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H. B. No. 429 As IntroducedAs Introduced
127th General Assembly | Regular Session | 2007-2008 |
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A BILL
To amend sections 5739.033 and 5739.24 of the Revised
Code and later to repeal section 5739.24 of the
Revised Code to authorize a vendor required to
utilize destination-based sourcing to determine
the appropriate sales tax jurisdiction to convert
to origin-based sourcing on or after January 1,
2009, and to discontinue compensation of impacted
counties for sales tax losses incurred under
destination-based sourcing.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 5739.033 and 5739.24 of the Revised
Code be amended to read as follows:
Sec. 5739.033. (A) Except as provided in division (B) of
this section, divisions (C) to (I) of this section apply to sales
made on and after January 1, 2008. Any vendor previously
required
to comply with divisions (C) to (I) of this section and
any
vendor that irrevocably
elects to comply with divisions
(C) to
(I) of this section for all
of the vendor's sales and
places of
business in this state shall continue to source its
sales under
those divisions.
The amount of tax due pursuant to sections
5739.02, 5739.021,
5739.023, and 5739.026 of the Revised Code is
the sum of the taxes
imposed pursuant to those sections at the
sourcing location of the
sale as determined under this
section or, if
applicable, under
division (C) of section 5739.031 or section 5739.034 of the
Revised Code, or at the situs of the sale as determined under
section 5739.035 of the Revised
Code. This section applies only to
a vendor's or seller's obligation to collect and remit sales taxes
under section 5739.02, 5739.021, 5739.023, or 5739.026 of the
Revised Code or use taxes under section 5741.02, 5741.021,
5741.022, or 5741.023 of the Revised Code. Division (A) of this
section does not apply in determining the jurisdiction for which
sellers are required to collect the use tax under section 5741.05
of the Revised Code. This section does not affect the obligation
of a consumer to remit use taxes on the storage, use, or other
consumption of tangible personal property or on the benefit
realized of any service provided, to the jurisdiction of that
storage, use, or consumption, or benefit realized.
(B)(1) As used in this division:
(a) "Delivery sale" means the taxable sale of tangible
personal property or a service that is received by a consumer, or
a donee designated by the consumer, in a taxing jurisdiction that
is not the taxing jurisdiction in which the vendor has a fixed
place of business.
(b) "Agreement" has the same meaning as in section 5740.01 of
the Revised Code.
(c) "Governing board" has the same meaning as in section
5740.02 of the Revised Code.
(2) If the tax commissioner does not make the
certification
under section 5740.10 of the Revised Code, a vendor
that is not
required by division (A) of this section to situs
sales
under
divisions (C) to (I) of this section on the date of
the
commissioner's certification may continue after that date to
situs
its sales under section 5739.035 of the Revised Code unless
it is
required, under division (B)(5) of this section, to situs
its
sales under divisions (C) to (I) of this section, and
divisions (B)(3) to (5) of this section shall not apply to that
vendor. On or after January 1, 2009, a vendor required under
division (A) of this section to comply with divisions (C) to (I)
of this section may elect to situs its sales under section
5739.035 of the Revised Code.
(3) Except as otherwise provided in divisions (B)(4) and (5)
of this section, a vendor with total delivery sales within this
state in prior calendar
years, beginning with
calendar year 2007,
of less
than five hundred
thousand dollars may
situs its sales
under section
5739.035 of the Revised Code.
(4) Once a vendor has total delivery sales in this
state of
five hundred thousand dollars or more for a prior
calendar
year,
the vendor shall source its sales under divisions
(C) to (I)
of
this section and shall continue to source its sales
under those
divisions regardless of the amount of the vendor's
total delivery
sales in future years.
(5) A vendor permitted under division (B)(3) of this section
to situs its sales under section 5739.035 of the Revised Code that
fails to provide, absent a clerical error, the notices required
under division (I)(1) of
section 5739.035 of the Revised Code
shall situs all subsequent
sales as required under divisions (C)
to (I) of this section.
