Services for software development subject to Ohio use tax.

A taxpayer purchased computerized information services from an information services provider and argued that the “true object” of the services was the code used for application software. The Board of Tax Appeals, however, considered the taxpayer’s purchase to be employment services. It stated that to be considered an employment service, three requirements must be met: one, personnel is provided on a temporary or long-term basis; two, the personnel perform work under the supervision or control of another entity; and, three, the personnel are compensated by the provider of the service. The court decided that the services provided met all three requirements and that the taxpayer was paying for and benefited from the labor. (Reed Elsevier, Inc. v. Thomas M. Zaino, Tax Commissioner of Ohio, Docket No. 2003-J-1083)

Posted on August 5, 2004