Ohio Updates Guidance on Taxability of Internet Access and Online Services

The Ohio Department of Taxation has updated guidance on the state’s application of sales and use tax to Internet access and online services. Included in Ohio’s definition of sale and selling is automatic data processing, computer services, or electronic information services that are or are to be provided for use in business when the true object of the transaction is the receipt by the consumer of automatic data processing, computer services, or electronic information services rather than the receipt of personal or professional services to which automatic data processing, computer services, or electronic information services are incidental or supplemental. The updated release provides examples of electronic information services that are subject to Ohio sales and use tax for business use: subscription services, inventory advertising, on-line chat features, mass e-mails, and credit reports (not provided by a consumer credit reporting agency for purposes of the Fair Credit Reporting Act). Electronic information services do not include personal or professional services. If a transaction includes electronic information services and personal or professional services, the department will evaluate if the electronic services render a significant benefit or are incidental to the provision of the personal or professional services. If a provider of online services combines taxable and nontaxable services for a single fee and does not provide a specific description on its invoices, the department may see it as a bundled transaction, in which case the entire amount would be subject to tax. (ST Information Release 1999-04, Ohio Department of Taxation, December 22, 2015)

Posted on March 23, 2016