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Sales Tax Articles

Sales Tax State Activity Update - March 2006

Ohio , Sourcing and the Streamlined Sales Tax Project

Current Law

According to Ohio Information Release ST2004-02 dated June, 2005, Ohio law requires the following sourcing rules to take effect.

"Ohio lawmakers recently passed a law (S.B. 26, 126th General Assembly) that will allow retailers more time to implement the sourcing changes made in section 5739.033 of the Revised Code. Vendors (retailers) can now voluntarily implement the sourcing change beginning January 1, 2005, but must complete the transition to the new sourcing provisions by January 1, 2008. However, there are two intermediate thresholds that may require compliance before that date.

If the vendor has taxable delivery sales in excess of $30 million in 2005, the vendor must change to destination sourcing on May 1, 2006. If the vendor has taxable delivery sales in excess of $5 million in 2006, the vendor must change to destination sourcing on May 1, 2007. Once a vendor changes to charging sales tax on destination sourcing, they may not return to origin based sourcing. The new sourcing provisions will require Ohio retailers that sell and then ship (deliver) their goods across county lines in Ohio to charge the sales tax rate that exists in the county where the merchandise will be delivered, not the rate where it is sold".

"The reason for the sourcing change is to bring Ohio into compliance with the terms of the Streamlined Sales Tax Project ("SSTP"). The SSTP is a multi-state initiative to make sales tax laws, rules, and systems more uniform across states. The ultimate goal of the SSTP is to encourage (or require with federal legislation) out-of-state retailers, primarily catalog and Internet companies, to collect the sales/use tax of Ohio and other states. This will make Ohio retailers more competitive with out-of-state retailers currently not charging and collecting Ohio sales/use tax. It will also reduce the estimated $600 million per year that Ohio's state and local governments lose in uncollected tax revenue on these types of sales".


The following is a summary of Ohio Proposed Amendment to Sections 308 and 310 of the Streamlined Sales and Use Tax Agreement date February 16, 2006:

  • This proposal amends section 308 of the Streamlined Agreement to allow states that have local option sales and use taxes the option of adopting their own sourcing rules for in-state sales.
  • Any state that chooses to use its own sourcing rules for in-state sales would be required to adopt a single statewide rate option for sales into the state from out-of-state locations. Sellers making sales into the state from locations outside the state would have the option to source their sales into that state under the rules of section 310A of the Agreement (destination sourcing) or to collect the single statewide rate for those sales.
  • The single statewide rate would be available for any seller making sales into the state from out-of-state, regardless of nexus.
  • The single statewide rate could not exceed the highest combined state and local tax rate in effect in any jurisdiction in the state.
  • The single statewide rate option provides sellers making sales from outside the state with a simple alternative to the destination sourcing rules.
  • The proposal would not affect the sourcing of leases under divisions B through D of section 310 of the Agreement.
  • Consumers that are charged the single statewide rate would be protected. If the local rate applicable where the consumer receives the product sold is higher than the single statewide rate, no additional tax could be charged to make up the rate for the jurisdiction where the property is received. If the item is moved, tax for the subsequent jurisdiction could apply use tax as applicable under state law.
  • If the single statewide rate is higher than the rate for the jurisdiction in which the product sold is received, the state would be required to give the consumer a refund of the difference in the tax rates. The state must provide the purchaser with at least one year to file such a claim.
  • Section 308 of the Agreement would be amended to specify that the single statewide rate is an exception to the single state rate provisions of that section.

It is expected that the Streamlined Sales Tax Governing Board will vote on the Ohio Sourcing Proposal at its April, 2006 meeting.

The full release can be accessed on the Ohio Department of Taxation website.

The proposal text can be accessed on the Streamlined Sales Tax Project website.

(Ohio Information Release ST 2004-02, Sourcing Law Change Update, June, 2006 and the Streamlined Sale Tax Governing Board, Inc. Web Site)

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