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Ohio looks to broaden sales tax, increase rate

  • Mar 28, 2017 | Gail Cole

 Ohio: Travel planning services would be taxed under governor's plan.

Update 5.25.2017: SB 9 was approved by the House and Senate and has been sent to Gov. Kasich for his signature. 

Not for the first time, Ohio Gov. John Kasich is proposing significant changes to the state sales and use tax. His budget proposal for the upcoming fiscal year would increase the rate from 5.75 to 6.25 percent and broaden the tax to numerous goods and services that are currently exempt. The governor would also raise taxes on beer and wine, cigarettes and cigars, and other tobacco products.

There have been several significant changes in Ohio sales and use tax in recent years: the state rate increased from 5.5 to 5.75 percent in Sept. 2013; sales of many digital goods and services became subject to tax as of Jan. 2014; and an exemption for magazine subscriptions was repealed. But the last time the governor sought the changes he now proposes, he failed to garner support. Whether they will be embraced this session remains to be seen.

Proposed sales tax changes

The governor’s plan proposes taxing the following services:

  • Cable subscriptions
  • Interior design and decorating
  • Lobbying
  • Non-medical necessity cosmetic surgery and similar procedures
  • Repossession services
  • Travel services (e.g., travel agents, pre-packaged tours)

These are “discretionary purchases,” according to the budget recommendations, not “items that are necessities.”

Other tax changes

The budget also recommends the following tax changes:

  • Increase the tax on cigarettes from $1.60 to $2.25 per pack
  • Increase the tax on other tobacco products (OTP) similarly
  • Apply the OTP tax to “vapor products” such as e-cigarettes
  • Increase the tax rate on high alcohol beer
  • Increase the tax rate on “most kinds of alcohol, other than spirituous liquors, by approximately 70 percent”
  • Decrease the rate of tax for champagne, carbonated wine, and sparkling wine from $1.48 to $0.51 per wine gallon
  • Eliminate deduction for early beer and wine payment
  • Reduce Small Brewers Credit

Sales tax exemptions under consideration

Several other changes to product taxability have been introduced in the Ohio Legislature this session:

House Bill 61 would create an exemption for “sales of tampons, panty liners, menstrual cups, sanitary napkins, and other similar tangible personal property the principal purpose of which is feminine hygiene in connection with the menstrual cycle.”

Senate Bill 65 seeks to create an annual three-day sales tax holiday, during which sales of qualifying Energy Star products would be exempt from sales and use tax. If approved, it would run the first Friday in April through the following Sunday.

Senate Bill 9 would provide a three-day sales tax holiday for certain clothing and school supplies.

House Bill 116 would exempt optical aids sold by licensed dispensers from sales and use tax. “Optical aid” is defined as contact lenses, eyeglasses (lenses and frames), or “other instruments or devices that may aid or correct human vision and that have been prescribed by a physician or optometrist licensed by any state, country, or province.”

The state budget must be approved and enacted by June 30. The Executive Budget Recommendations for FYs 2018 and 2019 and House Bill 49 provide additional information.

Changes in rates and product taxability make sales tax compliance challenging. Tax automation software facilitates compliance for businesses of all sizes in all states. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.