Information Release

ST 2008-03 - Resort Area Gross Receipts Excise Tax – Issued April 29, 2008; Updated August, 2016

This release was issued to explain the Resort Area Gross Receipts Excise Tax (RAGRET). The sections allowing for the imposition of this tax were enacted by Am. Sub. H.B. 327 (120th General Assembly) and became law effective June 30, 1993. This release is updated to address changes effective September 29, 2015, as a result of the enactment of Am. Sub. H.B. 64 (131st General Assembly) with regard to separately and proportionally stating the RAGRET, as well as the establishment of a tourism development district. A tourism development district may impose a RAGRET.

Revised Code (R.C.) 5739.101(A) allows a municipal corporation or township meeting certain requirements to declare itself a "resort area." R.C. 5739.101(B) authorizes the municipal corporation or township that has declared itself a resort area to levy a gross receipts tax on receipts derived from engaging in certain business activities within the resort area. R.C. 5739.101(B) provides:

(B)For the purpose of providing revenue for its general fund, the legislative authority of a municipal corporation or township, in its ordinance or resolution declaring itself a resort area under this section, may levy a tax on the privilege of engaging in the business of either of the following:

(1)Making sales in the municipal corporation or township, whether wholesale or retail, but including sales of food only to the extent such sales are subject to the tax levied under section 5739.02 of the Revised Code;

(2)Intrastate transportation of passengers or property primarily to or from the municipal corporation or township by a railroad, watercraft, or motor vehicle subject to regulation by the public utilities commission, except not including transportation of passengers as part of a tour or cruise in which the passengers will stay in the municipal corporation or township for no more than one hour.

The tax is imposed upon and shall be paid by the person making the sales or transporting the passengers or property. The rate of the tax shall be 0.5%, 1.0%, or 1.5% of the person’s gross receipts derived from making the sales or transporting the passengers or property to or from the municipal corporation or township.

Additionally, R.C. 5739.101(C) references that a municipal corporation or township that meets the requirements set forth in R.C. 503.56 or R.C. 715.014 may declare an area a “tourism development district”. R.C. 5739.101(C) further authorizes the municipal corporation or township that has declared itself a tourism development district to “levy a tax on the privilege of engaging in the business of making sales in the tourism development district, whether wholesale or retail, but including sales of food only to the extent such sales are subject to the tax levied under section 5739.02 of the Revised Code.”

The tax referenced under R.C. 5739.101(C) is imposed upon and shall be paid by the person making the sales. The rate of the tax shall be 0.5%, 1.0%, 1.5%, or 2.0% of the person’s gross receipts derived from making the sales in the tourism development district.

The RAGRET is not a sales tax, but it may be recovered from the customer by including it in the sales price. Prior to September 29, 2015, there was no law specifically authorizing the RAGRET to be separately stated on customer receipts or invoices. Pursuant to Am. Sub. H.B. 64, as of September 29, 2015, retailers may now separately or proportionately list the amount of the RAGRET on invoices. When utilizing this method, the sales tax calculation must include both the sales price and the RAGRET.

Because the RAGRET is not a sales tax, sales tax exemption certificates, such as those citing "sale for resale", "use in agriculture", or "sale to a political subdivision", apply only to taxability for the purpose of calculating sales tax and do not reduce the seller's RAGRET liability. There is no line for "exempt sales" on the RAGRET tax return.

The following is intended as a guide to help taxpayers conducting business in a resort area or tourism development district to better understand the application of the RAGRET.

A) What types of business activities generate receipts that are subject to the RAGRET?

The following list of taxable receipts is not all-inclusive. Also see R.C. 5739.01(B)(1) – (12) for more taxable services.

1)All receipts from wholesale and retail sales of tangible personal property (including leases and rentals) generated from doing business in the resort area or tourism development district are subject to the tax with the exception that sales of food are included only to the extent that such sales are subject to the tax levied under R.C. 5739.02. For purposes of resort areas, this also includes receipts generated from doing business in the resort area by businesses that are based on the mainland but travel to the resort area to make sales.

