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Ohio Abandons the Streamlined Sales Tax Project
For three years we have been telling you about Ohio’s planned changes in sales tax sourcing
rules. These changes were part of a larger plan to seek membership in the Streamlined Sales
Tax Project (SSTP). SSTP is a collective initiative entered into by over 25 states to increase
sales tax collection among non-resident taxpayers by creating uniform filing requirements,
definitions, exemptions, and increased collection efforts among all participating states.
While Ohio successfully made several changes to its sales tax law, there was one sales tax procedure
that had not completely changed and that was holding it back from becoming a full member state.
Traditionally, Ohio sitused sales tax within the state using origin based sourcing. This means that
businesses that shipped tangible personal property from an Ohio location to a customer located in Ohio
would charge sales tax based on the rate the selling business was located. The SSTP requires all member
states to require destination based sourcing. So when goods are shipped from an Ohio business to another
Ohio business, the selling company would have to charge sales tax based on the rate in the customer’s location.
Ohio has been phasing in the change from origin based sourcing to destination based sourcing. All
companies with Ohio destination sales of greater than $30 million were required to make the change
in 2005 and any business with less than $30 million of destination sales could volunteer to make the
switch before the January 1, 2008 deadline. At the same time, Ohio decided to provide a small business
exception so that business with less than $500,000 of delivery sales could stay on origin based sourcing.
However, the Streamlined Sales Tax Governing Board did not approve the small business exception and, as
a result, the Ohio Tax Commissioner decided to no longer be involved with the Project.
What does this mean for Ohio businesses? Any business that has not yet made the change to destination
based sourcing can now stay on origin based sourcing. This will be all businesses with less than $30
million of delivery sales which did not voluntarily switch to destination based sourcing before the
January 1, 2008 deadline. All businesses that have already made the switch to destination based
sourcing are not permitted to switch back now to origin based sourcing.
For additional information, contact Jennifer Tapia at 216-774-1154 or jtapia@cohencpa.com.
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