Tag Archives: ohio sales tax exemption rules

Sales & Use Tax: Applying The Tax

Many businesses have trepidation in applying Ohio sales and/or use tax to services provided in the course of daily activities.  The State of Ohio does offer a list of services which are subject to sales and/or use tax.  These services include the following:

  • Installation
  • Repair
  • Employment (temporary labor)
  • Lawn care and landscaping
  • Exterminating
  • Automatic data processing
  • Snow removal
  • Janitorial and maintenance
  • Storage
  • Maintenance contracts
  • Employment placement
  • Motor vehicle towing

The aforementioned services subject to tax are listed in “Table 2” of the general guidance offered by the Ohio Department of Taxation.

Ohio also offers a list of services that are generally not taxable.  These services include the following:

  • Professional
  • Personal
  • Insurance

These lists are not all inclusive (meaning that there are other services subject to tax), however, it does offer a starting point for determining which services are subject to tax.  Your business is unique and its activities will often lend itself to specific instances where services which appear subject to tax are not (due to a specific exemption) and services appearing exempt or non-taxable are subject to tax (due to a specific provision).  A Hair Salon provides an excellent example of services subject to and not subject to taxation:

Hair Salon Services Subject to sales taxation –

  • Application of Cosmetics
  • Manicures
  • Pedicures
  • Hair Removal
  • Massage

Hair Salon Services NOT Subject to sales taxation –

  • Hair Cutting
  • Hair Coloring
  • Hair Styling

As illustrated, it is not always cut and dry (no pun intended) what services are subject to sales and/or use tax.  Please contact your William Vaughan Company representative to determine the services that subject your business to sales and/or use taxation.

By: Nate Bernath, CPA

Does My Business Have An Ohio Sales and/or Use Tax Liability?

Most businesses are aware that their activities could result in an Ohio sales and/or use tax liability.  However, many companies struggle with determining their actual exposure to these taxes and how to apply Ohio’s sales and use tax guidelines to specific transactions.  These businesses should consider undergoing a formal sales and use tax analysis to highlight potential weaknesses in the application of these taxes and accurately determine the total exposure generated from their past and present operations.

An appropriate analysis provides the following:

  1. A thorough review of the same information and documentation that an Ohio auditor would request (readying your business for audit should one occur).
  2. As assessment of your operations/business activities to determine if your business qualifies for an exemption from sales and/or use tax (reducing your tax exposure).  Many companies are not aware of the exemptions for which they qualify.  The study would underscore applicable exemptions and identify the support needed to substantiate these exemptions.
  3. Application for Ohio sales tax amnesty if applicable.  This amnesty program is only available from May 1st, 2012 until June 15th, 2012.  This program allows you to avoid penalties and one half of the interest owed on prior unreported sales taxes.
  4. Application for Ohio use tax amnesty if applicable.  Use tax amnesty is available until May 1, 2013.  This program allows your business to report activity from January 1, 2009 and forward, avoid penalties and all of the interest owed on prior unreported use taxes.  What this means is that your potential liability will be waived from before January 1, 2009 and your business will only owe the tax incurred on purchases from January 1, 2009 and forward.
  5. Issuance of a report highlighting your business’s deficiencies, if any, and providing suggestions for ongoing best practices.

The June 15, 2012 deadline for the Ohio sales tax amnesty program of is quickly approaching.  Consequently, now is a great time for your business review its sales and use tax position.

William Vaughan Company offers an Ohio Sales and Use Tax Analysis based upon guidance provided in the Ohio Revised Code and applicable court cases.  In addition, William Vaughan Company’s analysis is conducted by professionals who have direct experience in the application and reporting process associated with Ohio’s amnesty programs.  Please contact your William Vaughan Company representative for further information regarding this opportunity.

By: Nate Bernath, CPA