Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

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Ohio State Tax Blog :: Sales and Use Tax, Ohio CAT, Multistate Tax, Ohio Tax Attorney
Sales and Use Tax In Ohio PDF Print E-mail
Friday, 18 October 2013 18:12

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

Last Updated on Friday, 18 October 2013 18:16
 
Illinois Supreme Court Rules "Click Through Nexus" Law Preempted PDF Print E-mail
Thursday, 31 October 2013 19:56

Illinois enacted its “click-through nexus” or “Amazon” law in 2011 expanding sales/use tax collection obligations to out-of-state retailers who contract with Illinois residents to refer customers via weblinks, which is a form of performance marketing. The Performance Marketing Association (PMA) quickly challenged the law asserting it violated the Commerce Clause of the United States Constitution and was preempted by the federal Internet Tax Freedom Act (ITFA). The PMA was granted summary judgment on both issues and the State appealed directly to the Illinois Supreme Court.

The Supreme Court agreed that Illinois’ click-through nexus law was preempted by the ITFA which prohibits states from imposing multiple or discriminatory taxes on electronic commerce. Performance Marketing Assoc. v. Hamer, 2013 IL 114496 (Oct. 18 2013). The Court found the law to be discriminatory because it imposed the sales/use tax collection obligation on retailers using online performance marketing, but not retailers using offline (e.g., print or broadcast) performance marketing. This is an interesting position, not considered by the New York Court of Appeals which held that its similar click-through nexus law did not violate the Commerce Clause and was enforceable. Justice Karmeier’s dissent criticizes the majority for failing to reach the Constitutional issue.

There is certainly much more to come regarding the validity of click-through nexus laws. In Ohio, Governor Kasich vetoed the passage of click-through nexus laws by the General Assembly earlier this year.

Last Updated on Thursday, 31 October 2013 19:59
 
Ohio Sales Tax Applies to Full Value of "Deal of the Day" Vouchers PDF Print E-mail
Tuesday, 25 February 2014 00:00

The popularity of “Deal of the Day” websites, such as Groupon and LivingSocial, has created an interesting issue as to the correct sales tax base when redeeming vouchers purchased from such websites, as illustrated in a previous post. When someone buys a $100 “gift card” for $50, is the sales tax base upon redemption $50 (what the customer actually paid) or $100 (the voucher’s value)? Unfortunately, the states do not treat such “Deal of the Day” vouchers uniformly. 

The Streamline Sales and Use Tax Agreement’s “best practice” is to apply the difference between the value of the voucher and amount actually paid for the voucher as a discount, thereby reducing the sales price upon which tax must be charged. See Streamline Sales and Use Tax Agreement (amended through Oct. 30, 2013), at Appendix E. So, in the above example, the customer would pay sales tax on $50 when redeeming the voucher / gift card. However, the Ohio Department of Taxation has not accepted this position and will continue to apply sales tax to the full amount of the voucher, regardless of the amount actually paid by the customer. See Ohio Streamline Sales Tax Best Practices Matrix (submitted Dec. 30, 2013). The better approach, in our opinion, is that adopted by Streamline Sales and Use Tax Agreement, which only taxes the amounts actually paid for the voucher. Ohio’s position ignores the substance of the transaction by inflating the sales tax base to include amounts never paid by the consumer, or anyone for that matter. See also, R.C. 5739.01(H) (“price” defined as the “total amount of  consideration” for  the property or services provided, and does not include discounts for which the vendor is not reimbursed). 

Businesses selling “Deal of the Day” vouchers can reduce the Ohio sales tax base for such vouchers by structuring them as a coupon rather than a gift card. This could be particularly important for restaurants selling such vouchers, who continue to receive increased scrutiny for Ohio sales tax.

 
U.S. House Urged to Immediately Enact Marketplace Fairness Act PDF Print E-mail
Tuesday, 14 January 2014 22:53

The Marketplace Fairness Coalition is trying to make 2014 the year when the U.S. Congress enacts legislation allowing states to require sales tax collection from remote sellers in the absence of a physical presence, reversing the 1992 U.S. Supreme Court decision in Quill Corp. v. North Dakota. On January 7, 2014, the Coalition’s hundreds of members, including national and state trade organizations and a diverse mix of businesses, sent the House Judiciary Committee Chairman a joint letter calling for the immediate passage of the Marketplace Fairness Act, which was passed the Senate last May. The list of businesses supporting this effort is wide-ranging, as it includes the largest and most well-known remote seller, Amazon.com, as well as stalwart brick-and-mortar retailers Best Buy, J.C. Penney, Sears and Wal-mart. The Marketplace Fairness Act continues to garner widespread support and is a key development to follow in 2014. 

Last Updated on Tuesday, 14 January 2014 22:54
 
Ohio CAT: BTA Predictably Upholds Ohio's Bright-Line Nexus Standard Despite Lack of Physical Presence PDF Print E-mail
Tuesday, 08 April 2014 00:00

The Ohio Board of Tax Appeals (BTA) found L.L. Bean, Inc. to be subject to Ohio commercial activity tax (CAT) because it had greater than $500,000 of Ohio gross receipts from catalog and Internet sales, even though it lacked an Ohio physical presence. L.L. Bean, Inc. v. Levin, BTA Case No. 2010-2853 (March 6, 2014). This was a simple application of Ohio’s statutory “bright-line presence” standard which deems nexus to exist if a taxpayer has at least $500,000 in calendar year gross receipts from Ohio sources. R.C. 5751.01(I).

Although this provision may be unconstitutional on its face or as applied to L.L. Bean, Inc., there was no doubt the BTA would find that substantial nexus existed since it is without jurisdiction to address Constitutional issues. Such determinations are left for the Ohio Supreme Court, where L.L. Bean recently filed its appeal. See L.L. Bean, Inc. v. Testa, Case No. 2014-0456 (Notice of Appeal, March 24, 2014). The BTA’s purpose was simply to create the factual record to be considered by the Supreme Court.

The Supreme Court will now address whether a mere economic presence is sufficient for Ohio to impose the CAT on foreign businesses without a physical presence under the U.S. Constitution’s Commerce Clause substantial nexus requirement enumerated in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 287 (1977). Other states in similar cases have found that the physical presence requirement in Quill Corp. v. North Dakota, 504 U.S. 298, 313 (1992) is limited to sales / use taxes. See e.g., Tax Comm’r v. MBNA America Bank, N.A., 640 S.E.2d 226 (2006) cert. denied FIA Card Services, N.A. v. Tax Comm’r of W. Virginia, 551 U.S. 1141 (2007); and Geoffrey, Inc. v. South Carolina, 437 S.E.2d 13 (1992) cert. denied Geoffrey, Inc. v. South Carolina Dep’t of Rev. and Tax., 510 U.S. 992 (1993).

Even if the CAT can be imposed on businesses without an Ohio physical presence, questions will remain, such as how is the economic presence to be determined / measured and must the business take affirmative acts to develop the Ohio market or is merely making sales into the state sufficient. Stay tuned as the Ohio Supreme Court’s ruling on this issue will be much more important.

 
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Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.

 

Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.

News

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

 

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