ST 1995-08 - 5741.01(G)(3) - Price Nonresident Temporary
Business Use - April, 1995
This is to clarify the Department of Taxation's position on
acceptable methods that may be used to determine the value of
nonresident temporary business use of tangible personal
property in this state.
Division 5741.01(G)(3) of the Ohio Revised Code provides
- "In the case of a nonresident business consumer that
purchases and uses tangible personal property outside this
state and subsequently temporarily stores, uses, or otherwise
consumes such tangible personal property in the conduct of
business in this state, the consumer or the tax commissioner
may determine the price based on the value of the temporary
storage, use, or other consumption, in lieu of determining
the price pursuant to division (G)(1) of this section. A
price determination made by the consumer is subject to review
and redetermination by the commissioner."
In determining the value of nonresident temporary business
use, the valuation must be based on the records that exist
including, in order of preference: 1. job cost records for
the time used in this state; 2. the prorated cost of the
thing used in conjunction with the length of time the thing
is used in this state, or; 3. the income generated from the
use of the thing in this state respectively.
JOB COST METHOD
Job cost records should be used as the basis for computing
"price" if the business has detailed job cost records
sufficient to identify the business cost associated with the
use of this equipment. This method is appropriate when job
cost records are an accurate reflection of the business and
they follow standard accounting practices.
PRORATED COST METHOD
Total acquisition cost is the cumulative price paid for the
equipment used, including any major repairs that might have
been capitalized. This cost should be used as described below
to compute a value of temporary use only when job cost
records are either nonexistent or unreliable.
Purchases: The total acquisition cost should
be subjected to the Ohio Personal Property Tax, True Value
Computation (TVC). (Instruction booklet for the true value
computation for Ohio Personal Property Tax is available at
any office of the Ohio Department of Taxation or in the
County Auditor's office in any Ohio county.) The true value
is then divided by the product of the remaining minimum life
(minimum life per true value schedules minus the age in whole
years but never less than 1 year) times 12 months to yield a
representative monthly value. This representative monthly
value plus the monthly cost of ownership can then be prorated
by the length of time actually used or stored in this state.
If consumed on the job in this state, the price would be the
true value as first calculated when brought into the state.
The monthly cost of ownership should include all costs such
as insurance, interest, permits, etc.
Example: $10000 class II equipment 2 yrs
old used in this
state for 1 month. (Class II minimum life = 6 yrs from TVC
$10000 X 76.3%(TVC tables) = $7630
Remaining life = 6 yrs - 2 yrs = 4 yrs
(4 yrs X 12 months)
Value of temporary use = $158.96 + monthly cost of
Rentals/leases: If the tangible personal
property is rented or leased by a nonresident business for
use in Ohio, the "price" is equal to the lease price or
rental price plus any other cost of use or license to use,
prorated by the amount of time used in this state.
Income earned from the use of the equipment should be used as
the price to the extent it includes only the income
associated with the equipment being used. An example would be
a billing of a job separately stating $100/hr for a backhoe
and $25/hr for the operator. The value of the use of the
backhoe is $100/hr. This method of valuation should be used
when job cost records or acquisition costs are not available.
A nonresident business may elect any alternative method of
calculation that results in an accurate value of temporary
use in Ohio or "price" for the purpose of fulfilling use tax
liabilities. The sufficiency of any calculation is dependent
on the approval of the end result by the Tax Commissioner.
**** SPECIAL NOTES ****
The tax rate to be applied to the "price" is always the
combined state and county rates based on the rate in effect
in the county where the item is used. The amount of tax due
should be off-set by a credit for tax legally levied by and
paid to another jurisdiction (state). In most every case
where tax was paid to the vendor at the time of purchase or
paid directly to another jurisdiction, the calculation for
the value of temporary use and the application of the tax
rate should result in no additional tax due for temporary use
in the State of Ohio.
Use tax on the temporary business use does not apply to a
motor vehicle that is licensed for use on public highways and
is titled in another state.
If you have any questions regarding this matter, you should
call us at 1-888-405-4039.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED