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ST 2004-02 - Sourcing Law Change Update – June, 2005
UPDATED - Supersedes Information Release Dated August,
2004<>
This information release addresses a change in how Ohio sales
tax is charged (sourced) on certain transactions involving
the sale and delivery of goods.
Ohio lawmakers recently passed a law (S.B. 26, 126 th General
Assembly) that will allow retailers more time to implement
the sourcing changes made in section 5739.033 of the Revised
Code. Vendors (retailers) can now voluntarily implement the
sourcing change beginning January 1, 2005, but must complete
the transition to the new sourcing provisions by January 1,
2008. However, there are two intermediate thresholds that may
require compliance before that date. If the vendor has
taxable delivery sales in excess of $30 million in 2005, the
vendor must change to destination sourcing on May 1, 2006. If
the vendor has taxable delivery sales in excess of $5 million
in 2006, the vendor must change to destination sourcing on
May 1, 2007. Once a vendor changes to charging sales tax on
destination sourcing, they may not return to origin based
sourcing.
The new sourcing provisions will require Ohio retailers that
sell and then ship (deliver) their goods across county lines
in Ohio to charge the sales tax rate that exists in the
county where the merchandise will be delivered, not the rate
where it is sold. The change will not affect the vast
majority of retailers that sell merchandise that is carried
away by customers (over the counter sales), or delivered to
customers at a location in the same county as the retailer’s
place of business.1
Similarly, the change will have little, if any, impact on the
operations of vendors who hold transient, service or delivery
licenses. The result is Ohio retailers will charge sales tax
on in-state, inter-county sales in the same manner as
retailers located outside the state (e.g. Internet and
catalog companies).
The reason for the sourcing change is to bring Ohio into
compliance with the terms of the Streamlined Sales Tax
Project (“SSTP”). The SSTP is a multi-state initiative to
make sales tax laws, rules, and systems more uniform across
states. The ultimate goal of the SSTP is to encourage (or
require with federal legislation) out-of-state retailers,
primarily catalog and Internet companies, to collect the
sales/use tax of Ohio and other states. This will make Ohio
retailers more competitive with out-of-state retailers
currently not charging and collecting Ohio sales/use tax. It
will also reduce the estimated $600 million per year that
Ohio’s state and local governments lose in uncollected tax
revenue on these types of sales.
The Department understands that some retailers will have to
change the business systems they use in order to determine
the correct amount of sales tax to charge their customers.
Our commitment is to work with retailers and point-of-sale
vendors to develop solutions that help make the transition as
smooth as possible. To that end, the Department has developed
a free, web-based system that will enable retailers (and
others) to inquire on-line about an address and/or zip code
and obtain the correct sales tax rate to charge.
A more in-depth information release with questions and
answers will soon be available on our web site. Additionally,
we will continue to provide updates on our web site to
retailers in the coming months. To access the most current
information and other resources, please visit our web site at
tax.ohio.gov and click on the SSTP link.
For additional assistance contact Taxpayer Services at
1-888-405-4039, or e-mail us through our web site:
tax.ohio.gov.
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1Note: the tax rate varies within a county where the Central
Ohio Transit Authority (COTA) tax applies in portions of the
cities of Columbus, Westerville, and Reynoldsburg that are
located in Delaware, Fairfield, and Licking Counties. Any
vendor making deliveries in those counties will need to
collect the correct tax including the COTA tax, if
applicable.