Tax rate by region Ohio

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Ohio SaaS VAT: A Complete Guide

Businesses in Ohio selling SaaS (software as a service) should be aware that its sales are subject to the state’s 5.8% sales tax. This applies to both business-to-consumer (B2C) and business-to-business (B2B) transactions. Notably, Ohio does not currently impose any form of value-added tax (VAT) that would be specific to SaaS. Nevertheless, the 5.8% general sales tax applies to the electronic delivery of SaaS products.

Ohio

Ohio’s income tax rate dropped to 3.5% effective January 1, 2024, as part of a broader tax reform initiative aimed at stimulating economic growth.

Official government link: Ohio Department of Taxation

5.80%

E-products and services VAT/Sales tax rate

Exempted product categories

Exempt for personal use

Reverse charge mechanism for B2B sales

Not applicable in the US

Tax ID validation required

Yes

When do you have to register

If you exceed $100,000 in sales.

Online registration possible

Yes

Registration procedure

Register with the Ohio Department of Taxation to obtain a vendor’s license for sales tax.
File Form FT-1120 (Ohio Corporation Franchise Tax Return) if earning Ohio-source income.
Appoint an Ohio registered agent if necessary

List of digital and electronic services liable for tax

SaaS, video games, digital products

Penalties

5% of unpaid tax for each month, max 25% (Late Filing); 10% of unpaid tax after 30 days (Late Payment)

Registration threshold

$100,000.00

Filing interval

Monthly, Quarterly, or Annually

Filing deadline

23rd of the month

E-invoicing requirements

No state-wide e-invoicing mandate

Record keeping

Income tax returns and supporting documents: 3 years minimum, 7 years recommended

Local Rate Range

0% – 3%

Effortless Subscription Management and Billing

Ohio SaaS Sales Tax: Compliance and Exemptions

To ensure compliance with Ohio’s SaaS sales tax requirements, businesses must register with the state’s Department of Taxation and obtain a sales tax permit. Additionally, they are required to collect and remit the sales tax to the state. However, businesses are not obligated to charge sales tax for SaaS products sold to customers who are exempt, such as government agencies or non-profit organizations. Keeping detailed records of sales and tax collected is essential, and Ohio recommends maintaining them for at least three years.

Ohio SaaS Sales Tax: Resources for Multi-State Businesses

For businesses operating in multiple states, managing SaaS sales tax can be a complex task. Fortunately, Ohio offers several resources to assist businesses in navigating these complexities. The Ohio Business Gateway provides comprehensive information on sales and use tax requirements, while the Department of Taxation’s website offers a dedicated section on e-services. Additionally, seeking guidance from a qualified tax professional can help ensure accurate compliance with Ohio’s SaaS sales tax regulations.

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