Ohio Sales & Use Tax: Digital Advertising Recognized as Nontaxable, but HB 466 Falls Short of Comprehensive Solution to Taxing on Services Delivered Online.
As we previously posted, the Ohio Department of Taxation has taken an extremely expansive view of taxable electronic information services (EIS). Per the Department, EIS essentially includes any services delivered via telecommunications equipment, including the Internet. With technological advances, the number of services delivered electronically has grown exponentially, which clearly could not have been anticipated when EIS originally were made taxable decades ago.
House Bill 466 was presented as a solution to limit the extended scope of taxable EIS by specifically excluding digital advertising services. “Digital advertising services” includes services used to electronically display, deliver, place or transfer promotional advertisements to potential customers. R.C. 5739.01(RRR). However, we share the opinion of the Ohio Society of CPAs that H.B. 466 does not go far enough as other clearly nontaxable services may now implicitly be considered taxable simply because they are delivered electronically, such as webinars and information reporting (e.g., Carfax, credit reports, etc.). See OSCPA Staff Reports, Lawmakers exempt digital advertising from sales tax (June 2, 2016) and OSCPA seeks broader solution to taxation of online services (May 5, 2016). Moreover, H.B. 466 does not apply retroactively and is not enacted as clarification of existing law. This confirms that digital advertising services were intended to be taxable in the past and does not relieve taxpayers who are currently under audit or have been assessed tax on such services.
Please contact us if you have questions about the taxability of services delivered electronically.