Apr 24, 2017
From KPMG TaxWatch
The Ohio Board of Tax Appeals recently addressed whether particulate removal services provided to restaurants and bars selling draught beer were subject to Ohio sales tax. The services, which were performed on a regular schedule, were intended to remove and prevent the buildup of bacteria, yeast, mold, beer stones, and other undesirable particulates in draught beer lines. Under Ohio law, sales and use tax is imposed on building maintenance and janitorial services. On audit, the Tax Commissioner determined that the taxpayer was providing taxable building maintenance and janitorial services and assessed tax on its sales.
On appeal, the taxpayer argued that its services were “preventative or restorative in nature” and were intended to keep the draught beer systems in ordinary operating condition. The taxpayer asserted that janitorial and maintenance services, by contrast, were largely cosmetic in nature and that any cleaning that occurred in connection with its services were incidental to the primary preventative/restorative service. The Board of Tax Appeals, citing to a previous Board decision addressing the cleaning and maintenance of motor vehicles, found that there was a distinction between removing contaminants for the purpose of making property “clean” or “fresh” and removing contaminants to maintain a proper operating condition. In the Board’s view, the taxpayer’s services were provided on a regular basis to detect and remove clogs in the beer lines and to ensure the draft systems were operating optimally. Accordingly, the Board held that the taxpayer’s services constituted regular maintenance services necessary for the proper functioning of the draught beer equipment, and any cleaning of the system was incidental to the nontaxable maintenance service. As such, the taxpayer’s services were not subject to Ohio sales tax. Please contact Greg Ruud at 513-763-2463 with questions on Great Lakes Bar Control Inc. v. Testa.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.