Tax Rules: Final: 5703-9
5703-9-46 Sales and use taxes: automatic data
processing, computer services, and electronic information
services.
(A) As used in this rule:
(1) "Automatic data processing" means:
(a) Processing others' data, including all activities
incident to processing of data such as keypunching, keystroke
verification, rearranging, or sorting of previously
documented data for the purpose of data entry or automatic
processing, changing the medium on which data is stored, and
preparing business documents such as reports, checks, or
bills, whether these activities are done by one person or
several persons; or
(b) Providing access by any means to computer equipment for
the purpose of processing data.
(2) "Computer services" means:
(a) Specifying computer hardware configurations, which is the
service of instructing others in the proper set-up,
installation, and start-up of computer hardware;
(b) Evaluating technical processing characteristics, which is
the service of reviewing, testing or otherwise ascertaining
the operating capacity or characteristics of computer
hardware or systems software. It does not include conducting
feasibility studies or analysis of hardware or software needs
or alternatives;
(c) Computer programming, which is, for purposes of the
definition of "computer services," the service of writing,
changing, debugging, or installing systems software; or
(d) Training computer programmers and operators in the
operation and use of computer equipment and its system
software.
Computer services must be provided in conjunction with and to
support the sale, lease, or operation of taxable computer
equipment or systems to fall within the scope of this
rule.
(3) "Electronic information services" has the same meaning as
in division (Y)(1)(c) of section 5739.01 of the Revised Code.
"Electronic information service" includes such services as
providing Internet access, providing access to database
information, and providing access to electronic mail
systems.
(4) "Systems software" includes all programming that controls
the basic operations of the computer, such as arithmetic,
logic, compilation or similar functions, whether it is an
integral part of the computer hardware or is contained on
magnetic disks or other storage media. "Systems software,"
solely for purposes of Chapter 5739. and 5741. of the Revised
Code because of division (Y)(2)(e) of section 5739.01 of the
Revised Code, does not include application software programs
that are intended to perform business functions or control or
monitor processes.
(5) "Personal and professional services" has the same meaning
as in division (Y)(2) of section 5739.01 of the Revised
Code.
(6) "Provider", for purposes of this rule, means a vendor or
seller who provides or supplies automatic data processing,
computer services, electronic information services, or
personal or professional services for a consideration, and
"provision" means the sale of such services.
(7) "Business" means the ongoing conduct of commercial,
manufacturing, mining, agriculture, professional, service, or
similar enterprise, whether or not the person or persons
conducting such enterprise are for-profit or nonprofit
entities and includes any activity engaged in by any person
with the object of gain, benefit or advantage, either direct
or indirect. Business does not include the activity of an
individual in managing and investing the individual's own
funds.
(B) For purposes of Chapter 5739. and 5741. of the Revised
Code:
(1) The provision of automatic data processing services,
computer services, or electronic information services in this
state for a consideration for use in business by the consumer
is a sale that is subject to the sales tax.
(2) The receipt of the benefit of these services in this
state for use in business by the consumer constitutes a use
subject to the use tax.
(3) When a transaction includes the provision of automatic
data processing, computer services, or electronic information
services:
(a) The true object of the transaction is the receipt of
automatic data processing, computer services, or electronic
information services if such services render a significant
benefit to the consumer;
(b) The true object of the transaction is the receipt of
personal or professional services to which the automatic data
processing, computer services, or electronic information
services are merely incidental or supplemental if:
(i) The automatic data processing, computer services, or
electronic information services are merely utilized by the
provider in the performance or delivery of such personal or
professional services;
(ii) The benefit sought to be received by the consumer is the
personal or professional service; or
(iii) The automatic data processing, computer services, or
electronic information services themselves provide no
significant benefit to the consumer.
(4) A transaction may include separable components such that
the true object of one or more separately stated components
is the receipt of automatic data processing, computer
services, or electronic information services and the true
object of any other separately stated components is the
receipt of personal and professional services or
consequential tangible personal property or other taxable
services. A transaction separable in this manner is a "mixed
transaction." The various components of a mixed transaction
shall be separately stated in the contract or initial billing
and the price applicable to each component shall similarly be
separated. It shall be sufficient for purposes of this rule
to separate components to the extent they are separate
categories under section 5739.01(B) of the Revised Code. Such
categories include, but are not limited to, all tangible
personal property; all repair and installation services; all
personal and professional services; and all automatic data
processing, computer services, and electronic information
services.
(5) The provision of computer services for consideration is a
sale, regardless of whether the provider is also a vendor of
computer equipment or software and regardless of whether the
work is performed on or off the premises of the consumer, and
whether the person performing the service acts under the
immediate supervision of the provider or the consumer.
Services performed by an employee for the employer are not
sales.
(C) Every person in this state who is making sales of
automatic data processing, computer services, or electronic
information services for use in business must be licensed
pursuant to section 5739.17 of the Revised Code. Every person
outside this state who is providing automatic data
processing, computer services, or electronic information
services in this state, and who has substantial nexus with
this state as provided in division (H) of section 5741.01 of
the Revised Code must be registered as a seller pursuant to
section 5741.17 of the Revised Code.
(D) For purposes of Chapter 5739. and 5741. of the Revised
Code, the provision of automatic data processing, computer
services, or electronic information services does not
constitute manufacturing.
(E) A provider of automatic data processing, computer
services, or electronic information services may claim
exemption on purchases of automatic data processing, computer
services, or electronic information services when both the
following are met:
(1) The purchased service is an integral part of the
automatic data processing, computer service, or electronic
information services being provided; and
(2) The total cost of the purchased service will be included
in the price of the service provided.
(F) A provider of automatic data processing, computer
services, or electronic information services may claim resale
on any purchase of tangible personal property that is or is
to be transferred permanently to the consumer of the service
as an integral part of the performance of the service.
Effective: 5-06-04
Promulgated under: 5703.14
Authorized by: 5703.05
Amplifies: 5739.01, 5739.02, 5739.071, 5739.17, 5741.02,
5741.17
Prior effective dates: 11-1-85, 12-23-92