Ohio Changes the Way Sales Are “Sourced” for Sales and Use Tax Purposes

Kegler Brown Business Tax Alert

Effective January 1, 2010, Ohio is changing the way sales of tangible personal property and taxable services are "sourced" for sales and use tax purposes. This will affect retailers as well as purchasers of tangible personal property and those services subject to sales or use tax. For the past few years, Ohio has participated in the Streamlined Sales and Use Tax Agreement along with many other states. The debate over implementation of any agreement centered on whether sales or use taxes should be assessed at the point of the sale (the "source") or at the destination. In other words, should taxes be assessed at the point of sale or the final destination of the merchandise or service? What seems like a fairly simple issue has, in fact, has wide-ranging implications. If "destination" taxation is used, some metropolitan areas would recognize more sales tax revenue because those areas would receive revenue regardless of where the merchandise or service was purchased. Likewise, some rural areas would receive far less sales tax revenue because most purchasers were not residents in the rural jurisdiction. Among the changes is Ohio's move back to origin sourcing for all sales of tangible personal property.

Though these changes are complicated, they are explained in the Department of Taxation's information release, ST 2009-03.

Kegler, Brown, Hill & Ritter has an active tax practice. Any questions may be directed to Daniel Ritter (614-462-5442) or Kenneth Cookson (614-462-5445).