Reasons for Tax Exemption in Ohio
Most states, including Ohio, impose sales tax on most retail transactions. Ohio also imposes a use tax on customers who participate in transactions in which the vendor didn't collect applicable sales tax. However, some transactions are exempt from sales and use tax in Ohio, and certain customers are exempt from paying sales or use tax for transactions that would usually be taxable.
As of August 2011, Ohio imposes a 5.5 percent sales and use tax on qualifying retail transactions and exchanges of services. Counties and regional governments may also impose an additional tax on such services. Taxable sales include all transactions in which one entity transfers possession of tangible property or a title to property to another entity for a price. Unless Ohio tax code exempts them, all retail sales are subject to sales and use tax.
Sales of certain items are exempt from sales and use tax. Tax-exempt items and services include copyrighted films sold for exhibition purposes, refundable deposits made on returnable drink containers, food sold for human consumption off the premises, food sold in student cafeterias, food served to employees as part of their compensation, items purchased with food stamps, newspapers, magazine subscriptions and sales of used mobile or manufactured homes. Other exemptions cover services used in maintaining aircraft with fractional ownership, property made in Ohio but immediately shipped out of state, motor vehicle fuel subject to state fuel tax, items used to package goods for sale, ships and other vessels used in interstate or foreign commerce, services provided by a public utility company, property used in commercial fishing, prescription medical equipment and prescription drugs.
Sales made to certain consumers and sales made by certain organizations are also exempt from sales and use tax. Exempt transactions include sales made by churches and other nonprofit organizations for charitable purposes, sales made to churches or other tax-exempt nonprofit organizations, sales of computer equipment to licensed educators, sales to government agencies, sales of animals by nonprofit animal shelters, sales of vehicles or repair services to a professional racing team, sales of grain bins to farmers and sales of construction materials to contractors providing services to government entities, nonprofit organizations or farmers.
Though most food and drink are exempt from sales and use tax, alcoholic beverages, soft drinks, tobacco and dietary supplements are all subject to taxation. Food consumed in a restaurant is also subject to sales tax. To qualify as a tax-exempt nonprofit organization in Ohio, the organization must obtain tax-exempt status from the Internal Revenue Service under section 501c3 of the Internal Revenue Code.