Like many states, Ohio has a sales tax that applies to most goods and certain services. However, not all services are subject to sales tax in Ohio. Understanding which services are exempt from sales tax is crucial for business owners, consumers, and anyone navigating Ohio’s tax regulations. Whether you’re a business owner looking to determine if your service is taxable or a consumer wanting to know what services you won’t be taxed on, this guide will break down everything you need about sales tax exemptions for services in Ohio.
What Is Sales Tax in Ohio?
Before diving into the specifics of sales tax exemptions on services, it’s essential to understand what constitutes sales tax in Ohio.
Ohio’s sales tax is generally a consumer-based tax, which means that sales tax applies to the sale or rental of tangible personal property and certain services. The state has a base sales tax rate of 5.75%. However, local jurisdictions (cities and counties) may impose additional sales taxes, increasing the overall rate in some areas.
On the other hand, services are subject to sales tax only if explicitly listed as taxable under Ohio law. Understanding which services are exempt is key to determining whether sales tax will be charged on a specific transaction.
Sales Tax Exemptions for Services in Ohio
Ohio law recognizes that not all services should be taxed, and various exemptions are in place. Below, we will explore some of Ohio’s most common types of services exempt from sales tax.
Professional Services
Certain professional services are exempt from sales tax in Ohio. This includes services provided by professionals who must have specific licenses or certifications. These services are not considered retail sales of tangible personal property, which is what the sales tax typically applies to.
Some professional services exempt from sales tax in Ohio include:
- Legal Services: Services provided by attorneys, such as legal advice, contract drafting, and representation in court.
- Medical and Health Services: Services rendered by licensed healthcare professionals, including doctors, dentists, and chiropractors. This also includes medical treatments, surgeries, and wellness consultations.
- Accounting Services: Services provided by certified public accountants (CPAs), such as tax preparation, audits, and bookkeeping services.
- Architectural and Engineering Services: Design and consulting services offered by licensed architects and engineers, including project plans and feasibility studies.
- Consulting Services: Services provided by experts in various fields, such as business consulting, financial advising, and marketing consulting.
Education and Training Services
Services related to education and training are generally exempt from sales tax in Ohio. This includes:
- Tutoring Services: Private student tutoring, including online or in-person tutoring services, is exempt.
- Vocational and Technical Training: Education or training for specific careers, such as medical, legal, or technical fields, is exempt from sales tax.
- Educational Workshops and Classes: If the primary purpose is education, such as workshops, seminars, or academic classes, these are also exempt from sales tax.
Nonprofit and Charitable Services
Ohio also exempts sales tax on services provided by nonprofit organizations operating within the scope of their exempt status. These services may include:
- Services Provided by Charitable Organizations: Many services offered by charitable, religious, or educational organizations are exempt from sales tax.
- Fundraising Events: Services provided by nonprofit entities during fundraising events are typically not subject to sales tax.
However, it’s important to note that certain types of transactions may still be taxable depending on the nature of the service and whether the nonprofit is engaged in a taxable activity.
Certain Personal Services
Several types of personal services are exempt from sales tax in Ohio, including:
- Personal Care Services: Services such as haircuts, manicures, pedicures, and massages are exempt from sales tax, as they are considered personal services rather than retail sales of tangible goods.
- Pet Grooming: Pet grooming services, including bathing and trimming, are also exempt from sales tax in Ohio.
However, services that involve the sale of tangible personal property in addition to the service (such as selling products with the service) may be taxable.
Insurance and Financial Services
Insurance and financial services are exempt from sales tax in Ohio. These services include:
- Insurance Brokerage and Underwriting: Insurance agents or brokers provide services to help customers purchase policies or underwrite risk.
- Banking and Investment Services: Services provided by banks and financial institutions, such as setting up accounts, making loans, or providing financial planning, are exempt from sales tax.
- Retirement Planning: Consulting or planning services related to retirement savings and investments are generally exempt.
Government Services
Various government services are exempt from sales tax in Ohio. This includes:
- Public Services: Services provided by federal, state, or local government agencies, such as public transportation or services related to public safety, are not subject to sales tax.
- Government-Run Education Services: Public schools and government-run educational programs are exempt from sales tax on services provided.
Repair and Maintenance Services
Generally, repair and maintenance services on tangible personal property are exempt from sales tax in Ohio unless the repair work involves selling taxable parts or materials. This means:
- Automobile Repair Services: Repairs and automobile maintenance, including fixing engines, changing tyres, and general maintenance, are exempt from sales tax.
- Home Appliance Repairs: Repair services for home appliances like refrigerators, ovens, and washing machines are typically exempt unless parts are sold with the service.
Services That Are NOT Exempt from Sales Tax in Ohio
While many services are exempt from sales tax, there are still certain services that do get taxed. Some examples include:
- Telecommunications Services: Charges for phone services, internet access, and cable television are taxable.
- Membership Services: Membership fees for gyms, clubs, and similar services are subject to sales tax.
- Catering Services: Catering services may be subject to sales tax if food and beverages are provided for events.
- Digital Products and Subscriptions: Subscription-based services such as software as a service (SaaS) or digital downloads (e.g., music, videos, e-books) are generally taxable.
How to Find Out If a Service is Exempt
Suppose you’re unsure whether a specific service is exempt from sales tax in Ohio. In that case, you can refer to the Ohio Department of Taxation’s guidelines. They offer resources and publication PDFs that outline the complete list of taxable and exempt goods and services. Additionally, the department provides taxability charts and helpful tools for businesses and consumers to determine whether a service or product is taxable.
You can also consult with a tax professional to ensure you comply with Ohio’s sales tax laws.
Conclusion: Understanding Sales Tax Exemptions for Services in Ohio
In Ohio, sales tax only applies to certain services, while others are explicitly exempt from taxation. Generally, professional services, education, personal care services, and services provided by nonprofit organizations are exempt. However, it’s crucial to remember that sales tax laws can change, and exemptions can be complex depending on the specifics of the service.
To ensure you abide by Ohio’s tax laws, consult with the Ohio Department of Taxation or a tax professional, whether you’re a business owner or a consumer. They can provide the most accurate and up-to-date information regarding which services are exempt from sales tax in Ohio.
The Ohio Department of Taxation also provides PDF documents with detailed explanations of taxable and exempt services, which can be downloaded from their official website. This can help you get more clarity on specific service categories and how to apply the rules.