Ohio Sales / Use Tax: Ohio joins the wave by enacting Wayfair economic nexus standards and expanding collection obligations to marketplace facilitators
Nexus for Ohio sales / use tax collection expands effective August 1, 2019 to include out-of-state sellers and marketplace facilitators that deliver at least $100,000 of sales or 200 transactions to Ohio. Ohio’s General Assembly recently enacted Am Sub. H.B. 166, the biennial budget bill, which adopted economic nexus provisions replacing the previous click-through, software, and affiliate nexus provisions. In addition to e-commerce retailers, these new provision will have a significant impact on out-of-state SaaS providers and online platforms that connect sellers of taxable services to Ohio consumers.
Ohio’s economic nexus standard is the same as that at issue in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2104, 201 L. Ed. 2d 403 (2018) (for more about Wayfair). Under the economic presence standard, an out-of-state seller is presumed to have substantial nexus with Ohio if the seller has Ohio gross receipts greater than $100,000 or at least 200 transactions delivered to Ohio. These thresholds include sales of tangible personal property and services delivered to Ohio consumers. Nexus is created if the sellers exceeds these thresholds in the current or previous calendar year. A seller meeting thresholds must obtain an Ohio seller’s use tax license and collect tax starting August 1, 2019, unless it can rebut the presumption that its activities are not significantly associated with the seller’s ability to establish or maintain a market – likely, a nearly impossible burden to meet. R.C. 5741.01. See also, Ohio Tax Alert, Substantial Nexus and Marketplace Facilitator Changes (7/23/19).
Further, marketplace facilitators will be presumed to have substantial nexus and required to collect Ohio sales / use tax based upon the same economic standards – i.e., if they make or facilitate at least $100,000 of sales or 200 transactions delivered to Ohio customers. The definitions of “marketplace facilitator” and sales that are “facilitated” are quite broad and will encompass more business models than the traditional e-commerce marketplaces like Amazon.com and eBay. For instance, any business that help connect customers to sellers and collects the price of the property or services sold, provides payment processing services, or provides virtual currency used to make the purchase could be a marketplace facilitator required to collect Ohio sales / use tax.
Ohio’s economic nexus statute will present unique compliance burdens for out-of-state retailers, service providers, and software businesses selling or facilitating sales to Ohio consumers. If you have questions about Ohio sales / use tax registration or collection requirements, including which sales and services are taxable, please contact us. You may also refer to our extensive Ohio Sales / Use Tax: Recent Trends, Developments and Planning Opportunities outline for information concerning which sales of property and services are taxable.
Attorney Steven A. Dimengo is Managing Partner of Buckingham, Doolittle & Burroughs, LLC and chair of the taxation practice group. He helps clients with complicated tax challenges including Ohio sales/use, income, commercial activity and federal taxes and has represented clients before the Ohio Supreme Court. Steve can be reach at [email protected] or 330.258.6460.
Buckingham Partner Richard B. Fry III is a member of the taxation practice group with a focus on state and local tax compliance and controversies, including Ohio and multistate sales/use tax, commercial activity tax, and personal income tax issues. He also represents clients in federal income tax controversies with the Internal Revenue Service (IRS). Rich can be reached at [email protected] or 330.258.6423
About Buckingham, Doolittle & Burroughs:
Buckingham is a corporate law firm that counsels Middle Market executives and business leaders all over Ohio and beyond. With offices in Canton, Akron, and Cleveland, Buckingham offers clients Business Law Reimagined through sophisticated and practical legal services. Serving the region for over 100 years with nearly 70 attorneys, Buckingham’s mission is to deliver meaningful experiences through the practice of law, exceed expectations in terms of service, counsel and business sense, and to offer continuous value to the industries, communities and clients they serve. See all of our news and updates by visiting our website.