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The Ultimate Guide To Ohio Sales Tax

Welcome to our handy guide on Ohio sales tax. We'll walk you through everything you need to know, from the specific sales tax rates in different counties and cities across Ohio to answering some of the most common questions. Plus, we'll guide you on how to efficiently collect and file your sales tax in Ohio.

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What is Nexus?

You'll need to collect sales tax in Ohio if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.

Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.

Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.

Calculating Nexus in Ohio

Physical Nexus

Your business is considered to have physical nexus in Ohio when there is a tangible presence in the state. This presence can take the form of a physical location, such as an office, store, or warehouse. Additionally, if you employ individuals, agents, or representatives in Ohio, store inventory in a local warehouse or fulfillment center, or regularly attend trade shows or events in the state, you establish physical nexus.

Economic Nexus

Economic nexus in Ohio is triggered by your sales figures. If your sales to Ohio customers surpass $100,000 and you have 200 or more transactions with Ohio customers in the current or previous year, you are deemed to have economic nexus.

Affiliate Nexus

Affiliate nexus comes into play when your business is connected to an Ohio-based entity that contributes to your sales. This connection could be with a parent company, subsidiary, or sister company in Ohio, or with Ohio-based affiliates involved in advertising or promoting your products.

Click-Through Nexus

Click-through nexus, which pertains to online referrals, is applicable in Ohio if you earn more than $10,000 from Ohio customers referred by in-state affiliates over the past 12 months. Additionally, having an agreement with an Ohio resident for customer referrals through a website link or other methods establishes click-through nexus in the state.

Marketplace Nexus

Marketplace nexus is for those using platforms like Amazon or Etsy that have a presence in Ohio. Here, the platform is responsible for collecting and remitting sales tax on your behalf.
Did you know logo

Ohio charges tax for the packaging and labeling of products, because apparently, appearances do matter.

Sales Tax Registration in Ohio

How to Get Your Ohio Sales Tax Permit

Here’s a step-by-step guide to make the process smoother for you: Check Your Sales Tax Nexus in Ohio Before anything else, confirm that your business indeed has a sales tax nexus in Ohio (you can check the earlier section about what constitutes a nexus).

Check Your Sales Tax Nexus in Ohio

Before anything else, confirm that your business indeed has a sales tax nexus in Ohio (you can check the earlier section about what constitutes a nexus).

Gather Your Info

Before you start registering, round up all the essential details:
  • Your business name and contact info
  • Federal Tax ID Number (EIN) or your Social Security Number if you're a sole proprietor
  • Details like names, addresses, and Social Security Numbers of the business owners or officers
  • What kind of business structure you have (like LLC, corporation, etc.)
  • Your business’s North American Industry Classification System (NAICS) code

Register Online

Head over to the Ohio Business Gateway. Create your account, then log in to fill out the "Sales and Use Tax" registration application. The online system is pretty straightforward and lets you submit everything electronically.

Wait for Approval

After you submit your application, the Ohio Department of Taxation will take a look. If everything’s good, they’ll send you your sales tax license. This could take up to 10 business days, so a little patience might be needed here.

Display Your License

Got your sales tax license? Awesome! Now, make sure it’s displayed prominently at your business location, as Ohio law requires. Cost of Registering for an Ohio Sales Tax License The great news is, it’s free to register for a sales tax license in Ohio. But keep in mind, depending on your sales and history with tax compliance, you might need to post a sales tax bond.

Cost of Registering for a Ohio Sales Tax License

The great news is, it’s free to register for a sales tax license in Ohio. But keep in mind, depending on your sales and history with tax compliance, you might need to post a sales tax bond.

Federal Tax ID for Ohio Sales Tax License

For most businesses, yes, you’ll need an Employer Identification Number (EIN) to register. Sole proprietors without employees can use their Social Security Number instead. Don’t have an EIN yet? You can easily apply for one through the IRS website.

Other Ohio Registrations to Consider

Depending on what your business does, you might need to sign up with other state agencies too:
  • Ohio Secretary of State: This is a must for corporations, LLCs, or partnerships.
  • Ohio Bureau of Workers' Compensation: Got employees? You'll need to register here for workers' comp insurance.
  • Ohio Department of Job and Family Services: For reporting and paying unemployment insurance taxes, employers need to register here too.

Guide to collecting sales tax in Ohio

Is Ohio an Origin or Destination Sales Tax State?

Ohio follows the destination-based sales tax approach. This means you'll calculate sales tax based on where your customer is located, not where you’re selling from. So, for each sale in Ohio, the sales tax rate will be the sum of the state, county, and local rates applicable to the customer’s location.

What Sales are Subject to Sales Tax in Ohio?

Sales tax in Ohio is applicable to various transactions, including the retail sale of tangible goods such as clothes, furniture, electronics, and home goods. Additionally, certain services, including landscaping, employment services, and cleaning services, are also subject to sales tax.

Is Software as a Service (SaaS) Taxed in Ohio?

When it comes to Software as a Service (SaaS), which refers to software accessed over the internet, Ohio treats it as a service. If SaaS is utilized in a business context, it is subject to Ohio's 5.75% sales tax. However, for personal use, SaaS generally isn't taxed, as it is not considered a significant revenue source for the state.

What is Exempt from Ohione Sales Tax?

Certain items are exempt from sales tax in Ohio, including prescription drugs and medical devices, most grocery items intended to be consumed off-premises, newspapers and magazines, purchases by nonprofits, schools, and government bodies, as well as manufacturing machinery and equipment.

Who is Eligible for Ohio Sales Tax Exemptions?

Sales tax exemptions in Ohio are available to various entities, such as nonprofits like churches and charities, government agencies at all levels, manufacturers purchasing machinery for manufacturing purposes, and resellers acquiring goods for resale. These exemptions are designed to provide relief for specific types of transactions and organizations.

What To Do If Your Customer is Exempt from Sales Tax in Ohio?

Got a customer who’s exempt from sales tax? You’ll need to collect a filled-out Ohio Sales Tax Exemption Certificate from them. Keep this document for at least four years as proof for any exempt transactions.

What if You Lose a Ohio Sales Tax Exemption Certificate?

If an exemption certificate goes missing, reach out to your customer for a new one. Keeping these records in check is crucial to avoid any hiccups with the Ohio Department of Taxation during audits.
Did you know logo

Ohio exempts sales tax on magazines, keeping the gossip and news tax-free.

Steps for Filing a Ohio Sales Tax Return

Your filing frequency in Ohio depends on how much sales tax you collect. Here’s how it works:Monthly Filing
  • If you’re collecting more than $1,200 per month in sales tax, you need to file monthly.
  • Your due date is the 23rd of the month following your reporting period.
Quarterly Filing
  • For those collecting between $200 and $1,200 per month, quarterly filing is your game.
  • Your due dates are April 23rd, July 23rd, October 23rd, and January 23rd, covering each fiscal quarter respectively.
Semi-Annual Filing
  • Collecting less than $200 a month? You’ll file semi-annually.
  • Due dates are July 23rd for the first half and January 23rd for the second half of the year.

What If a Filing Date Falls on a Weekend or Holiday?

If your due date falls on a weekend or holiday, don’t sweat it. The deadline moves to the next business day.

How to File a Ohio Sales Tax Return

Here’s a quick guide to filing:
  1. Gather Your Info: Make sure you have your sales data, license number, and any exemption certificates ready.
  2. Choose Your Filing Method: Online via the Ohio Business Gateway is the way to go for speed and ease. Prefer paper? That’s okay, too. Just get your forms from the Ohio Department of Taxation’s website.
  3. Complete the Return: Report your total sales, taxable sales, exempt sales, and the tax you’ve collected. Remember to include any local taxes too.
  4. Sort Out Use Tax: Bought something for your business without paying sales tax? Time to report and pay use tax on those items.
  5. Submit and Pay: File your return and make your payment by the due date. Online payments can be made via ACH or credit card (though credit card payments might have extra fees). Mailing in your return? Include a check or money order.

Penalties for Late Filing in Ohio

Late filing or payment can sting a bit. You might face:
  • A minimum penalty of $50 or 10% of the tax due for late filing or payment.
  • Interest charges on unpaid taxes, with the rate set by the Ohio Department of Taxation.

Sales Tax Incentives in Ohio

Looking for some perks? Ohio’s got a few, like:
  • Enterprise Zone Program: This offers property tax abatements and sales tax exemptions for certain business purchases.
  • Job Creation Tax Credit: A nice little refundable credit against your Commercial Activity Tax, depending on how many jobs you create.

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Top 5 Tips for Filing Sales Tax in Ohio

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