Effective Date: August 1, 2019 economic; September 1, 2019 Marketplace Facilitation
Threshold: $100,000 or 200 transactions
Measurement Date: Current or preceding calendar year
Includable Transactions: Retail* sales, including marketplace sales (*Clarification and update based on the 2021 SST Disclosed Practice 8 submitted by the state)
When You Need to Register Once You Exceed the Threshold: Marketplace facilitator: 1st of month following at least 30 days after meeting threshold; Remote sellers and marketplace sellers: the next day after meeting or exceeding the threshold
Ohio has enacted legislation that creates new requirements for certain remote sellers effective August 1, 2019 and marketplace facilitators must collect effective September 1, 2019. The new legislation requires that remote sellers and marketplace facilitators register and collect sales tax if the seller/facilitator:
The new legislation amends the previous economic nexus standard of $500,000. The law also repeals Ohio’s provisions relating to software (cookie) nexus as well as click-through and affiliate nexus. There is no longer a presumption of nexus if referrals from a person in exchange for commission exceed $10,000.
The bill defines a “marketplace facilitator” as a person that owns, operates, or controls a physical or electronic marketplace through which retail sales are facilitated on behalf of one or more marketplace sellers, or an affiliate of such a person. A sale is considered facilitated by the marketplace if the marketplace facilitator engages in activities such as listing products, communicating offers, fulfilment or storage services, and customer service on behalf of sellers using the platform.
A marketplace facilitator must begin collecting and remitting sales tax on Ohio sales on the first day of the first month that begins at least thirty days after meeting one of the economic nexus thresholds. If a marketplace facilitator reached on of the thresholds in the prior year, the marketplace facilitator must begin collection by September 1, 2019 (one month after the effective date). The marketplace facilitator will file the September return and remit payment on or before October 23, 2019.
Ohio is an origin-based state for sales tax, but the new law will require marketplace facilitators to source their facilitated sales to the customer location (destination sourcing).
The legislation also creates an option for large remote sellers to request a waiver from the tax commissioner for a marketplace facilitator not to be treated as a seller in regards to that marketplace seller if the following conditions are met:
A seller with both marketplace sales and non-marketplace sales such as through their website must include both types of sales toward their threshold calculation. If their total combined sales exceed the thresholds, they must register for a seller’s use tax account. However, the seller is only required to collect and remit tax on their taxable non-marketplace sales. (Amended Sub. H.B. 166, Laws 2019, Effective August 1, 2019; Ohio Tax Alert: Substantial Nexus and Marketplace Facilitator Changes, Ohio Department of Taxation)
UPDATE: Per the Ohio Department of Revenue website, here is how to calculate “gross receipts” for purposes of the economic nexus threshold: “R.C. 5741.01 utilizes gross receipts; however R.C. 5739.01(I) and R.C. 5739.01(B) defines “receipts” and “sales” to effectually be retail sales. Therefore, only those sales which are considered retail sales are included in the economic nexus threshold calculation. For example, only those enumerated services in R.C. 5739.01(B)(3) are utilized when determining the economic nexus threshold. Additionally, “retail sales” do not include “sales for resale”.”