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Impact of 2024 Ohio Sales Tax Holiday will surprise you!

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647 No Sales Tax Holiday

The upcoming 2024 Ohio sales tax holiday has been expanded from holidays in the past and will impact everyone in surprising ways! As we reported in our Buzz on Am. Sub. H.B. 33 (which was the budget bill for fiscal year 2023 – 2024), the Ohio legislature enacted a sales tax holiday, which is July 30, 2024 through August 8, 2024. The sales tax holiday exempts all sales of tangible personal property that are $500 or less except the excluded items listed below. Past sales tax holidays limited the exemption to back-to-school related items including clothing of $75 or less, or school supplies or instructional materials of $20 or less.

According to the Ohio Department of Taxation’s (ODT) Frequently Asked Questions (FAQs), the holiday exemption does not apply to:

  • Watercraft or outboard motors required to be titled pursuant to Chapter 1548
  • Motor vehicles
  • Alcoholic beverages
  • Tobacco
  • Vapor products
  • Items containing marijuana
  • Enumerated taxable services found in Ohio Revised Code (R.C.) 5739.01(B)(3)

Additional questions will likely be added to the FAQs as more issues arise. For instance, while not yet addressed in a question, it is our understanding that the holiday exemption will apply to restaurants on their sale of “food” (doesn’t include alcoholic beverages) consumed in the restaurant as long as the sale meets all of the requirements for the holiday exemption.

The holiday exemption is applied on an item-by-item basis and there is no limit on the exemption. Vendors cannot separate items normally sold together to meet the $500 or less requirement. If exempt and taxable items are sold together for one non-itemized price, the entire transaction is subject to sales tax.

Impact on Businesses

Vendors will have to adjust their point of sale equipment/software to properly apply the exemption during the holiday period. As stated above, vendors will need to be able to apply the holiday exemption on an item-by-item basis, which may require programming of the vendor’s POS equipment/software. There are numerous other issues addressed in the FAQs that vendors will need to address including allocating shipping/handling between exempt and taxable items, lay-a-way, coupons/rebates, and exchanges/returns. Vendors do not have the option of whether to participate or not in the holiday and must provide the exemption to qualifying sales.

Since the holiday expands the items subject to the exemption, businesses will not owe sales tax to their vendors or need to accrue consumers use tax on purchases of tangible personal property that qualify for the holiday exemption. If a business pays sales tax to a vendor or erroneously accrues use tax on tangible personal property that qualifies for the holiday exemption, the business will be entitled to a refund, which it can obtain from the vendor or directly from ODT.

ODT Guidance

ODT has indicated that repair services are excluded from the holiday; however R.C. 5739.01(B)(3)(a) indicates that repair services are not subject to tax if the item being repaired “would not be subject to the tax.” As a result, repair services may be exempt from sales tax for a different reason.

If you have any questions regarding the Ohio sales tax holiday, obtaining sales or use tax refunds or any other sales and use tax issue, please contact John Trippier or any other ZHF professional.

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