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Ohio clarifies taxation of online services


 This kind of advertising is exempt in Ohio.

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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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.