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ST 1995-05 - "Price" for Calculating Sales or Use Tax - March, 1995

The Federal government and the State of Ohio impose excise taxes which, depending on their nature, may or may not be included in the total amount (price) subject to Ohio sales or use tax.

EXCISE TAXES INCLUDED IN "PRICE"

Assuming that the item sold is subject to Ohio sales or use tax, the amount attributed to an excise tax imposed on the manufacturer, distributor, wholesaler, or retailer (someone other than the final consumer) by the Federal government or the State of Ohio is part of the "price" used for calculating sales or use tax. This applies even if the tax is separately stated on the invoice.

For example, the State of Ohio imposes an excise tax on cigarettes. This tax is required to be paid by the wholesaler before the cigarettes can be sold to retailers. This tax is then passed on to the retailers and the retailers pass it on to the final consumer. Each pack of cigarettes upon which the tax has been paid by the wholesaler is marked with a tax stamp. Because this tax is imposed on the wholesaler and not directly on the consumer, it becomes part of the "price" for calculating sales or use tax.

Another example is the federal luxury tax imposed on the retailer of luxury passenger vehicles. This tax is required to be paid by retailers when the first retail sale or lease of a luxury passenger vehicle occurs. The retailer can elect to pass all or part of the cost of the tax on to the consumer. Since this tax is imposed on the retailer and not the consumer, any amount of the Federal luxury tax that is passed on to the customer becomes part of the "price" for calculating sales or use tax. This is true even if the tax is separately stated on the invoice.

Other taxes that must be included in "price" include, but are not limited to, Ohio's personal property tax on leased equipment, federal and state excise taxes on alcoholic beverages, and federal excise taxes on tires. This holds true even if the tax is separately stated on the bill of sale or invoice.

 

EXCISE TAXES NOT INCLUDED IN "PRICE"

When an excise tax is imposed on the final consumer (i.e. the retailer must collect it from the consumer), it is not to be included in the "price" for calculating sales or use tax.
For example, the Federal government imposes a 12% federal retail excise tax on the consumer of heavy trucks. Retailers of heavy trucks are required to collect this tax from the consumer when the trucks are sold.

Since this is a tax levied directly on the consumer, it is not to be included in "price" when calculating sales or use tax. However, in order to be excluded from the tax base, this federal retail excise tax must be separately stated on the invoice.

If you have any questions regarding this matter, you should direct your questions to one of our district offices or call 1-888-405-4039.

OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750