Maya Chen
Ohio generally charges sales tax on rentals and leases of tangible personal property, unless an exemption applies. The base state sales tax rate in Ohio is 5.75%, but local rates can range from 0% to 2.25%, bringing the total sales tax range to 5.75-8%. In Ohio, sales tax nexus is created if a business has a physical presence in the state, such as employees, an office, or a place of business. Additionally, businesses located outside of Ohio may also be subject to its sales and use tax laws if they meet certain economic nexus thresholds. For short-term rentals, the guest pays the lodging tax, but the host is responsible for collecting and paying it to the proper tax authority.
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What You'll Learn
Ohio sales tax on short-term rentals
In Ohio, short-term rentals are defined as stays of less than 30 days. The standard overnight lodging tax in the state is 6%, but this may vary from county to county and can exceed this maximum rate.
If you offer five or more sleeping rooms for short-term rental, you are likely responsible for collecting, filing, and remitting sales taxes to the Ohio Department of Taxation. This includes the total amount charged for a room and food, as well as other fees such as cleaning, pet, and extra person fees.
Some short-term rental marketplaces, such as Airbnb and Vrbo, collect local lodging taxes from guests when a short-term rental is paid for. If taxes aren't collected by the marketplace, you are responsible for collecting and remitting them to state tax authorities. It is important to consult with a tax specialist to understand your specific tax obligations.
There are situations where you are not required to collect lodging taxes. For example, long-term rentals are exempt from short-term lodging taxes. Additionally, purchases of accommodations by certain organizations, such as governments, charities, and nonprofit organizations, may also be exempt.
It is worth noting that House Bill 161, if passed into law, could result in an increase in state, county, and local sales and lodging taxes for short-term rental stays in Ohio.
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Ohio sales tax on rented digital products
Ohio generally charges sales tax on rentals and leases of tangible personal property, unless an exemption applies. However, the definition of "tangible personal property" becomes complicated when discussing digital products. This is because digital products cannot be held or touched in the same way as physical items.
Some states do not charge tax on digital products because they are not considered "tangible". However, other states treat intangible goods as taxable because they can be seen or experienced. Ohio is one such state that considers specified digital products as taxable, whether rented or owned. This includes digital audio works, audiovisual works, books, magazines, newspapers, newsletters, reports, and greeting cards.
The taxability of digital goods can be challenging for businesses to navigate, as states define digital goods differently. In Ohio, sellers must understand how sales tax is structured to remain compliant. The state uses a layered approach, combining a base rate with additional local taxes depending on the buyer's location. Before collecting sales tax, businesses must determine if they have nexus in the state, which is established through physical presence or economic activity.
Ohio's booming ecommerce sector is driven by a strong logistics network, a central US location, and a surge in digital consumer spending. This growth has increased the complexity of tax compliance, and businesses that ignore or misunderstand their obligations risk penalties, audits, and setbacks. Therefore, it is essential for digital retailers to understand which goods and services are taxable to ensure accurate sales tax collection.
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Ohio sales tax on rented tangible personal property
Ohio generally charges sales tax on rentals and leases of tangible personal property, unless an exemption applies. This means that if you are renting out tangible personal property in Ohio, you have a sales tax collection responsibility there.
When it comes to short-term rentals, those registered with the Ohio Department of Taxation are required to file returns each assigned filing period, regardless of whether they had short-term rental income or collected lodging taxes. Such returns are commonly known as "zero-dollar returns." Local tax authorities may have their own requirements. In Ohio, the total amount charged for a room and food is subject to state sales tax if the establishment offers five or more sleeping rooms for short-term rental. This includes items such as cleaning fees, pet fees, rollaway bed fees, and extra person fees.
There are situations in which you aren't required to collect lodging taxes in Ohio. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. In Ohio, purchases of accommodations by organizations including the U.S. government, Ohio state government, other state governments that exempt sales to the state of Ohio, charities, churches, and nonprofit organizations may be exempt from short-term lodging taxes. Exemption certificates may be required.
Additionally, stand-alone delivery charges that aren't related to a sale of tangible personal property are generally exempt from sales tax in Ohio. However, if such a delivery charge is passed on to the consumer, it becomes part of the sales price and is taxable if the delivered goods are taxable.
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Ohio sales tax collection requirements
Sales Tax Nexus
The concept of "sales tax nexus" is pivotal in understanding Ohio's sales tax collection requirements. A sales tax nexus is established when a business has a significant presence or connection in a state, triggering sales tax collection responsibilities. In Ohio, a business can create a sales tax nexus through two primary ways:
- Physical Nexus: This occurs when a business has a physical presence in Ohio. According to the Ohio Department of Taxation, a physical nexus is created if a business has employees, agents, representatives, or independent contractors conducting activities such as taking orders, making sales or deliveries, or installing or assembling tangible personal property within the state. Maintaining an office, owning or renting property, delivering goods to customers, or assembling and servicing products in Ohio also establish a physical nexus.
