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Sales and Use - Applying the Tax

Sales and Use - Applying the Tax

A taxable sale includes any transaction in which title or possession of tangible personal property or the benefit of certain services is, or will be, transferred or provided for a price. All retail sales are subject to the tax unless they are specifically excepted or exempted in Ohio's sales tax law.

  • Copyrighted motion picture films for exhibition purposes unless solely used for advertising. The rental or sale of films or tapes to individuals is taxable.
  • The refundable deposit paid on returnable beverage containers, cartons, and cases.
  • Food for human consumption off the premises where sold (food does not include alcoholic beverages, dietary supplements, soft drinks, or tobacco).
  • Food sold to students in a dormitory, school cafeteria, fraternity or sorority house.
  • Food served without charge to employees as part of their compensation.
  • Items purchased with food stamps.
  • Newspapers (including community newspapers and national newspapers, such as the Wall Street Journal, USA Today, and other unbound publications.).
  • Sales by churches and nonprofit charitable organizations (excluding sales of motor vehicles, titled watercraft, titled outboard motors, off-highway motorcycles, all-purpose vehicles and personal watercraft) not exceeding six days in any calendar year.
  • Sales to nonprofit organizations operated exclusively in Ohio for certain charitable purposes as defined in sales tax law as follows: "Charitable purposes" means the relief of poverty; the improvement of health through the alleviation of illness, disease, or injury; the operation of an organization exclusively for the provision of professional, laundry, printing, and purchasing services to hospitals or charitable institutions; the operation of a home for the aged, as defined in section 5701.13 of the Ohio Revised Code; the operation of a radio or television broadcasting station that is licensed by the federal communications commission as a noncommercial educational radio or television station; the operation of a nonprofit animal adoption service or a county humane society; the promotion of education by an institution of learning that maintains a faculty of qualified instructors, teaches regular continuous courses of study, and confers a recognized diploma upon completion of a specific curriculum; the operation of a parent teacher association, booster group, or similar organization primarily engaged in the promotion and support of the curricular or extracurricular activities of a primary or secondary school; the operation of a community or area center in which presentations in music, dramatics, the arts, and related fields are made in order to foster public interest and education therein; the production of performances in music, dramatics, and the arts; or the promotion of education by an organization engaged in carrying on research in, or the dissemination of, scientific and technological knowledge and information primarily for the public.
  • Sales to churches.
  • Sales to organizations that have been granted and have maintained 501(c)(3) status by the Internal Revenue Service.
  • Sales of personal computers, computer monitors, computer keyboards, modems, and other peripheral computer equipment to an individual who is licensed or certified to teach in an elementary or a secondary school in this state for use by that individual in preparation for teaching elementary or secondary school students.
  • Sales to a veterans' organization state headquarters.
  • Sales of animals by nonprofit animal shelters and county humane societies.
  • Sales to U.S. government agencies.
  • Sales to the State of Ohio or any of its political subdivisions.
  • Sales to other states and their political subdivisions if they exempt sales to the State of Ohio and any of its political subdivisions.
  • Casual sales except sales of motor vehicles, boats and outboard motors that are required to be titled, snowmobiles, documented boats, all-purpose vehicles, off-highway motorcycles and personal watercraft.
  • Certain rented motor vehicles that are transferred to the owner or lessee of a motor vehicle that is being repaired or serviced, if the purchaser is reimbursed for the cost of the rented motor vehicle by a manufacturer, warrantor, or provider of a maintenance, service, or other similar contract or agreement, with respect to the motor vehicle that is being repaired or serviced. (Effective September 29, 2015)
  • Transportation of property.
  • Motor vehicles sold in Ohio to nonresidents for immediate removal and titling outside the state.
  • Drugs that are or are intended to be distributed free of charge to a practitioner licensed to prescribe, dispense, and administer drugs to a human being in the course of a professional practice and that by law may be dispensed only by or upon the order of such a practitioner.
  • Motor vehicle fuel that is subject to the state motor fuel tax.
  • Motor vehicles and parts used for transporting tangible personal property by persons engaged in highway transportation for hire.
  • Emergency and fire protection vehicles and equipment used by nonprofit organizations in providing emergency and fire-protection services for political subdivisions.
  • Sales of used manufactured homes and used mobile homes, as defined in section 5739.0210 of the Ohio Revised Code, made on or after Jan. 1, 2000;
  • Sales of tangible personal property and services to a provider of electricity used or consumed directly and primarily in generating, transmitting, or distributing electricity for use by others, including property that is or is to be incorporated into and will become a part of the consumer’s production, transmission, or distribution system and that retains its classification as tangible personal property after incorporation; fuel or power used in the production, transmission, or distribution of electricity; and tangible personal property and services used in the repair and maintenance of the production, transmission, or distribution system, including only those motor vehicles as are specially designed and equipped for such use. The exemption provided in this division shall be in lieu of all other exemptions in division (B)(42)(a) of section 5739.02 of the Revised Code to which a provider of electricity may otherwise be entitled based on the use of the tangible personal property or service purchased in generating, transmitting, or distributing electricity.
  • Things used or consumed primarily in storing, transporting, mailing or otherwise handling purchased sales inventory in a warehouse, distribution center or similar facility when the inventory is primarily distributed outside this state to retail stores of the person who owns or controls the warehouse, distribution center, or similar facility.
