Ohio Sales Tax Guide for SaaS and E-Commerce Businesses
2025-08-11
Ohio taxes most goods and software but exempts most services and digital goods. The state rate is 5.75%, with local taxes pushing combined rates up to 8% in Cuyahoga County. Ohio adopted economic nexus in August 2019 following the Wayfair decision. Incorrect collection leads to penalties and interest.
Quick Reference
| Item | Details |
|---|---|
| State Tax Rate | 5.75% |
| Local Tax Range | 0% - 2.25% |
| Combined Rate Range | 5.75% - 8% (Cuyahoga County: 8%) |
| Economic Nexus | $100,000 OR 200+ transactions in previous 12 months |
| Physical Nexus | Any presence in Ohio |
| SaaS Taxable | Yes (as digital service) |
| Registration Portal | Ohio Business Gateway |
Nexus in Ohio
Physical nexus
Physical presence creates immediate collection obligations:
- Office, warehouse, inventory, or employees in Ohio
- Independent contractors or affiliates soliciting sales
- Trade show attendance or temporary pop-ups
- Fulfillment by Amazon (FBA) inventory storage
- Having a store, showroom, or distribution center in the state
- Owning or leasing physical property in the state
Economic nexus
Effective August 1, 2019, register and collect when either condition is met in the previous 12 months (or current calendar year):
- Gross receipts from Ohio sales exceed $100,000
- 200 or more separate transactions into Ohio
Important: Retail sales include taxable and nontaxable sales made directly by the seller, as well as marketplace sales. However, wholesale sales and sales for resale are excluded from the threshold calculation.
Other nexus triggers
- Marketplace nexus: If all Ohio sales are through marketplaces that collect taxes, you may not need to register. However, if you also sell directly, registration is required.
- Affiliate nexus: Having ties to Ohio businesses that help facilitate sales
- Click-through nexus: Agreements with Ohio-based referrers generating sales
Registration and Filing
- Register online: Apply through Ohio Business Gateway portal. No registration fee required.
- Provide business details: Legal name, address, Federal EIN, business type, and projected sales.
- Receive Ohio Sales Tax Account Number: Used for collecting and remitting sales tax.
- Filing frequency: Assigned by Ohio Department of Taxation based on tax liability:
- Monthly: High-volume businesses
- Quarterly: Medium-volume businesses
- Semi-annually: Low-volume businesses (January and July)
- Due dates: Returns and payments due on the 23rd of the month following the period.
- Zero returns: Required when no sales tax is collected during the period.
- Electronic filing: Required for most businesses through Ohio Business Gateway portal.
- Streamlined Sales Tax: Ohio is a full member of SST, allowing registration through their system as well.
Taxability of Goods and Services
Tangible personal property
Taxable unless specifically exempt. Key exemptions:
- Food for human consumption (grocery items)
- Prescription drugs and certain medical devices
- Sales or rentals of medical equipment
- Sales or rentals of mobility or prosthetic devices
- Newspapers
- Refundable deposits on containers
- Movie screenings (though sales/rentals are taxable)
Digital goods and software
| Category | Ohio Taxability | Notes |
|---|---|---|
| Software as a Service (SaaS) | Taxable | Considered a digital service |
| Custom software written exclusively for one client | Exempt | Must be separately stated and reasonable |
| Music, videos, e-books delivered electronically | Taxable | Digital goods are generally taxable |
| Digital downloads (games, apps) | Taxable | When prewritten software |
Services
Services are generally exempt unless specifically taxable. Taxable services include:
- Information services
- Amusements and entertainment
- Telecommunications services
- Some repair services
- Professional services (medical and legal services are exempt)
Implementation, training, and consulting tied to software remain exempt when separately invoiced.
Shipping and handling
Complex rules apply based on delivery options and product mix:
- Delivery charges included in sales price: Generally taxable if no pickup option
- Separately stated delivery charges: Exempt when seller offers free pickup option
- Mixed shipments: When shipment contains both exempt and taxable goods, allocation rules apply
SaaS
| Requirement | Detail |
|---|---|
| Tax status | State level: SaaS is taxable in Ohio as a digital service |
| Sourcing | Destination-based for taxable transactions. Use purchaser location or billing address |
| Customizations | Separately stated custom development is exempt; subscription fee taxability varies by jurisdiction |
| Exempt purchasers | Accept valid exemption certificates from qualifying organizations |
| IaaS/PaaS | Raw computing power or storage is generally taxable as digital services |
| Implementation | Training and consulting services are exempt when separately invoiced |
Important: Ohio considers SaaS (Software as a Service) taxable under its sales tax laws as it qualifies as a digital service. This applies to cloud-based software and subscription services.
