of the state’s largest cities, was the third largest iron and steel producer in the country by 1853. During the approximately 10-year Ohio Oil Rush of the 1860s, the state produced more crude oil than anywhere else in the country. Rockefeller entered the oil business in 1863 by investing in a Cleveland refinery and founded the Standard Oil Co. in 1870. By the 1880s, his company controlled 90 percent of U.S. refineries and pipelines.

Ohio's manufacturing industry leads the country in production of plastics and rubber, fabricated metals and electrical equipment and appliances. The state is also a leading producer of trucks, autos and steel. Other leading industries include transportation and trade, business services, real estate and education and health. Fortune 500 companies headquartered in Ohio include Cardinal Health, Nationwide, Marathon Petroleum, Macy’s, Procter & Gamble and Kroger.

But who would expect to see sights like the vineyard below? Yes, this is one of Ohio’s 150 commercial wineries located along six wine trails running from the Lake Erie coastline in the north to the Ohio River Valley in the south. Ohio is becoming particularly well known for its dessert wines many of which have won national recognition within the past few years. Sorry folks, you will pay sales and alcoholic beverage taxes on your wine purchases in Ohio.

Ohio is home to dozens of colleges and universities, including Ohio State University, University of Dayton, Ohio University, University of Cincinnati and Kent State University.

Ohio, our 7th most populous state, with about 11.6 million residents, is also the 10th most dense in population. Ohio is the most affordable state, with the best housing affordability and one of the lowest costs of living. So maybe the sales tax and other consumption related taxes are not so bad.  Let’s take a look at some Ohio sales tax facts.

Sales Tax Facts by Avalara:

Sales tax provides critical revenue for states. Other than property and income tax, sales tax is the largest source of tax revenue in the majority of the states that collect it. From a government perspective, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is an exercise for income. It’s easy to be lured into a false sense of compliance when it comes to sales tax, this series is intended to insure that you are aware of the key sales tax facts for YOUR state.

Note: For sales tax definitions and essentials check out the opening article to this series.

  • The state sales tax rate is currently 5.75% but the total tax rate can be as high as 8% depending on local municipalities.
  • The Ohio sales and use tax applies to the retail sale, lease, and rental of tangible personal property as well as the sale of selected services in Ohio.
  • In transactions where sales tax was due but not collected by the vendor or seller, a use tax of equal  amount is due from the customer.
  • The state’s chief tax collector is the Ohio Department of Taxation.
  • Sales tax is referred to in Ohio as a “trust tax,” meaning that the buyer pays the tax to the seller and “trusts” that the seller remits it to the state.
  • Sales tax in Ohio is origin-based, meaning the tax rate is determined by the seller’s location. A seller in an origin-based state is required to charge the same sales tax rate for every order shipped to that state.
  • Ohio requires any person or business making retail sales of taxable products or services to obtain a vendor’s license and collect and remit sales tax.
  • Ohio participates in the Streamlined Sales Tax (SST project).
  • Ohio’s first-ever sales tax holiday went into effect August, 2015. The 2018 Ohio sales tax holiday is scheduled for August 5th.
  • The filing of sales tax returns is done only electronically. Paper returns are not accepted. All sales tax returns are due by the 23rd of the month following the reporting period.

Since Ohio participates in the Streamlined Sales Tax project, food consumed off premise is not taxable; therefore, the definition of what constitutes ‘food’ is extremely important.  One of the clearest ways of identifying food is by the presence of a ‘Nutritional Facts’ box on the product label, but confusion can abound with something as simple as coffee or tea.  For example, plain coffee or tea is food and therefore not taxable when not consumed on premise, but coffee or tea containing a sweetener is not food and is therefore taxable. Add some flavoring, but no sweetener to your coffee or tea, we are back to food again which is non-taxable, you can even add milk products and it’s still food, just don’t add sweetener. Is that clear as ‘black coffee’ or ‘weak tea’ folks? 

I can understand Ohio putting sales tax on chocolate chip cookies, but 'web cookies'? Did you know that Ohio (as of January 2018) maintains that out-of-state internet companies establish a physical presence in the state when they place software or web cookies on any in-state device like computers, phones or tablets. While this likely will not impact catalog sellers that don't advertise online, it will affect many online sellers. 

In Ohio snow removal is subject to sales tax if the provider uses "any mechanical means" and makes at least $5,000 in sales of such service during the calendar year.” On the other hand, the neighbor kids shoveling snow with only a shovel don't need to charge sales tax for their services.

Get your makeup done in a beauty salon in Ohio and you’ll pay sales tax. But you can go to your grave knowing the mortuary touched you up tax free.

Whether you are searching for your county, special district, and city to compute sales tax, or trying to decide if you should pay special taxes, you need to know all the details and requirements that are specific for what your are selling and where you are selling it. Manual sales and use taxes are prone to error and can consumes hours of your time in collection, accounting and reporting for what is pass-through rather than revenue-generating activities.

Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity so you won't spend time digging yourself out from under sales tax burdens or audits.