Ohio Department of Taxation Information Release

ST 2003- 11 - H.B. 95 - Storage - July 31, 2003

Am. Sub. H.B. 95 of the 125^th Ohio General Assembly included several expansions to the sales tax base. One such expansion is found in Ohio Revised Code ("R.C.") section 5739.01(B)(8), which applies the sales tax to:

On and after August 1, 2003, all transactions by which tangible personal property is or is to be stored, except such property that the consumer holds for sale in the regular course of business.

The purpose of this release is to provide information to vendors and consumers to assist them in meeting their obligations under the tax.

1. What types of transactions are subject to this new tax?

Any transaction by which tangible personal property is or is to be stored in Ohio is subject to sales tax. This includes any holding of a consumer’s tangible personal property for which there is a charge. An example of this type of charge would be storage of a person’s off-season clothing or furs in a vault. Other examples of taxable transactions include the provision of a locker, self-storage unit, building or other property for the consumer’s use in storing tangible personal property, the provision of dry dockage or out-of-water storage for watercraft, the provision of safe deposit boxes, and the provision of space for the consumer to keep a motor vehicle when the transaction does not constitute "parking."

2. What types of transactions are not taxable?

Transactions where the tangible personal property that is being stored is held by the consumer for sale in the regular course of business including raw material storage, in-process material storage or finished goods storage, are not taxable.

Transactions whereby parking, as distinguished from storage, for a motor vehicle is provided are not taxable under this new language. Examples of parking transactions that would not be taxable include parking provided as an adjunct to residential accommodations, such as a garage for an apartment building, and parking in a commercial lot or facility, such as an airport parking lot or a parking garage, whether paid on an hourly or monthly basis, and parking at parking meters.

Other examples of transactions to which the tax will not apply include:

1. The in-water dockage or mooring of boats at a dock or pier,
2. The kenneling or boarding of an animal where the transaction involves additional services such as animal care or feeding,
3. The provision of private mail boxes, or
4. Any bailment, such as a coat check, for which no fee is charged.

1. What type of license do I need to engage in making sales where tangible personal property is or is to be stored?

A vendor’s license is needed for each fixed location at which such sales occur. Vendor’s licenses must be purchased from the county auditor and cost twenty-five dollars. The application form for a vendor’s license is available on the Ohio Department of Taxation website: http://tax.ohio.gov/ under the tab for "FORMS."

2. What rate of tax do I collect?

You will need to collect tax at the rate in effect in the county where the property is being stored.

3. The tax applies to transactions "on and after August 1, 2003. I have customers that have entered into contracts with me prior to that date and who pay me monthly. Are these contracts subject to the tax?

Payments for storage made before August 1, 2003 are not taxable. Payments made on or after August 1, 2003 for storage provided on or after that date are subject to the tax. . For example, a late payment for storage provided in May 2003 that is made in September 2003 is not subject to tax. However, a payment made in August 2003 for storage provided during that month is subject to tax.

4. In addition to the fees I charge for a storage unit, I charge my customers a refundable security deposit. I also have fees for background checks on potential users of my storage space, and lock cutting fees. Are these charges taxable?

No. These charges are not charges for storing, or providing space to store, tangible personal property. However, any portion of a refundable security deposit that is not refunded is subject to the tax.

5. A transaction where property the consumer holds for sale in the normal course of business is not taxable. How will I know what the consumer is storing?

If a consumer is storing exempt items such as raw materials, in-process goods or sales inventory, the customer needs to provide the vendor with a completed exemption certificate. Exemption certificate forms are available on the Department’s website. The vendor must retain the exemption certificate in its records in case of audit. If a customer has provided a properly completed exemption certificate, the vendor is relieved of liability for collecting the sales tax.

6. I provide coin-operated storage lockers. Are these transactions taxable? If so, how do I report tax on these transactions?

The transactions are taxable. Since it would be impossible to separately charge tax on each transaction, the sales can only be made on a "tax included" basis. A vendor that makes this type of sale should either apply for a pre-determined reporting agreement as provided in R.C. 5739.05(B) or employ the alternate tax reporting method authorized in Ohio Adm. Code Rule 5703-9-05(F).

