Ohio clarifies taxation of online services
- Sep 23, 2016 | Gail Cole
The Ohio Department of Taxation has clarified the tax treatment of a number of online services and internet access in response to the enactment of Ohio House Bill 466. The bill adds “digital advertising services” to the definition of “personal and professional services,” which are exempt from Ohio sales and use tax. It takes effect December 1, 2016.
Mixed transactions
The department adds this note of caution:
“If an OSP [online service provider] combines many services together for a single fee and utilizes vague description on its invoices or in its contract, the Department may see these services to be a mixed transaction. Without a breakdown of what makes up the charge, the entire amount would be subject to sales and use tax. See Ohio Admin. Code 5703-9-46(B)(4).”
In other words, if the department concludes that electronic information services are a significant component of a transaction that includes digital advertising services, it will deem the mixed transaction to be taxable. Additional information, including a number of examples, is available on Information Release ST 1999-04, updated September, 2016.
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