Economic Nexus in Ohio

by | Nov 14, 2022 | Blog Posts

Economic Nexus in Ohio

 

State laws on economic nexus vary which imposes a compliance burden on businesses operating in multiple states. Our research team has all the information you need as it relates to economic nexus in Ohio.

With the South Dakota v. Wayfair Supreme Court ruling in favor of South Dakota, states are now able to collect sales tax from eCommerce businesses who have a “significant presence (or nexus)” in their state. Prior to this ruling, nexus was defined as having a physical presence (ex: brick and mortar store, employee, or inventory in a fulfillment center like FBA). But with this recent ruling, now this definition has been expanded to include economic activity in a state. This expanded concept of triggering sales tax responsibility because of a business’s economic activity is now referred to as economic nexus.

Bottomline, this now means that if you pass a state’s economic threshold for total revenue in that state and/or number of transactions in that state, you’re now legally required to register, collect and remit sales tax for that state.

With regard to Ohio’s economic nexus provisions, here is a summary:

  • Effective Date: August 1st, 2019. 
  • Threshold: Sales of $100,000 or more annually or 200 or more separate transactions into the state in the current or last calendar year.
  • Grace Period – Sellers must register and collect by the next day after meeting the threshold.
  • Summary: According to the state, sellers who meet the threshold are subject to the Commercial Activity Tax (CAT) and are required to register for an Ohio sales tax permit, collect sales tax on sales that ship into Ohio, and remit sales tax to the state.

If you have met the economic threshold requirement in Ohio, here are suggested next steps:

  1. Register for a sales tax permit in Ohio. Learn more about registering here.
  2. Ensure all your eCommerce channels are setup correctly to collect sales tax
  3. Start filing your monthly sales tax return to Ohio. Learn more about filing here.

As always, sales tax varies by state and if you have questions about your sales tax obligations or would like to outsource the burden, please reach out to our team.