(C) Except
for sales, other than leases, of titled motor
vehicles, titled
watercraft, or titled outboard motors as provided
in section
5741.05 of the Revised Code, or as otherwise provided
in
this
section
and section
5739.034 of the
Revised Code,
all
sales
shall be sourced as follows:
(1) If the consumer or a
donee designated by the consumer
receives
tangible personal property
or a service at a vendor's
place of business, the sale
shall be sourced to that place of
business.
(2)
When the tangible personal property or
service is not
received at a vendor's place of business, the sale
shall be
sourced to
the location known to the vendor where
the consumer or
the donee designated by the consumer receives the
tangible
personal
property or service, including the location
indicated by
instructions for delivery to the consumer or the
consumer's donee.
(3) If divisions (C)(1) and (2) of this section do not
apply,
the sale shall be sourced to
the location indicated by an address
for the
consumer that is
available from the vendor's business
records
that are
maintained in the ordinary course of the
vendor's
business, when
use of that address does not constitute
bad faith.
(4) If divisions (C)(1), (2), and (3) of this section do
not
apply, the sale shall be sourced to
the location indicated by an
address for the
consumer obtained
during the consummation of the
sale, including
the address
associated with the consumer's payment
instrument, if
no other
address is available, when use of that
address does not
constitute
bad faith.
(5) If divisions (C)(1), (2), (3), and (4) of this section
do
not apply, including in the circumstance where the vendor is
without sufficient information to apply any of those divisions,
the sale shall be sourced to
the
address from which tangible
personal property was shipped,
or from
which the service was
provided, disregarding any
location
that
merely provided the
electronic transfer of the
property sold
or
service provided.
(6) As used in division (C) of this section, "receive"
means
taking possession of tangible personal property or making
first
use of a service. "Receive" does not include possession by
a
shipping company on behalf of a consumer.
(D)(1)(a) Notwithstanding divisions (C)(1) to (5) of this
section, a business consumer that is not a holder of
a direct
payment permit granted under section 5739.031 of the
Revised Code,
that purchases a digital good, computer software, except computer
software received in person by a business consumer at a vendor's
place of business, or a
service, and that knows at the time of
purchase that such digital good, software, or service will be
concurrently
available for use in more than one taxing
jurisdiction shall
deliver to the vendor in conjunction with its
purchase an exemption certificate claiming multiple
points of use,
or shall meet the requirements of division (D)(2) of this section.
On receipt of the exemption certificate claiming multiple points
of use, the vendor is relieved of its obligation to
collect, pay,
or remit the tax due, and the business consumer must
pay the tax
directly to the state.
(b) A business consumer that delivers the exemption
certificate claiming multiple points of use to a vendor may use
any reasonable, consistent, and uniform method of apportioning the
tax due on the digital good, computer software, or service that is
supported by the consumer's business records as they existed at
the
time of the sale. The business consumer shall report and pay
the appropriate tax to each jurisdiction where concurrent use
occurs. The tax due shall be calculated as if the apportioned
amount of the digital good, computer software, or service had been
delivered to each jurisdiction to which the sale is apportioned
under this division.
(c) The exemption certificate claiming multiple points of use
shall remain
in effect for all future sales by the vendor to the
business consumer until
it is revoked in writing by the business
consumer, except as to the business
consumer's specific
apportionment of a subsequent sale under
division (D)(1)(b) of
this section and the facts existing at the time of
the sale.
(2) When the vendor knows that a digital good, computer
software, or service sold will be concurrently available for use
by the business consumer in more than one jurisdiction, but the
business consumer does not provide an exemption certificate
claiming multiple points of use as required by division (D)(1) of
this section, the vendor may work with the business consumer to
produce the correct apportionment. Governed by the principles of
division (D)(1)(b) of this section, the vendor and business
consumer may use any reasonable, but consistent and uniform,
method of apportionment that is supported by the vendor's and
business consumer's books and records as they exist at the time
the sale is reported for purposes of the taxes levied under this
chapter. If the business consumer certifies to the accuracy of the
apportionment and the vendor accepts the certification, the vendor
shall collect and remit the tax accordingly. In the absence of bad
faith, the vendor is relieved of any further obligation to collect
tax on any transaction where the vendor has collected tax pursuant
to the information certified by the business consumer.
