Information Release

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 that:

  • "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 tables)

$10000 X 76.3%(TVC tables) = $7630
Remaining life = 6 yrs - 2 yrs = 4 yrs
$7630 = $158.96
(4 yrs X 12 months)
Value of temporary use = $158.96 + monthly cost of ownership.

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 METHOD

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.

ALTERNATIVE METHODS

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
Phone: 1-800-750-0750