Ohio Sales Tax Handbook

RATE OF SALES TAX:

5.75%

LOCAL & COUNTY MAXIMUM RATES:

2.25%

What Are the Taxable Goods and Services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Ohio.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Ohio.

Prescription drugs, food, and fuel are all tax-free.

Businesses in Ohio are required to collect sales tax on digital commodities such as digital audiovisual work, digital audio work, and digital books.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Ohio are required to collect sales tax on digital items such as downloading movies, music mp3s, and ebooks.

How to Register for Sales Tax in Ohio

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Identification information for a business
Physical locations of your firm Date you will begin collecting Ohio sales tax NAICS Code defining your business type (You may do an NAICS Code Lookup to locate the NAICS Code for LLC that corresponds to your industry.)

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Store Sales Shipping Within-State Sales Outside-State Sales

Retail Sales

For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.

Here’s an illustration of how this situation may look:

Mary is the owner and manager of a bookshop in Akron, Ohio. Because books are taxable in Ohio, Mary charges her clients a flat-rate sales tax of 6.75% on all purchases. This includes the 5.75% state sales tax in Ohio and the 1.0% Summit County sales tax.

Sales inside the state

The state of Ohio has a policy known as origin-based sales taxation. This implies that long-distance purchases inside Ohio are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.

Consider the following scenario:

Steve operates his own eBay electronics company from his home in Dayton, Ohio. A buyer from Toledo, Ohio discovers Steve’s eBay website and buys a $350 set of headphones. Steve uses the 5.75% state tax rate for Ohio + 1.5% for Montgomery county when computing the sales tax for this transaction. The entire cost is $375.38 ($25.38 sales tax) at a total sales tax rate of 7.25%.

Out-of-State Purchases

Businesses in Ohio must only pay sales tax on out-of-state sales if they have a presence in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Ohio seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Ohio are required to file sales tax forms and make sales tax payments online.

How Frequently Should You File?

The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.

Semi-annual filing: If your company receives less than $200 in sales tax each month, you should submit returns on a semi-annual basis.
Quarterly filing: If your company receives between $200 and $5,000 in sales tax each month, you need submit quarterly reports.
Monthly filing: If your firm receives more than $6,250 in sales tax each month, you must submit monthly returns.

Deadlines for Filing

The deadline for all Ohio sales tax returns is the 23rd of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.

Penalties for Filing Late

When a taxpayer fails to promptly submit a return or repay the tax owed, Ohio assesses a Late Filing Penalty of up to $50.00 or 10% of the tax amount due, whichever is larger.

When taxpayers fail to pay the whole amount of tax owed, they are liable to an assessment that may include a penalty of up to 15% of the tax owing, plus interest.