(3) When the vendor knows that the digital good, computer
software, or service will be concurrently available for use in
more than one jurisdiction, and the business consumer does not
have a direct pay permit and does not provide to the vendor an
exemption certificate claiming multiple points of use as required
in division (D)(1) of this section, or certification pursuant to
division (D)(2) of this section, the vendor shall collect and
remit the tax based on division (C) of this section.
(4) Nothing in this section shall limit a person's obligation
for sales or use tax to any state in which a digital good,
computer software, or service is concurrently available for use,
nor limit a person's ability under local, state, or federal law,
to claim a credit for sales or use taxes legally due and paid to
other jurisdictions.
(E) A person who holds a direct payment permit issued under
section 5739.031 of the Revised Code is not required to deliver an
exemption certificate claiming
multiple points of use to a vendor.
But such
permit holder shall comply with division (D)(2) of this
section in
apportioning the tax due on a digital good, computer
software, or a
service for use in business that will be
concurrently available for use in more than
one taxing
jurisdiction.
(F)(1) Notwithstanding divisions (C)(1) to (5) of this
section, the consumer of direct mail that is not a holder of a
direct payment permit shall provide to the vendor in conjunction
with the sale either an exemption certificate claiming direct mail
prescribed by the tax commissioner, or information to show the
jurisdictions to which the direct mail is delivered to recipients.
(2) Upon receipt of such exemption certificate, the vendor is
relieved of all obligations to collect, pay, or remit the
applicable tax and the consumer is obligated to pay that tax on a
direct pay basis. An exemption certificate claiming direct mail
shall remain in effect for all future sales of direct mail by the
vendor to the consumer until it is revoked in writing.
(3) Upon receipt of information from the consumer showing the
jurisdictions to which the direct mail is delivered to recipients,
the vendor shall collect the tax according to the delivery
information provided by the consumer. In the absence of bad faith,
the vendor is relieved of any further obligation to collect tax on
any transaction where the vendor has collected tax pursuant to the
delivery information provided by the consumer.
(4) If the consumer of direct mail does not have a direct
payment permit and does not provide the vendor with either an
exemption certificate claiming direct mail or delivery information
as required by division (F)(1) of this section, the vendor shall
collect the tax according to division (C)(5) of this section.
Nothing in division (F)(4) of this section shall limit a
consumer's obligation to pay sales or use tax to any state to
which the direct mail is delivered.
(5) If a consumer of direct mail provides the vendor with
documentation of direct payment authority, the consumer shall not
be required to provide an exemption certificate claiming direct
mail or delivery information to the vendor.
(G) If the vendor provides lodging to transient guests as
specified in division (B)(2) of section 5739.01 of the Revised
Code, the sale shall be sourced to
the
location where the lodging
is
located.
(H)(1) As used in this division and division (I) of this
section, "transportation equipment" means any of the following:
(a) Locomotives and railcars that are utilized for the
carriage of persons or property in interstate commerce.
(b) Trucks and truck-tractors with a gross vehicle weight
rating of greater than ten thousand pounds, trailers,
semi-trailers, or passenger buses that are registered through the
international registration plan and are operated under authority
of a carrier authorized and certificated by the United States
department of transportation or another federal authority to
engage in the carriage of persons or property in interstate
commerce.
(c) Aircraft that are operated by air carriers authorized and
certificated by the United States department of transportation or
another federal authority to engage in the carriage of persons or
property in interstate or foreign commerce.
(d) Containers designed for use on and component parts
attached to or secured on the items set forth in division
(H)(1)(a), (b), or (c) of this section.
(2) A sale, lease, or rental of transportation equipment
shall be sourced pursuant to division (C) of this section.
