ST 2003-07 - Changes to the Definition of Price - July
Am. Sub. H.B. 95 contains a number of changes intended to
bring Ohio statutes into compliance with the terms of the
Streamlined Sales and Use Tax Agreement. Information on the
Streamlined Agreement can be found at www.streamlinedsalestax.org.
This information release addresses a substantial amendment to
the definition of "price" in R.C. 5739.01(H) and 5741.01(G).
This amendment will make two major changes in the meaning of
the term "price" for Ohio sales and use tax purposes. The
first change, effective July 1, 2003, involves the treatment
of certain discounts. The second change, effective August 1,
2003, includes delivery charges in the definition of price.
As amended by H.B. 95, the general definition of "price" in
R.C. 5739.01(H)(1) will be as follows:
(H)(1)(a) "Price," except as provided in divisions (H)(2)
and (3) of this section, means the total amount of
consideration, including cash, credit, property, and
services, for which tangible personal property or services
are sold, leased, or rented, valued in money, whether
received in money or otherwise, without any deduction for
any of the following:
(i) The vendor's cost of the property sold;
(ii) The cost of materials used, labor or service costs,
interest, losses, all costs of transportation to the
vendor, all taxes imposed on the vendor, and any other
expense of the vendor;
(iii) Charges by the vendor for any services necessary to
complete the sale;
(iv) On and after August 1, 2003, delivery charges. As used
in this division, "delivery charges" means charges by the
vendor for preparation and delivery to a location
designated by the consumer of tangible personal property or
a service, including transportation, shipping, postage,
handling, crating, and packing.
(v) Installation charges;
(vi) The value of exempt tangible personal property given
to the consumer where taxable and exempt tangible personal
property have been bundled together and sold by the vendor
as a single product or piece of merchandise.
(b) "Price" does not include any of the following:
(i) Discounts, including cash, term, or coupons that are
not reimbursed by a third party that are allowed by a
vendor and taken by a consumer on a sale;
(ii) Interest, financing, and carrying charges from credit
extended on the sale of tangible personal property or
services, if the amount is separately stated on the
invoice, bill of sale, or similar document given to the
(iii) Any taxes legally imposed directly on the consumer
that are separately stated on the invoice, bill of sale, or
similar document given to the consumer.
The special definitions of "price" for sales of new motor
vehicles and watercraft in R.C. 5739.01(H)(2) and (3) are
unchanged. The provisions for accelerating tax payment on
certain lease transactions have not been changed, but have
been moved from R.C. 5739.01(H)(4) to R.C. 5739.02(A)(2).
For the most part, the new definition of "price" has little
effect on the amount of any sale upon which tax will be
charged. However, the two substantive changes from prior Ohio
law are addressed below.
New R.C. 5739.01(H)(1)(b)(i) provides an exception from
the definition of "price" for:
Discounts, including cash, term, or coupons that are not
reimbursed by a third party that are allowed by a vendor
and taken by a consumer on a sale;
The definition of "price" before July 1, 2003 does not
allow any deduction for "discounts allowed after the
sale." The definition of "price" on and after July 1,
2003 allows "term" discounts to be excluded from "price"
if the consumer takes such discount. For example, a
vendor might allow a consumer a discount of two percent
if an invoice is paid within 30 days. Under prior law,
the price of the sale would not be reduced by the amount
of the discount. Under the new definition of "price",
effective July 1, 2003, such a discount will reduce the
taxable price of the sale to the extent the consumer
actually takes advantage of it.
It may happen that a consumer may make a payment and
receive a term discount after the vendor has filed a
return and remitted tax for the sale in question. In such
a case, the vendor may reduce its taxable sales and tax
liability on its next return by the amount of the
discount allowed and the portion of that discount that
reflects the reduction in tax, respectively.
- Delivery charges
Under prior law, separately stated delivery charges were not
included in the definition of the "price" of a sale. As part
of the tax reform and revenue package in H.B. 95, the Ohio
General Assembly included "delivery charges" in the
definition of "price." As a result, for sales made after
August 1, 2003, where the vendor makes a taxable sale to a
consumer and charges the consumer a delivery charge, as
defined in R.C. 5739.01(H)(1)(a)(iv), that charge is part of
the taxable price of the sale. As defined in R.C.
5739.01(H)(1)(a)(iv), a "delivery charge" means:
… charges by the vendor for preparation and delivery to a
location designated by the consumer of tangible personal
property or a service, including transportation, shipping,
postage, handling, crating, and packing.
This statutory change does not make charges by delivery
companies that are not making sales of tangible personal
property sales subject to the tax. For example, a vendor in
Columbus sells property to a consumer in Cleveland and pays a
delivery company to transport the property to the consumer.
The charge from the delivery company to the vendor is not a
sale that is subject to Ohio tax. However, if the vendor
passes that charge through to the consumer as a "delivery
charge," that charge is part of the price of the sale from
the vendor to the consumer. If the sale is taxable, tax must
be collected from the consumer on the delivery charge.
H.B. 95 amended the general use tax definition of "price" in
R.C. 5741.01(G)(1) to read as follows:
"Price," except as provided in divisions (G) (2) to (6)
of this section, has the same meaning as in division
(H)(1) of section 5739.01 of the Revised Code.
Therefore, an out-of-state vendor making a sale to an Ohio
consumer should use the definition of "price" found in R.C.
5739.01(H)(1) discussed above.
The provision for determining the price of a sale of a new
motor vehicle or a watercraft provided in R.C. 5741.01(G)(2)
The price provisions in the Streamlined Agreement deal with
the price on which a seller is to charge tax to a consumer.
Ohio law has several provisions in the use tax definition of
price that deal with tax to be paid by a consumer on items
that were not subject to Ohio tax at the time of sale. These
provisions are found in R.C. 5741.01(G)(3), (4) and (5).
These provisions are unchanged.
Previous R.C. 5741.01(G)(6) dealt with the acceleration of
tax on certain lease transactions. Those statutory provisions
have not been changed, but have been moved to R.C.
H.B. 95 did add a new R.C. 5741.01(G)(6), which provides:
If a consumer produces tangible personal property for
sale and removes that property from inventory for the
consumer's own use, the price is the produced cost of
that tangible personal property.
This does not represent a change in Ohio law with regard to
the use of property removed from sale inventory.
If you have questions regarding any matter covered in this
release, please call 1-888-405-4039 (Ohio Relay Service for
the Speech or Hearing Impaired: 1-800-750-0750), or e-mail us
through our web site at http://tax.ohio.gov/ .