Ohio Discusses Taxability of Internet Services Equipment.

In an information release, the Ohio Department of Taxation has identified two types of equipment used in internet service that may be subject to sales and use tax. A server may be taxable based on its use. If it is used primarily for e-mail services, it would be taxable. If the server were used for business customers, it may be eligible for a credit given to providers of electronic information services. Modems and routers provided to customers are also taxable. The service provider can collect and remit sales tax from the customer on separately stated equipment charges and claim a retail exemption. If not separately stated, the entire transaction is taxable. As an incentive to taxpayers to appropriately pay the tax, a penalty of 5% imposed if exemptions are inappropriately taken will be effective January 1, 2005. (Sales and Use Tax Information Release ST 2004-03, Ohio Department of taxation, December 20, 2004)

Posted on January 21, 2005