What Is Ohio Use Tax? And When Do You Need to Pay It?
Demystify Ohio Use Tax. Understand its purpose and your responsibilities for purchases made outside the state.
Ohio Use Tax is a tax on the storage, use, or consumption of tangible personal property or certain services within Ohio when sales tax was not collected at the point of sale. It complements the state’s sales tax, ensuring a consistent tax burden on items regardless of where they were purchased. If Ohio sales tax was not paid on a taxable purchase, the purchaser is responsible for remitting the use tax directly to the state.
When Ohio Use Tax Applies
Ohio Use Tax applies when sales tax was not charged by the seller. This commonly occurs when individuals or businesses purchase items from out-of-state retailers, including online, mail-order, or in-person transactions, and the seller does not collect Ohio sales tax. For example, if a consumer buys furniture from an online retailer based outside Ohio that does not charge Ohio sales tax, then use tax is owed.
This tax also applies to items brought into Ohio for use from states that may have lower or no sales tax. Examples of taxable items and services that could trigger use tax include office equipment, office supplies, furniture, and various services like installation, repair, or landscaping.
Calculating Ohio Use Tax
The Ohio use tax rate is the same as the Ohio sales tax rate at the location where the item is used or stored. This rate includes a statewide sales tax rate of 5.75%, plus any applicable county or regional transit authority sales taxes. Combined sales and use tax rates in Ohio range from 5.75% to 8%, varying by county.
Use tax is calculated on the purchase price of the tangible personal property or the true value of the service. For instance, if you purchase a taxable item for $100 and the combined state and local use tax rate in your county is 7%, the use tax would be $7. If sales tax was paid to another state on the same item, a credit may be allowed for the amount of tax paid, up to the Ohio rate. For example, if you paid 4% sales tax in another state on a $100 item, and your Ohio use tax rate is 7%, you would owe $3 in Ohio use tax ($7 Ohio tax minus $4 credit).
Paying Ohio Use Tax
The method for paying Ohio Use Tax differs for individuals and businesses. Individuals report and pay use tax when filing their annual Ohio income tax return on the Ohio IT 1040 form. The Ohio Department of Taxation also provides an online portal for individuals to remit use tax.
Businesses file a separate use tax return, the Ohio Sales and Use Tax Return (Form UST-1). Businesses may file these returns monthly, quarterly, or semi-annually, and electronic filing is required. Payments can be made electronically through the Ohio Business Gateway using various methods, including electronic checks or credit/debit cards.
Exemptions from Ohio Use Tax
Certain purchases are exempt from Ohio Use Tax. If an item is exempt from Ohio sales tax, it is also exempt from use tax. This includes most non-prepared food items, prescription medications, and certain items used in farming or manufacturing.
If Ohio sales tax was already collected by the seller, use tax does not apply. If sales tax was paid to another state, a credit is granted for that amount against the Ohio use tax liability. Items purchased during Ohio’s sales tax holiday are also exempt from use tax.