Ohio Enacts Economic Nexus Legislation

Effective Date: January 1, 2018 – enforced while litigation is pending; NEW LEGISLATION: August 1, 2019 economic; September 1, 2019 Marketplace Facilitation

Threshold: $500,000 or provides or enters into an agreement with another person to provide a content distribution network in Ohio to accelerate or enhance the delivery of the seller’s web site to consumers, provided the seller has gross receipts in excess of $500,000; NEW LEGISLATION: $100,000 or 200 transactions

Measurement Date: Current or preceding calendar year

Includable Transactions: Retail sales; Marketplace sales included towards the threshold for individual sellers

When You Need to Register Once You Exceed the Threshold: Next transaction

Effective January 1, 2018, a seller is deemed to have substantial nexus in Ohio if the seller:

• uses in-state software to sell or lease taxable tangible personal property or services to consumers, provided the seller has gross receipts in excess of $500,000 in the current or preceding calendar year from the sale of tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in Ohio, or
• provides or enters into an agreement with another person to provide a content distribution network in Ohio to accelerate or enhance the delivery of the seller’s web site to consumers, provided the seller has gross receipts in excess of $500,000 in the current or preceding calendar year from the sale of tangible personal property for storage, use, or consumption in Ohio or from providing services the benefit of which is realized in Ohio

“In-state software” means computer software, as defined in section 5739.01, that is stored on property in Ohio or is distributed within Ohio for the purpose of facilitating a seller’s sales. Computer software means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task. This could include internet cookies.

“Content delivery network” means a system of distributed servers that deliver web sites and other web content to a user based on the geographic location of the user, the origin of the web site or web content, and a content delivery server. Ohio previously enacted Click Through and Affiliate nexus in 2015. It will be interesting to see if a challenge is upheld as the Ohio Commercial Activity Tax (CAT) has an $500,000 economic nexus threshold which has been upheld as an adequate quantitative standard that ensures that taxpayer’s nexus with Ohio is substantial. (H.B. 49, Laws 2017)

UPDATE: Ohio’s economic nexus legislation has been challenged. NEW: The legislation did not include a stay of enforcement and therefore, this provision can still be enforced by Ohio while the litigation is pending. There is a chance that if the state is successful, the law could be enforced effective January 1, 2018. An evaluation of the risk of non collection should be evaluated on a case by case basis.For details, click here.

UPDATE: On December 18, 2018, the American Catalog Mailers Association (ACMA) voluntarily withdrew its lawsuit challenging Ohio’s economic nexus legislation (American Catalog Mailers Association v. Joseph W. Testa, Franklin Cty., Ohio Ct. Com. Pl., No. 17-CV-11440, voluntary dismissal 12/18/18)

UPDATE: Ohio passed new economic nexus provisions, effective August 1, 2019, in addition to legislation for marketplace facilitators, effective September 1, 2019. The legislation changes the economic threshold from $500,000 to $100,000 or 200 transactions. The law also repeals Ohio’s provisions relating to software (cookie) nexus as well as click-through and affiliate nexus. For more information, read our updated news item.