Expanding into Ohio means understanding which services trigger sales tax obligations. Unlike tangible goods that face automatic taxation, Ohio flips the script: most services walk free unless specifically named as taxable under state law.
This backwards approach creates headaches for service businesses. Miss which services require collection, and you’re facing audits that can drain cash flow faster than you can say “compliance.”
Whether you’re running a landscaping crew, property maintenance firm, or personal care studio, knowing Ohio’s service tax rules protects your bottom line and keeps state auditors off your doorstep.
Ohio’s Backwards Approach to Service Taxation
Ohio follows a reverse-default rule: services escape taxation unless the Ohio Revised Code explicitly names them as taxable. Tangible property? Taxed by default unless exempt.
The state charges 5.75% base sales tax, with local jurisdictions tacking on 0.75% to 2.25%. Combined rates land between 6.5% and 8%, depending on county.
For service businesses, this means professional services like accounting, legal advice, medical care, and insurance typically dodge sales tax entirely. But specific service categories face full taxation at combined state and local rates.
Which Services Actually Trigger Tax in Ohio
Ohio law defines specific service categories subject to sales tax. Understanding these categories determines whether your business collects and remits tax.
Landscaping and Lawn Care Services
Landscaping and lawn care services crossing $5,000 in annual sales become taxable. Small operators initially avoid obligations, but once revenue hits $5,000 annually, all subsequent sales face tax.
This includes mowing, trimming, garden maintenance, and outdoor property care. The $5,000 threshold applies to total annual landscaping revenue, not per-client billing.
Property Repair and Installation Services
Repairing or installing tangible personal property triggers tax obligations. Fixing appliances, installing equipment, servicing taxable items all face collection requirements.
The distinction matters: repairs to real property (building foundations, roofing) generally escape taxation. Repairs to tangible personal property (refrigerators, computers) don’t.
Janitorial and Building Maintenance
Janitorial and building maintenance services exceeding $5,000 annually become taxable. Ohio narrowly defines janitorial work: mopping, sweeping, trash collection.
Specialized cleaning that doesn’t fit traditional “janitorial” definitions may dodge taxation. This nuance requires careful analysis of your specific offerings.
Personal Care Services (But Not Hair Care)
Personal care services are taxable, with one curious exception: hair care remains exempt. Taxable personal care includes skin care, manicures, tattoos, hair removal, tanning, and massage.
The hair care exemption (covering cutting, coloring, styling) represents an unusual carve-out in an otherwise taxable category.
Hotel and Lodging Services
Rental of hotel rooms or sleeping accommodations for less than 30 days triggers sales tax when provided by establishments with five or more sleeping rooms. Extended stays (30 days or longer) typically escape this taxation.
This creates obligations for hotels, motels, bed-and-breakfasts, and short-term rental operators meeting the five-room threshold.
Food Service and Restaurant Rules
Ohio draws a sharp line based on where customers consume food:
Food consumed on-premises faces full sales tax: restaurant dining, cafeteria meals, food court purchases. Takeout and food consumed off-premises remains exempt.
Drive-through orders? Exempt, since customers consume food elsewhere. This distinction matters significantly for restaurants calculating what portion of sales triggers tax collection.
Transportation and Telecommunications
Transportation of persons within Ohio is taxable, with exceptions for public transit systems and commercial airlines. Private transportation services, rideshare operations, and charter services face collection obligations.
Telecommunication and satellite broadcasting services also trigger tax, covering phone services, internet access for business use, and broadcast subscriptions.
Other Taxable Services
Ohio taxes several additional service categories:
- Private investigation and security services
- Snow removal services exceeding $5,000 annually
- Exterminating and pest control services
- Employment and staffing placement services
- Vehicle towing, washing, waxing, and painting (except coin-operated)
- Storage of tangible personal property (except inventory)
- Laundry and dry-cleaning services (except coin-operated)
- Information services via 1-900 numbers
- Physical fitness and recreation club services
- Automatic data processing for business use
Software and Digital Services
Ohio considers Software as a Service (SaaS) taxable as electronically delivered software when used for business purposes. This creates significant obligations for cloud-based software providers serving Ohio business customers.
Digital products face taxation: downloaded e-books, music, movies, ringtones, and video games all trigger collection obligations. Streaming services like Netflix, Spotify, and Hulu also fall under taxable categories as electronically delivered entertainment.
Services That Dodge the Tax Bullet
Professional services including accounting, legal, medical, and insurance remain nontaxable. Advertising, marketing, consulting, educational services, and real property work also escape taxation.
Management consulting, interior design (when no installation involved), and architectural services fall into the nontaxable professional category. The key distinction: if the service involves installation or repair of tangible property, it likely faces tax.
Shipping Charges and Mixed Transactions
Ohio taxes shipping charges based on what’s being shipped. Shipping taxable items? The shipping charge is taxable. Shipping exempt items? Shipping stays exempt.
Mixed shipments containing both taxable and nontaxable items? The entire shipping charge becomes taxable. This catches many businesses off-guard when bundling products with different tax treatments.
Understanding Nexus: When Collection Obligations Begin
Before worrying about which services face tax, determine whether you have nexus. The connection to Ohio creating collection obligations.
Physical Nexus
Physical presence creates nexus through offices, employees, inventory, or leased property in Ohio. Using third-party fulfillment services or maintaining computer servers in-state also triggers obligations.
Economic Nexus
Since August 1, 2019, Ohio requires remote sellers to collect tax after exceeding either threshold during the current or previous calendar year:
- $100,000 in gross receipts sourced to Ohio, or
- 200 or more separate transactions
These thresholds include both taxable and nontaxable sales. Once crossed, collection begins immediately.
