Information Release

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ST 2005-01 - Vendor Compensation - Issued April 2005; Revised July 2005; Revised April 2007

A recent change in Ohio law requires vendors (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 in effect where the retailer sold the goods. 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 where the retailer sold the goods. Retailers may elect to begin collecting sales tax based on destination beginning January 1, 2005. Mandatory compliance will phase in between May 1, 2006 and January 1, 2008. Those vendors with delivery sales greater than $30 million in 2005 were to begin collecting tax based on destination May 1, 2006.(1) On January 1, 2008, compliance becomes mandatory for all vendors.

Vendors subject to the new sales tax sourcing provisions may be eligible to apply for one-time compensation to offset some of the cost they incur associated with their compliance efforts.

To be eligible, a vendor must hold one or more regular county vendor’s licenses (numbers 01-xxxxxx through 88-xxxxxx) issued prior to May 1, 2006, and have at least one permanent location in Ohio. The compensation is not available for sales made pursuant to service, delivery or transient vendor’s licenses. The vendor must also make delivery sales of tangible personal property into another county or other counties. The compensation shall be the actual amount of tax collected per county for each month of the six-month period, not to exceed twenty-five dollars per county per month and in which the vendor does not have a permanent location. This compensation is available for each of the first six months after the vendor switches to destination based sourcing as required by Ohio Revised Code section 5739.033.

Vendors with multiple vendors’ licenses filing on master numbers (89-x3xxxx) are also eligible for the compensation. Such vendors can receive the actual amount of tax collected per county for each month of the six-month period, not to exceed twenty-five dollars per month for each county into which they make deliveries and in which they have no location. No compensation can be claimed for sales delivered from one location into a county where the vendor has another location. Again, compensation is available for each of the first six months after the vendor changes its sourcing method to comply with the destination sourcing statute.

Compensation can be applied for by completing and filing the attached Application for Compensation of Expenses Incurred for Destination Based Sourcing Tax Collections (form ST-AR-DBS). The form ST-AR-DBS shall be filed within sixty days after the end of the reporting period that includes the last day of the last month of the six-month period for which the vendor is requesting compensation.

Examples for calculating compensation requests:

A) A Franklin County vendor ships to the following counties during the month*, but has no fixed place of business in those counties

Licking County    $ 50 Tax Paid on Return $25 Compensation
Madison County  $100 Tax Paid on Return $25 Compensation
Pickaway County $100 Tax Paid on Return $25 Compensation
Delaware County $15 Tax Paid on Return $15 Compensation

 

B) A Franklin County vendor ships to the following counties during the month*, but the Franklin County vendor also has a fixed place of business in Madison and Delaware counties

Licking County    $ 50 Tax Paid on Return $25 Compensation
Madison County  $100 Tax Paid on Return $ 0 Compensation
Pickaway County $100 Tax Paid on Return $25 Compensation
Delaware County $15 Tax Paid on Return $ 0 Compensation

 

C) A vendor has two locations, one in Franklin County and one in Delaware County. During the month*, both locations ship into Knox County where these is no location. The maximum compensation for the vendor is $25.00 for Knox County

Franklin County location:

Knox County    $ 20 Tax Paid on Return $20 Compensation

 

Delaware County location, same vendor:

Knox County    $ 15 Tax Paid on Return $5 Compensation

 

Total compensation for Knox County - $25

*These are monthly examples. The total reimbursement is limited to $25 per month, per county that tax was reported in for a maximum of $150 per county for the six month reimbursement period.

Vendors are required to submit the following information with their ST-AR-DBS:

  • a copy of the invoice(s) for any purchase(s)
  • proof the invoice(s) was paid in full (e.g., copies of cancelled checks, bank statements, etc.)
  • a numerical list of all active vendor's licenses for the legal entity claiming the compensation
  • any documentation that verifies the amount of compensation claimed

If you have any questions regarding this information release, please contact Taxpayer Services at 1-888-405-4039, or e-mail us through our Web site: tax.ohio.gov.

OHIO RELAY SERVICES FOR THE

HEARING AND SPEECH IMPAIRED

Telephone: 1-800-750-0750

(1) See Sales and Use Tax Information Release ST 2007-01, “Delay in Sourcing of Delivery Sales,” for additional information on a delay for most vendors switching to destination-based sourcing by January 1, 2008.