- Economic Nexus: Even without a physical presence, a business can establish an economic nexus in Ohio. As of August 1, 2019, Ohio's Wayfair law states that a business located outside of Ohio with sales of tangible personal property delivered into the state exceeding $100,000 or 200 separate transactions in the current or previous calendar year must register with the Ohio Department of Taxation to collect and remit sales tax.
Registration and Licensing
Once a business has determined that it has a sales tax nexus in Ohio, the next step is to register for a Vendor's License or a Seller's Use Tax License, depending on the situation. This can be done online through the Ohio Department of Taxation's Business Services Gateway or by mail using Form ST-100.
Sales Tax Rates and Calculation
Ohio's base state sales tax rate is 5.75%. However, many counties, cities, and special districts impose additional local sales taxes, known as surtax, which can range from 0% to 2.25%. To determine the applicable tax rate for a specific location, businesses can use the Ohio Department of Taxation's Sales and Use Tax Rate Search Tool. The total amount of sales tax to be collected from customers is calculated by adding the statewide base rate and any applicable local rates to the taxable sales price of goods or services.
Rental and Leasing Considerations
Ohio generally charges sales tax on rentals and leases of tangible personal property unless specific exemptions apply. This includes situations where there is a transfer of possession without a change in ownership, such as renting a property or leasing a car. Lodging tax on short-term rentals, defined as stays of less than 30 days, is also subject to sales tax in Ohio. If an establishment offers five or more sleeping rooms for short-term rental, they are typically responsible for collecting and remitting sales taxes to the Ohio Department of Taxation. However, long-term rentals are usually exempt from short-term lodging taxes.
Compliance and Filing
Businesses registered with the Ohio Department of Taxation are required to file tax returns each assigned filing period, regardless of whether they had short-term rental income or collected lodging taxes during that period. These returns are often referred to as "zero-dollar returns." Compliance with local tax authorities' requirements is also essential, as they may have their own rules and regulations regarding sales tax collection and filing.
In conclusion, Ohio's sales tax collection requirements are multifaceted and depend on the specific circumstances of each business. Understanding the concept of sales tax nexus, registering for the appropriate licenses, calculating the correct sales tax rates, and complying with filing obligations are crucial aspects of navigating sales tax in Ohio.
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Ohio sales tax rates
Sales tax nexus is a term used to describe the "invisible line" that, when crossed, creates a sales tax collection responsibility in a particular state. In Ohio, sales tax nexus is created if a business has a physical presence in the state, such as employees, agents, representatives, solicitors, installers, salespeople, or independent contractors. Additionally, owning, renting, or leasing real property or tangible personal property in Ohio can also establish nexus.
Even without a physical presence, a business can have nexus in Ohio if it meets certain economic nexus thresholds. As of August 1, 2019, Ohio's law requires any business without a physical presence in the state to obtain an Ohio seller's use tax license and collect sales tax if they meet one or both of the following criteria: gross receipts into Ohio exceeding $100,000 or at least 200 transactions in Ohio.
Regarding rentals, there are situations in which collecting lodging taxes is not required in Ohio. For example, long-term rentals are generally exempt from short-term lodging taxes. Additionally, purchases of accommodations by specific organizations, such as governments, charities, churches, and nonprofit organizations, may be exempt from short-term lodging taxes.
When it comes to short-term rentals, those offering five or more sleeping rooms for short-term rental are typically responsible for collecting, filing, and remitting sales taxes to the Ohio Department of Taxation. This includes charges for rooms, food, and various fees. It is important to note that local tax authorities may have their own specific requirements for tax collection.
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Frequently asked questions
The state of Ohio does collect sales tax on rent. However, there are some situations in which you aren't required to pay lodging taxes, such as if a guest rents for long-term rather than short-term.
The base state sales tax rate in Ohio is 5.75%. However, the local rates range from 0% to 2.25%, so the total sales tax range is 5.75% to 8%.
In Ohio, short-term rentals are defined as stays of less than 30 days.
If you offer five or more sleeping rooms for short-term rental, you are likely responsible for collecting, filing, and remitting sales taxes to the Ohio Department of Taxation.
You can register for a Vendor's License through the Ohio Department of Taxation's Business Services Gateway. Alternatively, you can register by mail using an application form (Application for a Vendor's License – Form ST-100).