7. I rent safe deposit boxes. While I have no knowledge of what any individual customer keeps in a safe deposit box, many people use such boxes to keep coins, currency, bonds or stock certificates. In these cases, are the safe deposit boxes used for storing "tangible personal property"?

Evidences of an investment, such as stock certificates or bonds, are tangible items. The storage of those items is storage of tangible personal property. Currency or coins being held as collectables or investments are tangible personal property. Therefore, the provision of a safe deposit box for keeping these items, or any other items of tangible personal property, is a taxable transaction.

8. I have a garage that I rent out. Am I required to collect sales tax on the rent payments?

If the garage were being rented for the renter’s use in parking a motor vehicle, this would not be taxable. The fact that other items might be incidentally stored in the garage would not make the transaction a taxable provision of storage space.

9. I own a building that I lease to business tenants. Some of my lessees may store items in the building. Am I required to collect tax?

Space that is rented out for the consumer to conduct business, as opposed to the provision of storage, is not taxable.

10. I provide storage of business records, which are in paper form or on some other storage medium. Is this a taxable transaction?

Yes. The statute provides no exemption for the storage of records. However, the electronic storage of data is not subject to tax as storage if the consumer has continuous access to that data via a computer. However, such electronic storage of records may be taxable pursuant to R.C. 5739.01(Y) if used by business to provide automatic data processing or electronic information services.

11. I operate a server on which I host my clients’ software or websites. Are these taxable transactions?

These would not be taxable as the provision of storage. However, some of these transactions might be taxable as the provision of automatic data processing or electronic information service as defined in R.C. 5739.01(Y).

12. I rent post office boxes to my customers. Is this a taxable transaction?

No. A post office box is used to receive mail, not store tangible personal property.

13. I rent apartments. In addition to renting the apartment, I offer my tenants the opportunity to lease a storage unit in the building for a separate fee. I also have carports that the tenants can rent for a separate fee. Are these fees taxable?

The fee for the storage unit would be taxable. The fee for the carport would normally be the provision of parking, which would not be taxable.

14. I rent apartments to college students. At the end of the school year, I offer my tenants the opportunity to leave their belongings in the apartment for a reduced monthly rent until school resumes. Is this taxable?

If the renters do not have the right to occupy the apartment during the period school is not in session, but are only allowed to leave their belongings, you are providing storage and tax should be charged.

15. My company provides service to college students. At the end of a school year, my company will pick up boxed goods and either ship them home to the student or store the boxes for the student until the next school year. The student is billed a per box fee for pick-up, storage and/or delivery. Are these charges taxable?

Transactions where goods are picked up and shipped to the student would not be the provision of storage and would not be taxable. However, transactions where the company holds the boxes and delivers them to the students when they return to school would be taxable storage transactions. The full charge for that service would be taxable.

16. I am a dry cleaner. I offer my customers a service of storing off-season clothing. The customers place their clothing in a box. I pick up the box and keep it until the customer will need it again. At that time, I have the clothing cleaned and return it to the customer. Is this taxable?

Yes. Both elements of the transaction are taxable. The storage of the clothing is a taxable provision of storage for tangible personal property and the cleaning is a taxable laundry and dry cleaning service.

17. I operate a towing service. Under contract with a city, I tow illegally parked motor vehicles to my lot. In order to retrieve their vehicle, the owners pay me a fee for towing and a storage fee based on the amount of time the vehicle was in my lot. Are these charges taxable?

The charge for towing is taxable under R.C. 5739.01(B)(3)(t), which applies sales tax to towing service. The storage fee is also taxable as a transaction by which tangible personal property is stored.

18. I run a city impound lot where motor vehicles are towed for violations of traffic or parking ordinances. In addition to any fines for the violations, owners have to pay a storage fee to retrieve their vehicles from impound. Is that storage fee taxable?

Yes, unlike services provided under R.C. 5739.01(B)(3), there is no exemption for storage provided by the state government or any of its agencies, instrumentalities or political subdivisions.

If you have questions regarding any matter covered in this release, please call 1-888-405-4039 (Ohio Relay Service for the Speech or Hearing Impaired