E-Commerce
Marketplace facilitator rule
Ohio has specific rules for marketplace facilitators:
- Threshold calculation: Marketplace sellers must aggregate all sales and transactions into Ohio made through all marketplace facilitators as well as any Ohio sales made on their own
- Registration requirement: A marketplace seller does not need to register in Ohio if ALL of its Ohio sales are made through a reporting marketplace provider
- Mixed sales: If a seller has both marketplace sales and direct sales to Ohio, they must register and collect tax on direct sales
- Marketplace facilitator responsibility: Marketplace facilitators must determine if they meet the $100,000 or 200 transaction thresholds on their own behalf
Ohio sales tax rates by major cities
| City | Local Tax Rate | Total Tax Rate |
|---|---|---|
| Cleveland | 2.25% | 8.0% |
| Cincinnati | 1.25% | 7.0% |
| Columbus | 0.5% | 6.25% |
| Toledo | 1.0% | 6.75% |
| Akron | 0.75% | 6.5% |
| Dayton | 1.0% | 6.75% |
| Parma | 2.25% | 8.0% |
Rate determination: Ohio is an origin-based sales tax state, meaning sales tax is charged based on the location of the seller, not the buyer. The highest combined rate is 8% in Cuyahoga County.
Product specific rules
| Product | Tax status | Rate |
|---|---|---|
| Groceries (food for human consumption) | Exempt | 0% |
| Prepared food consumed on premises | Taxable | 5.75% + local |
| Prescription drugs | Exempt | 0% |
| Clothing | Taxable | 5.75% + local |
| Digital products (e-books, music, movies) | Taxable | 5.75% + local |
| Software as a Service (SaaS) | Taxable | 5.75% + local |
| Custom software development | Exempt (when separately stated) | 0% |
Sales Tax Holidays
Ohio has one annual sales tax holiday:
Back-to-School Sales Tax Holiday
- Dates: First Friday of August and the subsequent Saturday and Sunday
- 2024 Dates: August 2-4, 2024
- Exemptions:
- Clothing under $75
- School supplies under $20
- School instructional materials under $20
Additional Compliance Information
Streamlined Sales Tax (SST)
Ohio is a full member of the Streamlined Sales Tax Governing Board (SSTGB). This means:
- You can register, file sales tax returns, and pay via the Streamlined Sales Tax site
- Simplified compliance procedures for multi-state sellers
- Uniform tax administration across member states
Multiple Location Registration
- Each business location in Ohio must be registered separately
- Out-of-state sellers can register through Ohio's One Stop Business Registration
- No additional fees for out-of-state vendor registration
Annual Filing Option
- Available for low-volume businesses
- Must be approved by the Ohio Department of Taxation
- Typically assigned to businesses with minimal tax liability
Extensions and Amendments
- Amended returns: Use form UST-1A for corrections
- Extensions: Available in certain circumstances, contact the department directly
- Appeals: File petition for reassessment within 60 days of audit findings
Exemptions and Certificates
Common exemptions
- Food for human consumption: Most grocery items, but excludes prepared foods and soft drinks
- Prescription drugs and medical devices: Including mobility and prosthetic devices
- Sales for resale: With valid resale certificate
- Tax-exempt organizations: Charities, schools, government agencies
- Educational purchases: Teachers can purchase computers tax-exempt
- Movie screenings: The screening itself, though sales/rentals are taxable
Exemption certificates
- Resale certificates: Required for wholesale sales
- Exemption certificates: For qualifying organizations and purchases
- Documentation: Must be properly completed and maintained for audit purposes
- Validity: Certificates must be current and properly executed
Penalties and Interest
Late Filing Penalties:
- Standard penalty: $50 per month up to maximum of $500
- Extreme late filings (beyond 60 days): Additional penalties may apply
Interest Charges:
- Accrues at federal short-term rate plus 5%
- Begins from due date until payment is received
Total Penalties:
- Combined penalties and interest generally cannot exceed 50% of the tax due
- Additional penalties for fraud or willful neglect
References
- Ohio Department of Taxation - Official state tax authority
- Ohio Business Gateway - Business registration portal
- Ohio Sales Tax Rate Lookup - Find local tax rates
- Streamlined Sales Tax - Multi-state compliance
- Ohio Tax Code - Complete tax regulations
- Ohio Administrative Code - Administrative rules and procedures
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