United States

Ohio: Guidance Issued on Remote Seller Nexus Law

Oct 30, 2017
From KPMG TaxWatch

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The Ohio Department of Taxation recently issued one new information release and revised another information release to account for recently-enacted remote seller nexus legislation. Among other changes House Bill 49, the Ohio FY 2018 budget bill, requires out-of-state sellers to collect and remit Ohio sales and use tax if they have Ohio gross receipts that exceed $500,000 and either: (1) use in-state software to sell or lease taxable tangible personal property or services; or (2) provide, or enter into an agreement with another party to provide a content distribution network in Ohio used to “accelerate or enhance the delivery of the seller’s website to consumers.” These provisions are effective January 1, 2018 and a retailer meeting these provisions would be required to file its first sales and use tax return by February 23 for the month of January 2018.  

The new information release, ST 2017-02, addresses the remote seller provisions included in House Bill 49. Notably, the release indicates that the Department will likely take a broad approach as to what constitutes “in-state software.” An example in the release addresses an out-of-state retailer that sells clothes through its website and a catalog application downloaded onto a customer’s computer or cell phone. It appears that in the Department’s view, the catalog application and “the html and java script coding used in displaying the seller’s website on the customer’s computer or cell phone” constitute in-state software, the presence of which meets the physical presence standard set forth in Quill and creates a collection duty for the retailer (when coupled with over $500,000 of sales).

The Department also recently revised its general information release on sales and use tax nexus. This information release sets forth certain “safe harbors” where the Department will not require an out-of-state seller to collect and remit tax. One safe harbor exists where an out-of-state seller grants a license to use software in Ohio, assuming the seller does not provide technical assistance. Another safe harbor exists where an out-of-state seller maintains a website on a server in Ohio owned by a third-party. Beginning January 1, 2018, the out-of-state seller must have less than $500,000 in Ohio gross receipts for these safe harbors to apply. For more information on Ohio’s newly-enacted nexus provisions, please contact Dave Perry at 513-763-2402. 

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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.