Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

Home Archives Ohio State Tax News Protecting Construction Contractors From Erroneous Property Classifications - Real versus Personal
Protecting Construction Contractors From Erroneous Property Classifications - Real versus Personal PDF Print E-mail
Tuesday, 13 November 2012 14:53

The rules concerning which components of a construction project become real property upon installation and those that are business fixtures (remaining personal property) are often confusing. Even the Ohio Department of Taxation has taken an inconsistent approach at times – for example, arguing (albeit unsuccessfully) that golf bunkers and tee boxes were personal property in a 2007 Board of Tax Appeals decision, while a 2007 Tax Commissioner’s Opinion found that bunkers were land and, thus, real property. Likewise, in the two seminal decisions concerning business fixtures, the Ohio Supreme Court found that roller coasters and station houses at Geauga Lake Amusement Park were personal property, while the Board of Tax Appeals later ruled that Polaris amphitheater and other structures were real property. Suffice it to say, it is often difficult to determine the portions of a construction project representing business fixtures, upon which the contractor must collect sales tax from its customer, versus those which become real property upon which the contractor must pay use tax on its materials.

Ohio Revised Code Section 5739.03(C) provides a procedure which protects the contractor from misclassification by requesting a certification from its customer – the contractee – as to the real property and personal property components of the project. The request must be sent via certified mail, return receipt requested, prior to entering into the contract or agreement. The contractor will be protected from a misclassification if it relies upon in good faith, and acts consistent with, the contractee’s certification. And if the contractee fails to provide the requested certification, the contractor may rely upon its good faith determination as to its Ohio sales and use tax obligations. However, since this procedure shifts the exposure of a misclassification to the contractee, it would be prudent to advise the contractee prior to requesting such a certification.

If you need help complying with the procedures for requesting a certification for your customer, or classifying components of a construction contract as real or personal property, contact us as we have extensive experience in this area. In fact, Steve represented the taxpayer in the controlling Ohio Supreme Court case (Funtime v. Wilkins) governing this area.

Last Updated on Tuesday, 13 November 2012 15:19
 
clock

 

 

Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.

 

Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.

Subscribe

News

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

 

BEST LAWYERS' 2012 LAWYERS OF THE YEAR:

Steven Dimengo has been named the Best Lawyers' 2012 Akron Tax Law Lawyer of the Year