  • Things used or consumed by a warrantor in fulfilling a warranty on tangible personal property.
  • Sales of drugs for a human being, dispensed pursuant to a prescription; insulin as recognized in the official United States pharmacopoeia; urine and blood testing materials when used by diabetics or persons with hypoglycemia to test for glucose or acetone; hypodermic syringes and needles when used by diabetics for insulin injections; hospital beds when purchased by hospitals, nursing homes and other medical facilities; and medical oxygen-dispensing equipment.
  • The purchase of durable medical equipment for home use, or mobility enhancing equipment, when made pursuant to a prescription and when such devices or equipment are for use by a human being.
  • Tangible personal property used in air, noise or water pollution control facilities by holders of pollution control certificates.
  • Tangible personal property to be resold in the form received.
  • Tangible personal property used or consumed in commercial fishing.
  • Gas, water, steam, and electricity delivered through pipes, conduits, or wires and sold by a public utility or, if applicable, a municipal gas utility.
  • Bulk water for residential use.
  • Tangible personal property incorporated into an energy conversion facility, solid waste energy conversion facility, or a thermal efficiency improvement facility by holders of the appropriate certificate.
  • Telecommunications service to call centers. (No longer an exemption of the sale of 800, WATS, or private communications services).
  • Sales of property for used directly in agricultural production.
  • Property used in the preparation of eggs for sale.
  • Sale and installation of agricultural land tile.
  • Sale and construction of portable grain bins to farmers.
  • Sales to persons licensed to conduct a food service operation of tangible personal property primarily used directly: to prepare food for human consumption for sale; to preserve food which has been or will be prepared for human consumption for sale by the food service operator, not including tangible personal property used to display food for selection by the consumer; and to clean tangible personal property used to prepare or serve food for human consumption for sale.
  • Ships or vessels or rail rolling stock used in interstate or foreign commerce and material used for repairing, altering, or propelling them.
  • Material, machinery, equipment and other items used in packaging property for sale by a manufacturer or retailer.
  • Building and construction material sold to contractors for incorporation into real property of federal, state, or local governments; religious and charitable institutions; a sports facility under section 307.696 of the Ohio Revised Code; or outside this state if exempt by that state.
  • Building and construction materials sold to construction contractors or persons engaged in the business of horticulture or producing livestock for incorporation into a horticulture or livestock structure.
  • Building materials and services sold to a construction contractor for incorporation into a building under a construction contract with an organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 when the building is to be used exclusively for the organization’s exempt purposes.
  • Property manufactured in Ohio and immediately shipped outside the state for use in the retail business, if sold by the manufacturer to the retailer and shipped in vehicles owned by the retailer.
  • Material incorporated as part of tangible personal property produced for sale by manufacturing, assembling, processing, or refining.
  • Tangible personal property used or consumed in a manufacturing operation.
  • Sales where the purpose of the consumer is to use or consume the things transferred in making retail sales and consisting of newspaper inserts, catalogues, coupons, flyers, gift certificates, or other advertising material which prices and describes tangible personal property offered for retail sale.
  • Sales to direct marketing vendors of preliminary materials such as photographs, artwork, and typesetting that will be used in printing advertising material; of printed matter that offers free merchandise or chances to win sweepstakes prizes and that is mailed to potential customers with advertising material described in section 5739.02 (B)(35)(a) of the Ohio Revised Code; and of equipment such as telephones, computers, facsimile machines, and similar tangible personal property primarily used to accept orders for direct marketing retail sales.
  • To use tangible personal property to perform a service listed in division (B)(3) of section 5739.01 of the Ohio Revised Code (repair; installation; towing, washing, cleaning, waxing, polishing or painting motor vehicles; transportation of persons, within Ohio, except by public transit systems or commercial airlines; laundry and dry cleaning (except coin operated); automatic data processing, computer service and electronic information service; telecommunications; satellite broadcasting service (audio and video); landscaping and lawn care; snow removal; private investigation and security; 1-900 information; personal care service, including skin care, application of cosmetics, manicures, pedicures, hair removal, tattoos, body piercing, tanning, massage and other similar services (not including hair care such as cutting, coloring, and styling); building maintenance and janitorial; exterminating; physical fitness facility; recreation and sports club) if the property is or is to be permanently transferred to the consumer of the service as an integral part of the performance of the service.
  • Parts and services used in repairing and maintaining aircraft with fractional share ownership (private aircraft whose ownership is shared by a group of people).
  • Sales of a digital audio work electronically transferred for delivery through use of a machine, such as a juke box, that does all of the following: (a) Accepts direct payments to operate; (b) Automatically plays a selected digital audio work for a single play upon receipt of a payment described in division (B)(55)(a) of this section; (c) Operates exclusively for the purpose of playing digital audio works in a commercial establishment.  (Effective October 1, 2017)
  • "Direct use" exemptions:
    • Material used or consumed directly in mining, farming, agriculture, horticulture, floriculture, or used in the production of and exploration for crude oil and natural gas. Motor vehicles titled and registered to operate on the highways generally do not qualify for exemption.
    • Tangible personal property used directly in rendering a public utility service.
    • Tangible personal property used or consumed in the preparation for sale of printed material.
    • Sales to organizations described in division (D) of section 5709.12 of the Ohio Revised Code.
  • Sales of investment metal bullion and investment coins.  (Effective October 1, 2021)

