If you sell things online or run a company outside of Ohio, that does not mean you do not have to receive sales tax from people who live in Ohio. In some cases, this idea, called “use tax,” is applicable.
Let us talk about what use tax is and how it might affect your Ohio-based business if you sell things to people there. If you are not sure what your use tax obligations are, you should talk to tax services in Columbus to make sure you follow the rules.
Table of Contents
Understanding use tax.
Most of the time, the seller collects sales tax when the item is bought. Sometimes, though, the seller might not be in the same state (or even country) as the buyer.
This is where the use tax comes in. It is basically a tax that the customer owes to their home state for purchases, whereas sales tax was not collected at the time of purchase.
Use tax and online sellers.
In 2018, the Supreme Court ruled in South Dakota v. Wayfair, Inc. that states can require internet stores to collect sales tax, even if the stores are not located in the state.
This has big effects on online stores that want to sell to people in Columbus. Even though Columbus does not have its own sales tax on top of the state and city taxes, you may still have to coordinate the collection of use tax.
Determine what your use tax responsibilities are.
A few things will determine if you need to collect use tax from customers in Columbus. The main question is: Does your company do business in Ohio?
Having an economic relationship with a state means having a strong enough link with it, even if you are not physically present there. This link can be made by things like making more than a certain number of sales in the state.
You can find more information about Ohio’s economic tie rules on the Ohio Department of Taxation website. If your company meets the economic connection requirements, you will have to receive and send both sales tax and any use tax that Columbus locals are required to pay.
The importance of accurate tax rates.
The sales tax rate in Columbus is 7.5%, which is made up of the state rate (5.75%) and the county rate (1.25%). It is important to keep in mind, though, that tax rates can be different in different parts of Columbus. This is because some places may have different sales tax rates.
To make sure you receive the right amount of tax, you need to use reliable tax calculator tools or services that take the customer’s zip code into account.
How does the use tax impact your business?
While collecting use tax may seem like an extra hassle, keep in mind that it is the law that you have to do it. Not following the rules can lead to big fines and interest charges.
Getting use tax can also help your business’s image and make customers happier. Being open about your tax obligations shows that you care about doing business honestly.
You might want to use tax compliance tools or talk to a tax professional to make the process of collecting and sending use tax easier. These tools can help you keep up with changes to tax rules and make sure your numbers are correct.
Online sellers and companies from other states that do business in Columbus need to know about use tax. It is possible to make sure you follow tax rules and avoid fines by learning about Ohio’s economic link laws and using accurate tax calculation tools.
