Taxpayers to Enjoy Two Weeks Of Sales Tax Savings
In recent years, Ohio has designated certain three-day periods in August as “sales tax holidays.” During this period of time, the purchases of certain items were exempt from sales tax. Historically, the sales tax holiday was subject to limitations on qualifying items, as well as low maximum thresholds for the dollar amount of individual items. However, Ohio’s most recent budget bill, House Bill 33, enacted significant changes to expand the sales tax holiday.
The sales tax holiday was extended to ten days in 2024. In 2025, the Ohio sales tax holiday will be extended even further. This year, the event will run for two full weeks, beginning at midnight on Friday, Aug. 1, until 11:59 p.m., Thursday, Aug. 14, and will be afforded to all taxpayers within the state.
Ohio’s sales tax holiday includes purchases of all tangible personal property with a selling price of $500 or less. This includes sales of dine-in food at restaurants.
Taxable services, titled watercraft, motor vehicles, alcoholic beverages, tobacco, vapor products, and items containing marijuana are excluded from the holiday.
How Will Retailers Conduct The Sales Tax Holiday?
The sales tax holiday applies to qualifying items with an individual selling price of $500 or less. There is no limit on the total purchase amount. Qualification is determined on an item-by-item basis. Other factors to consider for the applicability of the holiday:
- Retailers may not apply the exemption to the first $500 of the item and charge tax on the remaining amount. If the item exceeds $500, it is fully taxable.
- Retailers may not split items that are normally sold together to fall under the sales price threshold.
- The total price of “buy one, get one free” or similar transactions cannot be averaged to qualify both items for the holiday.
- If retailers offer discounts or coupons (including loyalty card programs) that reduce the price of an eligible item to $500 or less, the item will qualify.
- Discounts provided by manufacturer’s coupons or similar arrangements that entitle the retailer to third-party reimbursement do not reduce the item’s sales price for purposes of determining an item’s eligibility for the sales tax holiday. Rebates are also treated in this manner.
- For online sales, the exemption will apply if the customer orders and pays for an eligible item and the retailer accepts, even if delivery is after the exemption period.
Sales Tax Reporting & Other Considerations
If a consumer is charged sales tax on a qualifying item during the holiday, the retailer must refund the sales tax to the consumer.
For reporting purposes, retailers will report all sales for the period on the gross sales line, then include all sales that qualify for the holiday on the exempt sales line (Line 2) of the applicable sales tax return.
The Ohio sales tax holiday applies to the entire sales tax rate. This includes county and transit authority permissive rates. All retailers are required to participate in the sales tax holiday. Retailers should review their point-of-sale software to confirm that it can appropriately accommodate exempt sales during the holiday period.
GBQ will provide updates as warranted if additional guidance is provided by the Ohio Department of Taxation. Contact your GBQ state and local tax representative if you have questions.
By Jeff Monsman, JD, Director, State & Local Tax Services
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