(I)(1) A lease or rental of tangible personal property that
does not require recurring periodic payments shall be sourced
pursuant to division (C) of this section.
(2) A lease or rental of tangible personal property that
requires recurring periodic payments shall be sourced as follows:
(a) In the case of a motor vehicle, other than a motor
vehicle that is transportation equipment, or an aircraft, other
than an aircraft that is transportation equipment, such lease or
rental shall be sourced as follows:
(i) An accelerated tax payment on a lease or rental taxed
pursuant to division (A)(2) of section 5739.02 of the Revised Code
shall be sourced to the primary property location at the time the
lease or rental is consummated. Any subsequent taxable charges on
the lease or rental shall be sourced to the primary property
location for the period in which the charges are incurred.
(ii) For a lease or rental taxed pursuant to division (A)(3)
of section 5739.02 of the Revised Code, each lease or rental
installment shall be sourced to the primary property location for
the period covered by the installment.
(b) In the case of a lease or rental of all other tangible
personal property, other than transportation equipment, such lease
or rental shall be sourced as follows:
(i) An accelerated tax payment on a lease or rental that is
taxed pursuant to division (A)(2) of section 5739.02 of the
Revised Code shall be sourced pursuant to division (C) of this
section at the time the lease or rental is consummated. Any
subsequent taxable charges on the lease or rental shall be sourced
to the primary property location for the period in which the
charges are incurred.
(ii) For a lease or rental that is taxed pursuant to division
(A)(3) of section 5739.02 of the Revised Code, the initial lease
or rental installment shall be sourced pursuant to division (C) of
this section. Each subsequent installment shall be sourced to the
primary property location for the period covered by the
installment.
(3) As used in division (I) of this section, "primary
property location" means an address for tangible personal property
provided by the lessee or renter that is available to the lessor
or owner from its records maintained in the ordinary course of
business, when use of that address does not constitute bad faith.
Sec. 5739.24. (A) As used in this section:
(1) "Destination-based sourcing requirements" has the same
meaning as in section 5739.123 of the Revised Code.
(2) "Impacted county" means a county having a population of
less than seventy-five thousand as of the decennial census of 2000
taken by the United States census bureau.
(3) "Master account holder" means a person that holds more
than one vendor's license under division (A) of section 5739.17 of
the Revised Code, operates in multiple tax jurisdictions under the
same ownership, and files or is required to file a consolidated
return under section 5739.12 of the Revised Code.
(4) "Tax jurisdiction" means a county or, if applicable, the
portion of a county in which a transit authority has territory.
(B)(1) Beginning in 2006 and ending January 31, 2009, within
thirty days after the thirtieth day of June and the thirty-first
day of December of each year, a master account holder that makes a
sale that is subject to the destination-based sourcing
requirements shall file with the tax commissioner a report that
details the total taxable sales it made for the prior six-month
period in each tax jurisdiction and at each fixed place of
business for which the master account holder holds or should hold
a license, irrespective of where those sales were sourced under
those requirements. The commissioner may extend the time for
filing the report under this section.
(2) If the report required by division (B)(1) of this section
is not timely filed by a master account holder, the tax
commissioner shall mail notice of a delinquent report to the
holder. In addition to any other penalties or additional charges
imposed under this chapter, the commissioner may impose a penalty
of up to fifty dollars for each fixed place of business of the
master account holder. If the report is filed within fifteen days
after the commissioner mails the delinquency notice, the penalty
may be remitted in full or in part by the commissioner. But if the
master account holder fails to file the report within fifteen days
after the commissioner mails the notice, the commissioner shall
impose a penalty of up to one hundred dollars for each fixed place
of business of the master account holder. This penalty may not be
remitted in full by the commissioner. A penalty imposed under this
division is subject to collection and assessment in the same
manner as any tax levied under this chapter.
