If you’re running a successful company in the state, you’re likely already familiar with the various taxes and regulations that come along with it. If not, you can check out our Ohio Business Taxes Guide here.
However, when it comes to sales tax compliance, things can get a little tricky.
Don’t worry, though – we’ve got you covered!
In this post, we’ll be sharing some helpful tips and best practices to make navigating Ohio’s sales tax regulations a little easier.
Whether you’re just starting out or you’ve been in business for a while, we know that sales tax compliance can be a headache.
By the end of this post, you’ll have a better understanding of which taxes your business is liable for and how to ensure you’re complying with Ohio’s sales tax regulations.
We want to help you streamline this process, so you can get back to focusing on what really matters – growing your business!
Ohio Sales Tax Basics
It isn’t uncommon to be confused about which of your goods are subject to sales tax, and we don’t blame you.
So, let’s start with the basics.
In its simplest form, a sales tax is a tax imposed by the locality or region in which you operate when somebody spends money on your products or services.
It’s your responsibility as a business owner to collect sales tax – the rate of which is currently 5.75% in Ohio – and make the necessary reimbursements should you sell any goods or services in your connected jurisdiction.
If you aren’t outsourcing tedious tax admin to digital calculators or an experienced Ohio accounting firm, calculating sales tax can be tricky.
It, unfortunately, isn’t as easy as slapping on a predefined tax value and making a simple calculation, instead, requires you to take into account the additional local sales taxes which range from 0% to 2.25% in Ohio (making the Ohio sales tax range between 5.75% and 8%).
It’s important to note that, unlike a parking ticket, you can’t approach Ohio sales tax with a “pay it and forget it” attitude.
You’re instead required to file regular sales tax returns with the state and remit any taxes owed. Failure to do so can result in penalties and interest charges, which wouldn’t bode too well for your books.
Which Businesses Need to Collect Sales Tax in Ohio?
In Ohio, most businesses are required to collect sales tax on the goods and services they sell. This includes retail stores, restaurants, online businesses, and service-based companies.
The Ohio Department of Taxation provides a detailed list of the types of service businesses that are required to collect sales tax, including specific industries such as automobile dealerships, construction contractors, and telecommunications providers.
However, there may be some exceptions for certain products or services. For example, certain groceries, prescription drugs, and medical equipment may be exempt from sales tax. It’s always a good idea to consult with a tax professional or the Ohio Department of Taxation directly to determine your specific sales tax obligations.
Common Ohio Sales Tax Exemptions
While sales tax is required for most sales of tangible personal property and certain services, there are ways in which you can take advantage of certain tax exemptions to help lower your sales tax liability.
Such exemptions include but are not limited to:
- Food and beverages sold for off-premises consumption
- Prescription drugs and medical devices
- Sales made to the federal government or certain nonprofit organizations
- Educational materials and textbooks
- Agricultural products sold by the producer
By proving you meet the specified requirements and providing the supporting documentation, you can increase your chances of qualifying for the applicable tax exemptions.
These requirements vary depending on the exemption you wish to qualify for.
For instance, you’ll need to have a valid prescription or other medical documentation to render your prescription drugs and medical devices exemption valid.
Like all things tax, applying for sales tax exemptions can be a rather troublesome process, but it’s more than worthwhile when it comes to easing the burden on your wallet.
You’ll need to complete the appropriate forms and provide supporting documentation to the Ohio Department of Taxation, and you’ll still need to keep detailed records of your sales and any exemptions claimed so that you can avoid unnecessary charges.
Ohio Sales Tax Filing Requirements
As we’ve previously touched upon, you’re under obligation to file regular sales tax returns with the Ohio Department of Taxation so that you can mitigate any penalties that may otherwise come your way.
How often you file your sales tax varies from business to business, and ultimately depends on your business’s sales volume:
- If your company has an average monthly sales tax liability of $1,000 or more, you’ll need to file and pay your sales tax every month.
- If your average monthly liability is less than $1,000, you’ll need to file and pay your sales tax quarterly.
Sales tax returns in Ohio are due on the 23rd of the month following the end of the reporting period. For example, if you’re filing a monthly sales tax return for January, your return and payment are due by February 23rd.
Pssst… Here at ZenStrategies, we handle all of this for you. If you’d like to see how we can simplify for your business taxes, you can book a call with us anytime here.
Five Strategies for Streamlining Ohio Sales Tax Compliance
Navigating Ohio sales tax can be more than a little complicated, but here are a few tips and best practices that can make the process easier.
If you’re new to the world of taxes, the term “Nexus” might sound like something out of a video game. However, in tax law, Nexus refers to a commercial connection in a particular state that determines whether your business is subject to Ohio’s tax laws. Knowing your Nexus is crucial because it helps you understand the type of business you’re running, and how much revenue you’re generating in Ohio.
Once you’ve identified your Nexus, you can register for a sales tax permit and ensure that all your business operations are fully compliant with Ohio’s tax laws.
Accurate records of your sales and any exemptions claimed are essential for compliance with Ohio sales tax regulations. This can help you avoid any penalties or interest charges that may be imposed for noncompliance.
We live in a day and age where previously lengthy processes have been distilled and compressed into a mobile app or tool, available to us at our fingertips. Understanding these technological advancements and leveraging them to your advantage can help you keep up to date with the latest in tax regulations, sales tax holidays, discounts, and other ways to keep your business thriving.
Ohio sales tax regulations can change over time, so staying informed of any updates or changes that may affect your business is essential. You can do this by signing up to the relevant Ohio State Tax Department newsletters and social media profiles that provide you with consistent, easy-to-access updates.
Asking a professional
If you’re having trouble navigating Ohio sales tax regulations, don’t hesitate to seek help from a professional. After all, we’ve undergone the hardship to know the tax industry inside and out, so that we can help make your life that little bit easier.
Need Further Help with Ohio Sales Tax?
We know that navigating Ohio sales tax regulations can be a real headache. If you’re feeling lost or confused about anything related to Ohio sales tax law, we’re here to help!
At ZenStrategies, we’ve been assisting Ohio-based business owners with their tax planning and calculations for over two decades. We’re well-versed in both state and federal tax legislation, and we take a holistic approach to business advisory. That means we look at the big picture of your business to minimize taxes and increase profits annually.
If you’re interested in discussing how we can help improve your business finances, please don’t hesitate to get in touch! You can easily schedule a meeting with one of our accountants by filling out the form on our website.
Until next time!
Did you enjoy this blog? If so, check out our popular article on everything you need to know about business taxes in Ohio.