Ohio Department of Taxation Information Release

ST 2003- 12 - H.B. 95 -  Laundry and Dry Cleaning Service - 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 an amendment to Ohio Revised Code ("R.C.") section 5739.01(B)(3)(d). On and after August 1, 2003, that section will impose tax on laundry and dry cleaning services. Furthermore, R.C. 5739.01(BB) was amended to provide:

"Laundry and dry cleaning services" means removing soil or dirt from towels, linens, articles of clothing, or other fabric items that belong to others and supplying towels, linens, articles of clothing, or other fabric items. "Laundry and dry cleaning services" does not include the provision of self-service facilities for use by customers to remove soil or dirt from towels, linens, articles of clothing or other fabric items.

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

1. I provide uniforms to businesses. Before August 1, 2003, this was a taxable "industrial laundry cleaning service." Does the change in the statute exempt my sales?

No. The amendments to R.C. 5739.01(B)(3)(d) and 5739.01(BB) expand the scope of transactions to which the tax applies. A uniform business is "supplying … articles of clothing" to its customers, which is a taxable laundry and dry cleaning service.

2. I am a dry cleaner. What type of license do I need to comply with the new law?

Dry cleaners in this state will need a vendor’s license for every fixed location where they provide laundry and dry cleaning services. Vendor’s licenses must be obtained from the county auditor in the county where the place of business is located. The application form for a vendor’s license is available on the website of the Ohio Department of Taxation: http://tax.ohio.gov/ under the "FORMS" tab.

Out-of-state providers of laundry or dry cleaning services that provide pickup and delivery of items in this state to be cleaned is required to collect Ohio tax and must obtain a seller’s use tax registration from the Department of Taxation. The application for a seller’s use tax account is also available on the Department of Taxation website.

3. I already have a vendor’s license for my dry cleaning shop because I perform alterations and sell some cleaning supplies. Do I need another vendor’s license to provide laundry and dry cleaning services?

No. You should report your sales of laundry and dry cleaning services and the tax collected on those sales on your existing vendor’s license.

4. I provide a service where I pick up clothing from my customers to be cleaned and then deliver the cleaned clothing to the customer. I charge for pick-up and delivery separately from the charge for cleaning. Are my pick-up and delivery charges taxable?

Yes. Under R.C. 5739.01(H)(1)(a)(iii) and (iv), amounts you charge your customers for pick-up and delivery are part of the taxable price of the laundry and dry cleaning service.

5. Are charges for the application of stain repellants or waterproofing in conjunction with dry cleaning taxable?

Yes. However, if no laundry or dry cleaning service is provided with the application of stain repellants or waterproofing, the service would not be taxable.

6. What if my customer claims an exemption from the tax?

If a customer claims an exemption from the tax, the customer must provide a properly completed exemption certificate. The exemption certificate relieves the seller of the obligation to collect the tax. The seller needs to retain the exemption certificate in its records in case of audit. Exemption certificate forms are available on the Department of Taxation website.

7. A hotel provides laundry service to its guests. My business contracts with the hotel to provide the cleaning. I bill the hotel for the cleaning and the hotel bills the guests. Are these types of sales to the hotel taxable?

No. In this situation the hotel should provide the cleaner an exemption certificate claiming that its purchases are for resale. The hotel should then charge tax on the amount it bills to the guest for the laundry service.

8. A local cleaning company engages in remediation of flood damage for a business or home. As part of that service, the cleaning company sends curtains to my dry cleaning establishment. I clean the curtains and bill the cleaning company. The cleaning company bills the business or homeowner for the curtain cleaning as part of the remediation service. Are my charges to the cleaning company taxable?

No. The cleaning company should provide the cleaner an exemption certificate claiming that the purchase is for resale. The cleaning company should itemize the charge for its remediation service, which is a building maintenance and janitorial service, separately from the laundry and dry cleaning service on its bill to its customer. Regardless how billed, the tax is imposed on both types of services.

9. As a dry cleaner, do I have any claim of exemption on equipment or supplies I purchase for use in providing a laundry and dry cleaning service?

R.C. 5739.02(B)(43)(m) provides an exemption to persons that provide services under R.C. 5739.01(B)(3), including laundry and dry cleaning services, for purchases of any tangible personal property that "is or is to be permanently transferred to the consumer of the service as an integral part of the performance of the service." This would include starches, stain repellants and waterproofing products that are applied to and remain in the fabric of the items being treated, as part of a laundry and dry cleaning service [see question 5]. Exemption can also be claimed on such items as hangers, plastic bags and other materials in which permanently transferred to the customer with the cleaned items.

No exemption can be claimed on equipment or supplies used to perform laundry and dry cleaning services that are not permanently transferred to the customer as part of the performance of the service. This would include all machinery used to clean or press fabric items and any fluids, stain removers, soaps or other supplies that are consumed in the cleaning process.

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: 1-800-750-0750).