Note: This list of exemptions is merely an abbreviation of the law. The statutes and rules concerning sales tax exemptions are very long and complicated. Also there are hundreds of court decisions which affect the application of these exemptions. If you have any questions regarding a particular situation, please contact the Department of Taxation.

  • Rental of hotel rooms or similar sleeping accommodations for less than 30 days by establishments with five or more sleeping rooms.
  • Provision of landscaping or lawn care service, if annual sales of this service equal or exceed $5,000.
  • Provision of private investigation or security service.
  • Provision of information service through use of a nine-hundred telephone call (1-900).
  • Production of tangible personal property from material supplied by the customer. For example, a tailor using fabric furnished by the customer.
  • Building maintenance and janitorial service, if annual sales of this service equal or exceed $5,000.
  • Exterminating service.
  • Physical fitness facility service.
  • Recreation and sports club service.
  • Repair of tangible personal property (except repair of property which is exempt from sales tax).
  • Installation of tangible personal property (except installation of property which is exempt from sales tax).
  • Washing (except coin-operated), cleaning, waxing, polishing, or painting of motor vehicles.
  • Towing service for motor vehicles, this includes the conveyance of a wrecked, disabled, or illegally parked motor vehicle.
  • Laundry and dry cleaning service, excluding sales made through coin operated machines.
  • Automatic data processing, computer services, or electronic information services provided for use in a business. Electronic information services include, but are not limited to, Internet access charges and e-mail service charges for use in a business.
  • Certain telecommunication services.
  • Satellite broadcasting service.
  • Personal care service, including skin care, application of cosmetics, manicures, pedicures, hair removal, tattoos, body piercing, tanning, massage and other similar services. It does not include hair care: cutting, coloring, and styling.
  • Transportation of persons, within Ohio, except by public transit systems or commercial airlines.
  • Snow removal service, if annual sales of this service equal or exceed $5,000.
  • Storage of tangible personal property (except such property that the consumer of the storage holds for sale in the regular course of business).