Common Compliance Traps for Service Businesses
Service businesses face unique challenges navigating Ohio sales tax:
Bundled Transactions: Combining taxable and nontaxable services in single transactions requires proper characterization. Mischaracterization creates audit exposure.
Materials vs. Services: Service businesses purchasing materials to fulfill contracts must understand when they’re consumers (paying use tax) versus retailers (collecting sales tax). This prevents double taxation or underpayment.
Exemption Certificates: Sales to tax-exempt organizations like nonprofits or government agencies may escape tax, but you must collect and maintain valid certificates. Missing certificates during audits result in assessments for uncollected tax, plus penalties and interest.
Use Tax Obligations: Service businesses purchasing materials from out-of-state vendors without paying sales tax must remit use tax to Ohio. This frequently overlooked obligation creates audit liability.
Filing Requirements and Deadlines
Once registered, Ohio businesses collect appropriate sales tax and file returns based on assigned frequency:
- Monthly filers: Due by the 23rd of the following month
- Quarterly filers: Due April 23, July 23, October 23, and January 23
- Semi-annual filers: Due July 23 and January 23
Ohio requires filing even with zero taxable sales. Missing zero returns triggers penalties.
Timely filers receive a 0.75% discount on sales tax liability. Small reward for compliance.
Penalties That Bite
Ohio imposes penalties starting at $50 or 10% of tax due, whichever bites harder. Interest accrues from the day after payment deadlines.
For 2025, interest runs 8% annually or 0.67% monthly, continuing until paid.
Service businesses attract audit attention because their transactions involve both consumer and retailer roles, creating multiple potential tax outcomes. Ohio recently targeted bars, restaurants, and motor vehicle dealers for intensive audit scrutiny. If you operate in these sectors, expect heightened compliance expectations.
Quick Reference: Common Service Questions
Is consulting taxable? No. Professional consulting remains exempt unless it involves tangible property installation.
Is IT support taxable? Yes. Automatic data processing for business use faces taxation.
Are haircuts taxable? No. Hair care (cutting, coloring, styling) is specifically exempt.
Are manicures taxable? Yes. Personal care services excluding hair care trigger tax obligations.
Is landscaping always taxable? Only after crossing $5,000 in annual landscaping revenue.
How Hands Off Sales Tax Simplifies Compliance
Navigating Ohio’s service tax rules while running your business creates constant pressure. Small mistakes like mischaracterizing services, missing exemption certificates, under-collecting bundled transactions compound into significant audit liability.
Hands Off Sales Tax takes complexity off your plate:
Nexus Analysis: We determine exactly where you’ve triggered obligations based on physical presence and economic activity across all states. Learn about our nexus analysis services.
Registration: We handle registrations with the Ohio Department of Taxation and other authorities, managing paperwork so you’re properly licensed. See our registration services.
Ongoing Filing: We prepare and file Ohio returns (monthly, quarterly, or semi-annually), ensuring timely compliance and capturing early-filing discounts. Learn about our filing services.
Exemption Certificate Management: We help collect, validate, and maintain proper certificates from tax-exempt customers, protecting you during audits.
Audit Defense: If Ohio audits your business, we serve as your partner. Organizing documentation, interpreting assessments, defending your position to minimize liability.
Notice Management: We interpret and respond to confusing notices from the Ohio Department of Taxation, resolving issues efficiently.
Voluntary Disclosure Agreements: If you discover past obligations, we file VDAs with Ohio to limit lookback periods and reduce or eliminate penalties.
We’ve focused exclusively on sales tax for over 25 years. Through our parent company TaxMatrix, we’ve served North America’s largest companies, bringing enterprise expertise to service businesses of all sizes.
Take Ohio Sales Tax Off Your Plate
Ohio’s service tax rules create ongoing complexity for growing businesses. Determining which services face tax, tracking nexus thresholds, managing exemption certificates, and filing accurately across jurisdictions drains time and resources.
Professional sales tax management ensures you collect correctly, file on time, and avoid costly audits, letting you focus on delivering services rather than decoding tax codes.
When you’re ready to take Ohio sales tax off your plate, we’re ready to help. Contact Hands Off Sales Tax today to discuss your compliance needs.
Want to learn more? Get our “10 Sales Tax Mistakes E-Commerce Sellers Make” e-book.
Frequently Asked Questions
Are professional services taxable in Ohio?
No. Professional services like accounting, legal, medical, and insurance are nontaxable in Ohio. The state only taxes services specifically enumerated in the Ohio Revised Code.
What is the $5,000 threshold for landscaping and janitorial services?
Landscaping, lawn care, snow removal, and janitorial services become taxable once annual sales reach or exceed $5,000. Below this threshold, services remain exempt. Once crossed, all subsequent sales face tax.
Is SaaS taxable in Ohio?
Yes. Ohio considers Software as a Service (SaaS) taxable as electronically delivered software when customers use it for business purposes. However, separately invoiced implementation, training, and consulting remain exempt.
How do I know if I have nexus in Ohio?
You have nexus through physical presence (offices, employees, inventory) or by exceeding economic thresholds: $100,000 in gross receipts or 200 transactions in the current or previous calendar year.
What happens if I don’t collect sales tax on taxable services?
Ohio can audit your business for unpaid taxes, penalties, and interest. Penalties start at $50 or 10% of tax due, with interest currently at 8% annually. Service businesses face frequent audit scrutiny.
Are hair care services taxable in Ohio?
No. Hair care services are exempt, representing an exception within the otherwise taxable personal care category.
