Sales Tax State Activity Update - December 2004

Ohio Announces Private Communications Sourcing Rules

The Ohio Department of Taxation has recently adopted a rule that provides guidance to taxpayers on the sourcing of a sale of private communication services for sales tax purposes.

The term “private communication service” means a communications channel or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected. This definition includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of such channel or channels.

A sale of private communication service is sourced as follows:

• Service for a separate charge related to a customer channel termination point is sourced to each level of jurisdiction in which the customer channel termination point is located.
• Service where all customer termination points are located entirely within one jurisdiction or level of jurisdiction is sourced to the jurisdiction in which the customer channel termination points are located.
• Service for segments of a channel between two customer channel termination points located in different jurisdictions in which segments of the channel are separately charged is sourced 50% in each level of jurisdiction.
• Service for segments of a channel located in more than one jurisdiction or levels of jurisdiction in which segments are not separately billed is sourced in each jurisdiction. This is based on a percentage that is derived by dividing the number of customer channel termination points in each jurisdiction by the total number of customer channel termination points.
  
  OAC 5703-9-26, Ohio Department of Taxation, effective 11/4/04
  

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