Nexus for Ohio sales / use tax collection expands effective August 1, 2019 to include out-of-state sellers and marketplace facilitators that deliver at least $100,000 of sales or 200 transactions to Ohio. Ohio’s General Assembly recently enacted Am Sub. H.B. 166, the biennial budget bill, which adopted economic nexus provisions replacing the previous click-through, software, and affiliate nexus provisions. In addition to e-commerce retailers, these new provision will have a significant impact on out-of-state SaaS providers and online platforms that connect sellers of taxable services to Ohio consumers.

Ohio’s economic nexus standard is the same as that at issue in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2104, 201 L. Ed. 2d 403 (2018) (for more about Wayfair). Under the economic presence standard, an out-of-state seller is presumed to have substantial nexus with Ohio if the seller has Ohio gross receipts greater than $100,000 or at least 200 transactions delivered to Ohio. These thresholds include sales of tangible personal property and services delivered to Ohio consumers. Nexus is created if the sellers exceeds these thresholds in the current or previous calendar year. A seller meeting thresholds must obtain an Ohio seller’s use tax license and collect tax starting August 1, 2019, unless it can rebut the presumption that its activities are not significantly associated with the seller’s ability to establish or maintain a market – likely, a nearly impossible burden to meet. R.C. 5741.01. See also, Ohio Tax Alert, Substantial Nexus and Marketplace Facilitator Changes (7/23/19).

Further, marketplace facilitators will be presumed to have substantial nexus and required to collect Ohio sales / use tax based upon the same economic standards – i.e., if they make or facilitate at least $100,000 of sales or 200 transactions delivered to Ohio customers. The definitions of “marketplace facilitator” and sales that are “facilitated” are quite broad and will encompass more business models than the traditional e-commerce marketplaces like Amazon.com and eBay. For instance, any business that help connect customers to sellers and collects the price of the property or services sold, provides payment processing services, or provides virtual currency used to make the purchase could be a marketplace facilitator required to collect Ohio sales / use tax.

Ohio’s economic nexus statute will present unique compliance burdens for out-of-state retailers, service providers, and software businesses selling or facilitating sales to Ohio consumers. You may also refer to our extensive Ohio Sales / Use Tax: Recent Trends, Developments and Planning Opportunities outline for information concerning which sales of property and services are taxable.