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News Release

October 1, 2007 - Department of Taxation: Sales Tax Collection Rules Won't Change

COLUMBUS, Ohio - Ohio retailers who engage in delivery sales will not be required to change the way they calculate sales taxes starting Jan. 1, the Ohio Department of Taxation announced today.

Today was the deadline for Ohio Tax Commissioner Richard A. Levin to certify whether the Governing Board of the Streamlined Sales and Use Tax Agreement had approved changes sought by the Ohio General Assembly earlier this year to exempt small retailers from a move to destination sourcing of the sales tax.

Levin indicated today that the Governing Board has not agreed to these changes.

As a result, no Ohio retailers will be required to change the way they calculate sales taxes at the end of the year. A few dozen of Ohio’s largest delivery retailers – those with more than $30 million in delivery sales annually – will continue to calculate sales taxes based on the destination of the sale as well as smaller delivery retailers who have voluntarily converted to destination sourcing. All others may continue calculating the tax based on rates at the origin of the sale.

“The bottom line here is that nothing changes for Ohio retailers,” Levin said.

State government had long been looking at moving retailers from origin-based to destination-based sourcing of the state sales tax in order to make Ohio a full member of the Streamlined Sales and Use Tax Agreement. The agreement is an effort to harmonize sales tax rules across state lines and eventually put states in position to start collecting sales taxes on sales from out of state businesses – particularly catalog and Internet sales.

In May 2006, businesses with more than $30 million in delivery sales switched to destination sourcing, and state law at that time called for other retailers with delivery sales to follow suit by Jan. 1, 2008.

But with small business owners expressing concern about the complexity of calculating sales tax rates based on the destination of sales, the General Assembly relaxed the requirement last summer. Language included in the state budget bill would have moved other retailers to destination sourcing only if retailers with less than $500,000 in annual delivery sales were exempted.

Ohio could not win agreement for such an exemption during a meeting last month in Kansas City, Kan. of the Governing Board of the streamlined sales tax effort. Work on possible alternatives also failed to bear fruit.

Levin said he would still like to find a way to make Ohio a full member of the streamlined sales tax effort, but that he is also sensitive to the needs of small business.

“The goal here is to level the playing field and make sure Ohio retailers are on an equal footing with out-of-state competitors,” Levin said. “Ohio businesses should not be at a disadvantage to out-of-state retailers when it comes to selling to Ohio residents.”

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TAXPAYER INFORMATION: Contact (888) 405-4039 or (614) 466-7351.

MEDIA INFORMATION: Contact John Kohlstrand at (614) 644-3858 or Mike McKinney at (614) 466-5461.