Professional, personal, and insurance transactions are not taxable when any transfer of tangible personal property is a small item for which no separate charge is made.

Yes. The sale of a prepaid authorization number and/or a prepaid telephone calling card is considered a sale subject to sales tax, unless the purchaser has a statutory basis for claiming exception or exemption.

“Prepaid authorization number” means a numeric or alphanumeric combination that represents a prepaid account that can be used by the account holder solely to obtain telecommunications service, and includes any renewals or increases in the prepaid account.

"Prepaid telephone calling card” means a tangible item that contains a prepaid authorization number that can be used solely to obtain telecommunications service, and includes any renewals or increases in the prepaid account.

Prior to July 1, 2020, the charges for Internet service (on-line access to information stored in a computer) for use in business were subject to Ohio sales or use tax.  However, effective 7/1/2020, charges for Internet service for use in business are not subject to Ohio sales or use tax. 

The charges for Internet service for individuals are not subject to Ohio sales or use tax. 
 

 

 

 

The charge for creating a Web site on an ISP’s server is a charge for personal service and it is not subject to sales or use tax.

Basically, yes. However, warranties, extended warranties, maintenance agreements or service contracts covering exempt equipment would also be exempt.

Price discounts – The tax base is reduced when the discount is allowed at the time of sale. Also qualifying are cash and term discounts allowed by a vendor and taken by the consumer.

Coupons – The tax base is reduced when the customer uses a coupon supplied or published by the vendor free of charge. Manufacturers' coupons that are redeemable by any vendor and for which the vendor will be reimbursed by the manufacturer do not reduce the tax base.

Manufacturers' rebates –- The tax base is never reduced by any form of rebate for goods and services sold. The vendor must charge tax on the total amount charged at the time of the sale.

Trade-in Allowances:

  • New motor vehicles (including all-purpose vehicles and off-highway motorcycles but does not include manufactured homes or mobile homes) –- the tax base can be reduced on the sale of a new motor vehicle when a licensed new motor vehicle dealer accepts a motor vehicle in trade. No other item accepted in trade can reduce the tax base of a motor vehicle.

For example, a new car is priced at $18,500 and the customer receives a trade-in allowance of $500, leaving the net difference $18,000. The tax base becomes $18,000.

Note: The tax base is not reduced on the sale of a used motor vehicle when a trade-in is allowed.

  • New and used titled watercraft and outboard motors (includes titled personal watercraft) –- The tax base can be reduced on the sale of new and used watercraft and outboard motors when a licensed watercraft dealer accepts a watercraft, watercraft and trailer and/or outboard motor in trade.

Note: The tax base cannot be reduced when only a trailer is accepted in trade.

For all other sales, a trade-in allowance does not reduce the tax base.

 

“Food” means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. “Food” does not include alcoholic beverages, dietary supplements, soft drinks, or tobacco. Please refer to the information release Food Definition Change, ST 2004-01 for additional information.

Yes, soft drinks, alcoholic beverages, dietary supplements, and tobacco. Beverages that do qualify as food include milk or milk products, soy, rice, or similar milk substitutes, or items that contain greater than 50-percent vegetable or fruit juice by volume.

Bottled water, distilled water, mineral water, ice and carbonated water sold for ingestion by humans are considered food. Food items consumed off premises are not taxable. Water that contains natural or artificial sweeteners is a “soft drink” under R.C. 5739.01(CCC)(2)(c) and excluded from the definition of food. Please refer to the information release titled Food Definition Change, ST 2004-01 for additional information.

Medicines (including tonics), vitamin preparations and other non-prescription products are taxable.

