Ohio Sales Tax Guide
Chapter 8: Understanding Ohio sales tax rules for shipping & handling
If you do business in Ohio, you should know that the Ohio Department of Taxation takes the collection of sales tax on shipping and delivery charges very seriously. In fact, so much so that the state considers any type of delivery charge as part of the sale, and under no circumstances is it allowed to be treated as separate when it comes to taxation, even if it’s listed separately on an invoice.
Here’s what you should know about collecting sales tax on shipping and delivery charges in Ohio.
Is Shipping Taxable in Ohio?
Any time an Ohio retailer charges for shipping or delivery, that amount is considered part of the sale, and sales tax should be applied. Ohio defines delivery charges as the “preparation and delivery to a location designated by the consumer of tangible personal property or a service, including transportation, shipping, postage, handling, crating, and packing.”
Impact of Delivery Methods
The State is clear that if the seller ships or delivers a product to a consumer and then charges them for it, sales tax should be charged, no matter how the seller transported the item. But if the buyer uses a third-party carrier to deliver the item, the retailer is not responsible for collecting sales tax on that delivery.
In addition, the state points out that if the buyer offers to pay a friend a small amount to pick up the item for him, that friend is not required to charge sales tax because the “charge” is not a charge “by the vendor for preparation and delivery to a location designated by the consumer of tangible personal property.”
Shipping Tax Exempt Purchases
When sellers ship or deliver a mix of taxable and exempt products, Ohio law dictates that sellers allocate the delivery charges in proportion to the taxable and exempt portions of the delivery. This can be done by calculating the price or the weight of the shipment, and assigning the delivery charges to the correct portions.
Ohio has local-level sales tax rates, which can be levied at the city, county, transportation, and school level. In addition, sales tax may be levied by special purpose districts, which are independent governmental bodies. The state sales tax is 5.75 percent, and for those areas that have a local sales tax, the rate can be as high as 8.75 percent.
According to Gary Gudmundson, of the Ohio Department of Taxation, the state and local sales tax rules are the same, so there will never be an instance when sellers have to choose between the two.
Finally, when we asked what ecommerce sellers should watch out for, Gudmundson offered some advice: “If an individual purchases shipping from a shipper such as FedEx or UPS to send a parcel, that is not subject to tax in Ohio. However, if that individual buys a product from a vendor, and that vendor charges a shipping or delivery fee, both the product and the shipping charge are subject to sales tax in Ohio. Shipping become part of the taxable purchase price for that product.”