“The sales tax for businesses in Ohio is 5.75%”

What Does The Ohio Sales Tax For Businesses Mean?

Overall, Ohio businesses have benefited from major tax cuts, and the state’s company rates are lower than those of other states. Between the late 1970s and the first decade of the new century, businesses paid a lower share of Ohio state and local taxes, while individuals paid a higher share. The General Assembly then approved the phase-out of two key business taxes – the corporate franchise tax on non-financial enterprises and the tangible personal property tax – in favor of the new Commercial Activity Tax in 2005. (CAT). 

Ohio’s business tax, known as the franchise tax, was levied on earnings or net value. The tangible personal property tax was a local tax on non-land and non-building items such as machinery, equipment, furniture, fixtures, and inventory.

How Much Is The Ohio Sales Tax For Businesses?

Ohio has a 5.75 percent state sales tax and allows local governments to collect a 2.25 percent local choice sales tax. There are 579 local tax jurisdictions in the state, collecting an average of 1.504 percent in local taxes.

The highest sales tax rate in Ohio is 8% in the cities of Cleveland and Columbus when combined with the state sales tax (and 41 other cities).

Ohio Sales Tax For BusinessesThreshold Limit
5.75%$100,000 economic sales threshold limit and 200 transaction limit

Do You Need To Collect Ohio Sales Tax For Your Ecommerce Business?

If you have a nexus in Ohio, you must collect sales tax. When it comes to nexus, sellers can be linked to a state in two ways: physically or economically. Physical nexus is defined as having enough tangible presence or activity in a state to make paying sales tax there beneficial. Passing a state’s economic threshold for total income or number of transactions is referred to as economic nexus.

Therefore, this is what the Ohio sales tax for businesses is all about. Now the question arises: what types of goods and services are taxable under Ohio sales tax? Let’s see.

What Types Of Goods and Services Are Taxable In Ohio?

The first step in sales tax compliance is determining if the products or services your company offers are taxable in Ohio.

Traditional Goods or Services

Physical items, such as furniture, home appliances, and automobiles, are all subject to sales tax in Ohio.

Sales taxes are not charged on prescription medications, groceries, or gasoline. In Ohio, some services are subject to sales tax. 

On the sale of digital commodities such as digital audiovisual work, digital audio work, and digital books, Ohio requires firms to collect sales tax.

Digital Goods or Services

Anything that is provided electronically, such as an album downloaded from iTunes or a video purchased from Amazon, is considered a digital good or service.

Businesses in Ohio are required to collect sales tax on digital goods including downloading movies, music mp3s, and ebooks.

Therefore, if you are dealing in any of these goods and services you are subject to pay sales tax in Ohio. Now let’s move on to see the tax collection and tax filing procedure in Ohio.

Tax Collection

You’ll need to figure out how much sales tax to charge different clients after you receive your seller’s permit and start your business. It is critical for business owners to collect the correct rate of sales tax in order to prevent fines and the possibility of costly audits.

When calculating sales tax, you must account for the following categories of purchases:

  • Store Sales- Calculating sales tax for traditional business owners selling goods or services on-site is simple: all sales are taxed at the rate determined by the store’s location.
  • In-state Sales- The state of Ohio has a sales tax regime known as origin-based sales tax. This means that long-distance sales in Ohio are taxed based on the buyer’s address. The state, county, and local sales taxes are all subject to this law.
  • Out-of-state Sales- On out-of-state sales, only businesses with nexus in other states are required to pay sales tax. A company’s actual presence in another state is referred to as a “nexus.”

Tax Filing

You’re ready to file your sales tax return now that you’ve applied for your Ohio seller’s permit and learned how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines by adhering to all filing deadlines.

Businesses in Ohio are required to file sales tax forms and make sales tax payments online.

How often do you need to file the sales tax return in Ohio?

  • Semi-Annual Filing- If your company receives less than $200 in sales tax every month, you must file returns on an annual basis.
  • Quarterly Filing- If your company collects between $200 and $5,000 in sales tax every month, you should file returns every three months.
  • Monthly Filing- If your company receives more than $6,250 in sales tax per month, you must file returns on a monthly basis.

What If You Do Not File The Ohio Sales Tax Return Before The Deadline?

Filing Deadline

Unless it’s a weekend or a federal holiday, all Ohio sales tax returns are due on the 23rd of the month. If it’s a weekend or a federal holiday, the deadline is pushed out to the next working day.

Penalty for Late Filing

When a taxpayer fails to timely submit a return or repay the tax due, the state of Ohio imposes a Late Filing Penalty of up to $50.00 or 10% of the tax amount due, whichever is larger.

When a taxpayer fails to pay the full amount of tax owed, Ohio imposes a Late Payment Penalty, which can include a penalty of up to 15% of the tax payable, plus interest.

Need Assistance With Ohio Sales Tax

If you have any questions about the Ohio Sales Tax in 2022, please do not hesitate to contact us. FreeCashFlow is a tax and accounting firm in Los Angeles, California, with over 20 years of experience. With our tax and accounting services, we will be able to provide you with the finest possible service.

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