Federal law prohibits states from imposing sales tax on items purchased with food stamps. This includes items, such as soft drinks, which are normally subject to Ohio sales tax.

Sales –- You are required to collect and remit sales tax on all sales including rentals, except for sales of food for consumption off the premises where sold. For example, if you are catering a wedding at your facility, you would be required to collect and remit sales tax on the sale of the food and beverages and on the rental of chairs, tables, dishware, stemware, silverware, napkins, tablecloths, silk flowers etc. If you are catering a wedding at a facility arranged for by the wedding party (not your facility or a facility arranged for by you), you would be required to collect and remit tax on sales of all beverages (soda, beer, wine, mixed drinks, etc.) and on all rental items, but you would not be required to collect tax on the sale of food as the food is consumed off the premises where sold.

Purchases –- You would be entitled to claim exemption on the purchase of all items that are purchased for “resale” (food, beverages and/or rental items). If you are licensed to conduct a food service operation pursuant to section 3732.03 of the Ohio Revised Code, you are entitled to claim exemption on the purchase of items primarily used directly in preparing and preserving food for human consumption for sale (not including items used to display food for selection by the consumer), and to clean items used to prepare or preserve food for human consumption for sale.

If your bed & breakfast has five or more rooms, you must charge sales tax on the total amount charged.

If your bed & breakfast has fewer than five rooms, you should separate the charges for the room from the charges for the food. You must collect sales tax on the amount charged for food. If you do not separate the room charges from food charges, you must collect sales tax on the total amount charged.

Yes. Effective Aug. 1, 2003 delivery charges by a vendor for preparation and delivery to a location designated by the consumer of tangible personal property or a service, including transportation, shipping, postage, handling, crating, and packing are taxable.

Floormats, area rugs and other types of unattached floor coverings are sales or rentals of tangible personal property and are subject to the sales tax. Also, the outright purchase of carpet, vinyl flooring and tiles to be installed by the consumer or a third party are taxable.

The sale and installation of carpeting is a retail sale and taxable on material and labor. Labor charges to install carpeting supplied by others are taxable.

The sale and installation of all other types of floor coverings (wood, vinyl, tile, etc.) is considered a construction contract; the contractor is required to pay tax on all material and equipment used or consumed in the installation.

Yes, items that become a part of real property are taxable unless the contractee is:

  • the State of Ohio or one of its political subdivisions;
  • the federal government;
  • a house of worship or religious education;
  • a non-profit organization operated for certain charitable purposes as defined in the sales tax law;
  • contracting for the original construction of a sports facility under section 307.696 of the Ohio Revised Code;
  • contracting for a hospital facility entitled to exemption under section 140.08 of the Ohio Revised Code;
  • contracting for real property located in another state when the materials are not subject to tax in that state; or
  • contracting for a horticulture or livestock structure for a person engaged in the business of horticulture or producing livestock.

Also, building and construction materials sold to a construction contractor for incorporation into real property outside this state are not subject to Ohio sales or use tax if such materials would be exempt from tax when sold to the contractor in the other state. The contractee’s exemption does not apply to the contractor’s tools, equipment, rentals of personal property, form lumber, temporary items such fencing, lighting, etc., and any other purchases of tangible personal property, or taxable services, not incorporated into real property.

There is a special Contractor's Exemption Certificate and a Construction Contract Exemption Certificate prescribed by the Tax Commissioner for claiming exemption.  A copy of each form is available on this site by searching Tax Forms.

Farmers are entitled to claim exemption on the purchase of items of tangible personal property used directly in the production of a product for sale. This would include, but is not limited to: seeds, fertilizers, insecticides, pesticides, field tiles, tractors, plows, combines, and specially designed motor vehicles with PTO applicator units that travel from farm to farm to apply chemicals and fertilizers. This would not include: almost all motor vehicles licensed to operate on the highway [passenger cars; pick-up trucks; larger trucks and trailers that are primarily used to haul people, animals, raw materials (seeds, fertilizers, insecticides and pesticides) to the farm and finished goods (corn, wheat, soy beans, cattle, hogs, etc.) from the farm to market], lawn mowers, weed eaters, items used to maintain set-a-side fields, chain saws, all purposes vehicles that are primarily used for recreation, and home garden equipment.

To claim exemption, a fully completed exemption certificate must be given to your supplier; the certificate is available by searching Tax Forms.

A rented motor vehicle is a motor vehicle for which the possession is transferred for a fixed or indefinite term, for consideration.  See R.C. 5739.01(SS). 

Prior to July 1, 2019, all sales of corrective eyeglasses, frames, and contact lenses are subject to the tax unless a specific exemption or exception applies.  Effective July 1, 2019, if issued pursuant to a prescription and for a human being, the sale of corrective eyeglasses and frames or contact lenses are not subject to the tax.

Prior to July 1, 2019, all sales of corrective eyeglasses or contact lenses are subject to the tax unless a specific exemption or exception applies.  Effective July 1, 2019, if issued pursuant to a prescription and for a human being, the sale of corrective eyeglasses or contact lenses are not subject to the tax.

If all of the following apply, then no sales or use tax is due: 

(1)    The dealer pays the owner of the rented vehicle for its use;  

(2)    The dealer is providing the rented motor vehicle because the customer’s motor vehicle is being repaired or serviced pursuant to an agreement of the manufacturer, warrantor, administrator, or other obligor; and 

(3)    The dealer receives reimbursement for the cost of the rental vehicle from the manufacturer, warrantor, administrator, or other obligor.

Nonprescription “readers” are always taxable unless a specific exemption or exception applies.  If readers are issued pursuant to a prescription and for a human being, they may be purchased exempt of the tax.  The prescription or a fully completed exemption certificate should be provided to the vendor.

Effective April 1, 2020, feminine hygiene products are no longer taxable in Ohio.  “Feminine hygiene products” are defined by statute to include tampons, panty liners, menstrual cups, sanitary napkins and other similar tangible personal property designed for feminine hygiene in connection with the human menstrual cycle. 

Other items that will qualify as “feminine hygiene products” include reusable and disposable pads, menstrual discs and menstrual sponges.  However, clothing items are considered tangible personal property and are subject to the tax.

“Grooming and hygiene products” including soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and screens are specifically excluded from the definition of “feminine hygiene products” and are still considered taxable. Included in the definition of “grooming and hygiene products” are items like douches, cleansing cloths and washes and feminine hygiene deodorant sprays and are therefore subject to the tax.

No.  A vendor is not required to obtain an exemption certificate from the consumer for the purchase of exempt feminine hygiene products.

Effective April 1, 2020, sales of certain diapers and incontinence underpads are exempt from sales and use taxes if all of the following apply:

  1. They are sold pursuant to a prescription.
  2. They are sold for the benefit of a Medicaid recipient with a diagnosis of incontinence.
  3. They are sold by a Medicaid provider that maintains a valid provider agreement under R.C. 5164.30 with the Department of Medicaid.

A “diaper” is an absorbent garment worn by humans who are incapable of or have difficulty controlling their bladder or bowel movements.  An “incontinence underpad” is an absorbent product, not worn on the body, designed to protect furniture or other tangible personal property from soiling or damage due to human incontinence. 

Pursuant to R.C. 5739.03, the vendor must obtain a fully completed exemption certificate from the consumer claiming the exemption.  Infant diapers and adult diapers sold without a prescription and/or by non-Medicaid providers are not covered by this exemption and are still subject to the tax. 

Generally, the gold, silver, platinum, or palladium bullion described in 26 U.S. Code §408(m)(3)(B) should be equal to or exceed the minimum fineness that a designated contract market requires for these metals.  The IRS currently requires the following fineness:

  • Gold: .995 fine
  • Silver: .999 fine
  • Platinum: .9995 fine
  • Palladium: .9995 fine

The exemption found in R.C.5739.02(B)(57) is effective October 1, 2021.

An investment coin means any coin composed primarily (more than 50%) of gold, silver, platinum, or palladium.

The exemption found in R.C.5739.02(B)(57) is effective October 1, 2021.

Additional Resources

Additional Resources