(C)(1) Beginning in 2006 and ending April 17, 2009, within
seventy-five days after the thirty-first day of July each year and
the thirty-first day of January of the following year, the tax
commissioner shall determine for each county both of the
following:
(a) The amount of taxes reported on returns filed by all
vendors licensed under division (A) of section 5739.17 of the
Revised Code that were levied by sections 5739.021 and 5739.026 of
the Revised Code and were reported as due in accordance with the
destination-based sourcing requirements;
(b) The amount of taxes levied by those sections that would
have been paid to the county by vendors licensed under division
(A) of section 5739.17 of the Revised Code if the taxes had been
collected in accordance with section 5739.035 of the Revised Code.
The commissioner may make any adjustments that are necessary
to account for delinquent tax returns or reports.
(2) In making the determination required by division (C)(1)
of this section, the commissioner shall use the lesser of the
county's tax rate in effect as of January 1, 2006, or the actual
tax rate in effect for the six-month period for which the
compensation was calculated.
(3) The commissioner also shall calculate the percentage
difference between the amounts determined under divisions
(C)(1)(a) and (b) of this section by using a fraction, with the
amount determined under division (C)(1)(a) of this section in the
numerator, and the amount determined under division (C)(1)(b) of
this section in the denominator.
(D)(1) If the percentage difference calculated under division
(C)(3) of this section for a county is ninety-six per cent or
less, and the county is an impacted county under this section, the
county shall receive compensation. Beginning in 2006 and ending
May 1, 2009, within ninety days after the thirty-first day of July
each year and the thirty-first day of January of the following
year, the tax commissioner, in the next ensuing payment to be made
under division (B)(1) of section 5739.21 of the Revised Code,
shall in addition provide from the general revenue fund to such
county compensation in the amount of ninety-eight per cent of the
denominator calculated under division (C)(3) of this section,
minus the numerator calculated under division (C)(3) of this
section.
(2) A county that is entitled to compensation under division
(D)(1) of this section may request an advance payment of that
compensation. The commissioner shall adopt rules that establish
the manner by which such county may make the request and the
method the commissioner will use to determine the amount of the
advance payment to be made to the county. Compensation provided
under division (D)(1) of this section shall be adjusted
accordingly to account for advance payments made under division
(D)(2) of this section.
(E) If, under division (C)(1) of this section, the tax
commissioner determines that a county received more taxes under
the destination-based sourcing requirements than it would have
received if taxes had been paid in accordance with section
5739.035 of the Revised Code, the county is a windfall county
under this division. Beginning in 2006, within ninety days after
the thirty-first day of July each year and the thirty-first day of
January of the following year, the commissioner, in the next
ensuing payment to be made under division (B)(1) of section
5739.21 of the Revised Code, shall reduce the amount to be
returned to each windfall county by the total amount of excess
taxes that would have been received by all windfall counties in
proportion to the total amount needed to compensate counties under
division (D) of this section.
(F) The commissioner shall make available to the public the
determinations made under division (C) of this section, but any
data obtained from taxpayers under this section or that would
identify those taxpayers shall remain confidential.
(G) There is hereby created the county compensation tax study
committee. The committee shall consist of the following seven
members: the tax commissioner, three members of the senate
appointed by the president of the senate, and three members of the
house of representatives appointed by the speaker of the house of
representatives. The appointments shall be made not later than
January 31, 2007. The tax commissioner shall be the chairperson of
the committee and the department of taxation shall provide any
information and assistance that is required by the committee to
carry out its duties. The committee shall study the extent to
which each county has been impacted by the destination-based
sourcing requirements. Not later than June 30, 2007, the committee
shall issue a report of its findings and shall make
recommendations to the president of the senate and the speaker of
the house of representatives, at which time the committee shall
cease to exist.
Section 2. That existing sections 5739.033 and 5739.24 of the
Revised Code are hereby repealed.
Section 3. That section 5739.24 of the Revised Code is hereby
repealed effective May 1, 2009. No payments or reductions in
payments required by division (D) of section 5739.24 of the
Revised Code shall be effected after May 1, 2009. No request for
an advance of the payment that, but for this act, would have been
made after May 1, 2009, shall be honored.
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