This would include, for example, receipts from the sale, resale, rental or lease of watercraft; outboard motors; automobiles; golf carts; lawn mowers; bicycles; tractors; food consumed on the premises where sold; soft drinks; beer, wine, and other forms of alcohol; prescription and nonprescription drugs; books; video and audio tapes; newspapers; magazines; fishing tackle; bait; gasoline; oil; lubricants; heating fuel; souvenirs; clothes; art; printed matter; and crafts.

2) Hotel and/or motel room rentals (including Bed & Breakfasts with five or more sleeping rooms).

NOTE: Bed & Breakfasts with fewer than five sleeping rooms should make separate charges for the sale of food consumed on premises. The gross receipts from these food sales are subject to the RAGRET to the extent such sales are subject to sales tax under R.C. 5739.02.

3)Sales of repair and installation labor when repairing or installing items of tangible personal property (e.g., motor vehicle and boat repairs; installing an outboard motor on a boat; repairing televisions, radios, radars, and appliances).

4)Sales of the following services in the resort area or tourism development district: automatic data processing, computer services or electronic information services; industrial laundry cleaning service; telecommunications service; private investigation and security service; information service (1-900 telephone calls); employment service; employment placement service; exterminating service; physical fitness facility service; and recreation and sports club service.

5)Sales within the resort area or tourism development district of landscaping and lawn care service; building maintenance and janitorial service; and snow removal service by a person having $5,000 or more in total sales of such services made in and outside of the resort area during the calendar year.

6)Sales of warranties, maintenance or service contracts, or similar agreements.

7)Personal care services (unless prescribed or performed by a physician or chiropractor) such as manicures; pedicures; tanning; massages; skin care; application of cosmetics; hair removal; tattooing; and body piercing.

NOTE: Haircuts, hair coloring and hair styling are NOT subject to RAGRET.

8)For purposes of resort areas, transportation of persons or property primarily to or from a resort area by a P.U.C.O.- regulated transportation company (e.g., train, ferry, bus service).

9)Storage of tangible personal property, other than property held for sale by the consumer of the storage space.

NOTE: Storage includes personal and mini self-storage facilities.

10)Satellite broadcasting service (audio and video).

11)Dry cleaning and laundry (but NOT coin operated laundry).

12)Intrastate transportation of people by such means as taxis, limousines, chartered buses and helicopter rides (but NOT ambulances, public transit systems or commercial airlines).

13)Motor vehicle towing.

B) What are some examples of business activities that generate receipts that are not subject to the RAGRET?

This list is not all-inclusive.

1)Sales of food for consumption off the premises where sold (i.e., carryout food sales and food sold at grocery or convenience stores).

SPECIAL NOTE: Soft drinks, alcoholic beverages, dietary supplements and tobacco are not considered food items, and therefore receipts from the sale of those items are subject to the RAGRET.

2)Improvements to real property where items are installed into homes or business structures and/or where items previously installed into a home or business structure are repaired (e.g., installation of central air conditioning units, repairs to a furnace).

3)Charter fishing trips.

4)Campsite fees.

5)Legal and medical services.

6)Dockage fees.

7)Watercraft towing.

8)Waste disposal fees.

NOTE: Separate charges for the rental/lease of waste disposal containers are subject to the RAGRET.

C) Who must register with the tax commissioner and how is registration accomplished?

R.C. 5739.103 requires that no person shall exercise the privilege of engaging in business in the resort area or tourism development district without first registering with the tax commissioner. All persons that make sales in the resort area or tourism development district whether they have a permanent location in the resort area or tourism development district or not and all persons that come into the resort area or tourism development district to perform a taxable service must register for the RAGRET.

Businesses engaged in any of the taxable business activities are required to register with the tax commissioner by completing an application for registration (Form RA 1). Each business location must have a separate registration.

Businesses not engaged in any taxable business activities may be asked to provide the tax commissioner with a signed statement attesting to this fact. The tax commissioner has the authority to, and may send examiners to, examine the books and records of a business.

D) How is the RAGRET reported and paid?

Upon receipt of a completed application, the Department of Taxation will establish a resort area tax account and assign an account number. During the last month of the reporting period, a tax return, filing instructions and a return envelope will be sent to registered taxpayers.

The Department has established semiannual reporting periods as follows:

January 1 through June 30: Due July 31

July 1 through December 31: Due January 31

Returns must be postmarked on or before the due date. Remittance should be made payable to the Ohio Treasurer of State.

E) Is there a penalty for failure to file the returns and pay the tax due?

Yes, R.C. 5739.102 provides for penalties in certain situations. The failure to timely file a return or to remit the tax due subjects taxpayers to an additional charge of up to $50.00 or 10% of the tax liability due, whichever is greater.

Failure to remit the entire amount of tax due also subjects taxpayers to an assessment that may include a penalty up to 15% of the tax due, plus interest.

Individuals can be held personally liable for the debts of the corporation.

F) Can the RAGRET be collected from customers?

Beginning on September 29, 2015, a person may separately or proportionately bill or invoice the RAGRET to recover the cost of the RAGRET. However, the tax incidence remains on the person with the business activity within the resort area or tourism development district. In the alternative, businesses may incorporate the cost of the tax in the price charged to the customers, as the tax is an expense to the business person similar to other operating expenses and the cost of goods sold. Accordingly, if the RAGRET is stated on invoices, sales receipts, or any other document given to customers as the result of a sale, it remains part of the price and is subject to the sales tax.

The RAGRET should never be lumped into the line dedicated for state and local sales tax. The RAGRET should be identified as a resort tax and separately stated on the customer's receipt or invoice. Any and all amounts listed on customers’ receipts or invoices as sales tax must be included in the retailer's sales tax liabilities reported and remitted to the Department.

The following scenarios are not acceptable. In each example, the sales tax rate in Ottawa County is presumed to be 7%.

Example 1: Combining the RAGRET into the Sales Tax Line on the Receipt in Ottawa County.

Item #1

$100.00

Tax of 8.5%

$8.50

Total

$108.50

R.C. 5739.29 requires vendors to collect the full and exact sales tax rate. Since this receipt indicates the tax of 8.5% was collected from the customer, the entire 8.5% must be reported and remitted to the Department as sales tax. If the vendor only reported and remitted 7% as sales tax, the Department would consider the difference between 7% and 8.5% to be sales tax collected by the vendor and not remitted. Therefore, the vendor would be subject to a penalty of 50% of the unremitted tax. In this scenario, the customer was overcharged sales tax by the vendor. Upon presenting their receipt, the customer is entitled to a refund of the 1.5%.

Example 2: Combining the RAGRET into the Sales Tax Line on the Receipt but Including a Disclaimer in Ottawa County.

Item #1

$100.00

Tax of 8.5%

$8.50

Total

$108.50

The tax rate of 8.5% includes a 1.5% resort tax charge.

This scenario is similar to Example 1, except this receipt specifically states that part of the tax is attributed to the RAGRET. Even a statement that 1.5% of the sales tax is the RAGRET results in an inaccurate collection of sales tax. Because the amount is identified as tax, the full amount of the 8.5% needs to be remitted to the Department. Under audit, the Department would consider the 1.5% to be sales tax collected and not remitted by the vendor, subject to the 50% penalty.

Permissible Method

For vendors that want to separately state the charge on customers’ receipts, one scenario that conforms to the requirements of the sales tax law is to add a separate line on the receipt to show the amount of the resort tax, which is included in the price. Note that when the RAGRET is itemized on the invoice, it is also subject to the sales tax. Here’s an example of how that receipt would appear:

Item #1

$100.00

Resort Tax of 1.5%

$1.50

Subtotal

$101.50

Tax of 7%

$7.11

Total

$108.61

By separately stating the RAGRET on the receipt to the consumer and adding the RAGRET to the total purchase price of the item, this method would not violate the provisions of the Revised Code. Separating the sales tax from the RAGRET also ensures proper record keeping for sales tax purposes.

G) May a refund be obtained if a taxpayer pays the RAGRET in error or overpays the tax actually due?

Yes, R.C. 5739.104 provides that the tax commissioner shall refund the amount of the RAGRET erroneously paid. An application for refund (Form RT AR) must be made within four years from the date the tax was erroneously paid.

Please contact us at 1-888-405-4039 or e-mail us through our website at tax.ohio.gov with any questions regarding this communication.

OHIO RELAY SERVICES FOR THE HEARING OR SPEECH IMPAIRED

Phone: 1-800-750-0750