Sales Tax Articles
Sales Tax State Activity Update - April 2008
Ohio Point-of-Sale Marketing Analysis Exempt
The taxpayer is offering a marketing and data analysis service at the point-of-sale ("POS") in retail stores. With this service, the taxpayer contracts with numerous manufacturing companies to deliver manufacturer coupons free of charge to specified shoppers as they check-out at retail stores.
The POS coupon service offering is based on what products the shoppers have purchased in the past 52 weeks and if the shopper meets certain purchase criteria. The service targets customers who hold the retail store's "loyalty" card and that do not have a valid mailing address. The POS coupon service provides the retail store's customers with twelve manufacturer coupons and two retail store coupons. The taxpayer charges the manufacturer X cents per coupon and does not charge the retailer.
In providing this service, the taxpayer out sources the service to an independent third-party. The outsourcing company performs all of the technical services on behalf of the taxpayer. The outsourcing company maintains, owns and operates the entire computer hardware and software infrastructure necessary to provide the POS coupon service. In addition, all rights, title and interest in the software are retained by the outsourcing company and are never transferred to the taxpayer or any of the taxpayer's clients. The outsourcing company invoices the taxpayer for the services based on a set price for each manufacturer coupon generated but less than the taxpayer charges its manufacturing clients.
Opinion
The facts show that taxpayer is distributing, or out sourcing the distribution of, printed material (the coupons) to a designated segment of the public without charge. Under these facts the Ohio law provides the taxpayer is the consumer of the printed matter (the coupons), pursuant to R.C. 5739.01(D)(4)(b). Along with the service of printing the coupons at the POS, the taxpayer is providing the electronic processing and analysis that allows a particular coupon to be printed. The collection and analysis of the data by the taxpayer is a marketing service and not a taxable automatic data processing service.
The full opinion can be viewed on the Ohio Department of Taxation Website.(PDF)
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