Are Professional Services Taxable in Ohio?
Ohio sales tax on services can be confusing. Discover which specific services are taxable and clarify common misconceptions about professional services.
Sales tax application to services can be a complex area, often leading to confusion for businesses and consumers. While sales tax typically applies to the sale of tangible personal property, its reach extends to certain services in many states. Ohio has established specific regulations governing the taxability of services, deviating from a blanket approach. Understanding these nuances is important for compliance and financial planning.
General Tax Treatment of Services
In Ohio, most services are not subject to sales tax. This distinction arises from the difference between tangible goods, which can be seen and touched, and intangible services, which involve an action or performance. For instance, common services like medical consultations, legal advice, accounting services, or barber services are not subject to sales tax. This general exclusion forms the baseline understanding before considering specific exceptions.
Specifically Taxable Services
Ohio law specifically enumerates certain services that are subject to sales and use tax. For example, landscaping and lawn care services are taxable, including planting, seeding, trimming, and fertilizing. Sales tax applies once a provider’s annual sales from these services reach or exceed $5,000 in a calendar year.
Building maintenance and cleaning services are also taxable, provided annual sales for these services equal or exceed $5,000. This category encompasses activities like washing, vacuuming, dusting, and power washing of building interiors and exteriors. Pest control or exterminating services are subject to sales tax. Security services, including private investigation services, are also identified as taxable.
Snow removal services performed by mechanical means are taxable, with an exception for providers whose sales are less than $5,000 annually. If only salt application by hand is performed, the service is not taxable. Telecommunications services, encompassing prepaid calling services and ancillary services, are also subject to sales tax. Certain automatic data processing, computer services, and electronic information services provided for business use are likewise taxable.
Understanding Professional Services for Tax Purposes
The term “professional services” often carries a common understanding that may not align with Ohio’s sales tax definitions. Many services traditionally considered professional, such as those provided by licensed doctors, lawyers, or certified public accountants, are not subject to sales tax in Ohio. This stems from the nature of these services, which focus on intangible expertise and advice.
However, the taxability of a service in Ohio hinges on whether it falls within the specific categories enumerated in the state’s tax law, rather than merely if it is performed by a licensed professional or requires specialized skills. For instance, while an accountant’s core advisory services are exempt, certain computer or information services they might provide for a business could be taxable if they meet the statutory definition of an automatic data processing or electronic information service. Therefore, businesses and individuals should look to the specific service provided and compare it against Ohio’s defined taxable services to determine sales tax obligations.