Information Release

ST 1995-02 - Building Management - UPDATED November, 2004- Supercedes Information Release Dated October, 1995

The proper application of sales and use tax to building managers has been a recurring question over the years. The inclusion of “landscaping and lawn care services,” “private investigation and security services,” “exterminating services,” “building maintenance and janitorial services,” and “snow removal services” as services subject to sales and use taxes has made this question of greater interest.

For purposes of this information release, a building manager is a person (corporation, partnership, individual, etc.) who has complete responsibility for the operation of a commercial property under contract with the property owner.

A common example of this would be an office building owned by a limited partnership. The partnership contracts with a building management company to keep the property in good repair, provide housekeeping and security for the tenants, mow the lawn and landscape the grounds, sweep and plow the parking lot, collect rents, remodel offices, etc. The manager submits a monthly invoice to the owners and is reimbursed all authorized expenditures and paid a fee for the management service.

For sales and use tax purposes, the building manager is the consumer of everything purchased to provide the management service. The transaction between the manager and the owner is a “building management service” which is not currently subject to sales tax. Even though, as part of the overall management service, the manager is performing lawn care, security, housekeeping, etc., the manager does not need a vendor’s license and should collect no sales tax from the owner.

The building manager, however, must pay sales or use tax on all tangible personal property purchased to provide the management service. For example, the manager must pay sales tax when purchasing light bulbs, cleaning supplies, maintenance tools, restroom supplies, furniture, and so forth.

The manager must pay sales tax when purchasing taxable services. Examples of taxable services include: hiring a security company to provide guards and/or monitor the security system, having a nursery landscape the grounds, retaining an exterminator to spray for insects, having a cleaning company clean carpets, or getting personnel from a temporary employment agency. Any work actually performed by employees of the building manager has no sales or use tax consequences.

If you have any questions regarding this matter, contact our Taxpayer Services Center at 1-888-405-4039, or e-mail us through our website at tax.ohio.gov.

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