April 25, 2008 - Streamlined Sales
Tax Effort Takes Step Forward
COLUMBUS, Ohio – Legislation signed by
Governor Ted Strickland last week means that businesses
engaging in delivery sales within Ohio will soon return to
the state’s traditional way of calculating the sales tax: at
the origin of the sale.
An emergency clause in the newly-signed bill – House Bill
429, sponsored by Rep. Bob Gibbs, R-Lakeville – allows Ohio
businesses now charging sales taxes based on the destination
of their Ohio delivery sales to switch back to the
traditional “origin” method as soon as the start of next
month if they wish. Merchants who moved to destination
sourcing of delivery sales have until Jan. 1, 2010 to switch
back to the traditional method, according to the new law.
The new law is, in part, a response to small business owners
who considered destination sourcing more complex than Ohio’s
traditional “origin” method. “This law balances the needs of
small business owners with the goal of creating a more level
playing field for all Ohio businesses when it comes to Ohio’s
sales tax,” Tax Commissioner Richard A. Levin said.
The vast majority of Ohio merchants have always collected and
remitted sales tax based on the location of their store. For
them, little will change. H.B. 429 also means no change for
out-of-state retailers selling into Ohio; they continue to
collect sales taxes based on the rate at the destination of
the sale, as they do today.
But the new law means big change for a relatively small group
of merchants who engage in delivery sales of tangible
personal property, such as furniture stores and appliance
stores. Since 2006, Ohio had been gradually moving such
merchants to “destination sourcing” of the sales tax –
charging sales tax based on the destination of the delivery
rather than the location of the store.
This transition was part of Ohio’s effort to become a full
member of the Streamlined Sales Tax Project, a multi-state
effort to harmonize sales tax rules across state lines and
simplify compliance for multistate businesses. For years, the
multistate group required states to move to destination
sourcing in order to become full members.
As a result, approximately 55 of Ohio’s largest delivery
sellers were required by Ohio law to move to destination
sourcing in 2006. A relatively small number of other delivery
sellers – probably under 1,000 – voluntarily switched to
destination sourcing in anticipation of a Jan. 1, 2008
That deadline never came. Last summer, in response to
concerns from small businesses, the General Assembly put the
shift to destination sourcing of delivery sales on hold.
Later, in December, the Governing Board of the Streamlined
Sales Tax Project decided to allow “origin states” to become
a full member of the organization starting in 2010 as long as
at least four other “origin states” are also ready to become
H.B. 429 is a response that moves Ohio back into the origin
Merchants who switched to the new destination sourcing system
and who will now be switching back per H.B. 429 will
eventually be eligible for compensation of up to $1,000 (for
mandatory switches to destination sourcing) and $600 (for
voluntary switches). The compensation won’t be available
until July 1, 2009 at the earliest; more information will be
available later on this subject from the Department of
SALES TAXPAYER CONTACT: Ohio Department of
Taxation Taxpayer Services Business Taxpayer Assistance Line
MEDIA CONTACT: John Kohlstrand at (614)
644-3858 or Mike McKinney at (614) 466-5461.