OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 39* Bill Analysis
135th General Assembly
Click here for S.B. 39’s Fiscal Note
Version: As Reported by House Ways & Means
Primary Sponsor: Sen. Schaffer
Effective date:
Zachary P. Bowerman, Attorney
SUMMARY
Sales and use tax on delivery network services
▪ Allows a company that coordinates delivery of goods between customers and local
businesses to obtain a waiver from the requirement that it collect and remit sales or use tax
on the goods as if it was the seller.
▪ Subjects the delivery charges of a company that has obtained a waiver to sales or use tax,
thus requiring such a company to collect and remit tax on its delivery services but not the
cost of goods delivered.
Commercial activity tax situsing for motor vehicles
▪ Situses receipts to Ohio from the sale or lease of a motor vehicle by a dealer, for commercial
activity tax (CAT) purposes, only if a certificate of title with an Ohio address is issued for that
vehicle.
▪ Applies the situsing provision retrospectively and prospectively to all tax periods.
Limitations on property tax challenges
▪ Modifies the requirements governing when political subdivisions can file property tax
complaints, counter-complaints, and appeals.
*This analysis was prepared before the report of the House Ways and Means Committee appeared in the
House Journal. Note that the legislative history may be incomplete.
December 18, 2024
Office of Research and Drafting LSC Legislative Budget Office
DETAILED ANALYSIS
Sales and use tax on delivery network services
The bill authorizes an optional waiver to change the way sales and use taxes are collected on
transactions completed through online marketplaces that coordinate between customers and local
businesses located within 75 miles of each other. Services that will be eligible to avail themselves of
the bill’s provisions typically offer consumers a way to order food or other goods for delivery from
a local business like a grocery store or restaurant. The bill refers to these companies as “delivery
network companies.”1
The key to understanding the bill’s changes is to first focus on two general questions related
to the sales and use taxation of online purchases:
▪ Who is the seller or vendor?
▪ What is the taxable price?
The seller or vendor
Ohio’s use tax law refers to “sellers” and the sales tax law refers to “vendors,” but the
distinction is not necessary to understand the bill’s changes, so this analysis will only refer to sellers.
Current law treats most delivery network companies as the seller of the products delivered from
local businesses.
That is because these companies generally qualify as what continuing law calls “marketplace
facilitators” – businesses that operate physical or electronic marketplaces where retail sales are
facilitated for third-party sellers. E-commerce platforms are well-known examples, because in
addition to selling their own products, they may allow third parties to list and sell products as well.
For sales and use tax purposes, if a marketplace facilitator has a “substantial nexus” with
Ohio, the marketplace facilitator is treated as the seller of all products sold on its marketplace. A
marketplace facilitator has substantial nexus if it facilitates enough transactions with Ohio
purchasers to subject itself to the state’s legal jurisdiction. Continuing law presumes a substantial
nexus for marketplace facilitators that annually facilitate $100,000 in total sales or 200 individual
sales in Ohio.
Because marketplace facilitators with a substantial nexus are treated as the seller for sales
and use tax purposes, they are responsible for collecting sales and use tax on sales to Ohio
consumers and remitting that tax to the state.2 Due to the volume of transactions delivery network
companies are generally involved with, they will likely easily meet the substantial nexus test if they
serve Ohio customers.
The taxable price
In Ohio, sales of tangible personal property, i.e., physical items, are taxable unless specifically
exempt by law, and sales of services are not taxable unless specifically made so by law. Delivery, as
1 R.C. 5739.01(XXX).
2 R.C. 5741.01; R.C. 5741.07 and 5741.071, not in the bill.
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a standalone service, is not generally a taxable service. But, because of the way sales and use tax is
calculated, combined with the law regarding marketplace facilitators, delivery services can be
taxable under certain circumstances.
Sales and use taxes are calculated by applying the tax rate to the taxable purchase price of a
taxable item or service. Delivery charges may or may not be included in taxable price, depending on
who is providing and charging for the delivery and the products being delivered.
If the seller is charging for preparation and delivery, the delivery charges are considered part
of the price. So, if the item or service is taxable, and the seller provides and charges for delivery, the
tax will be calculated based on the combined price of the item or service and the delivery charge. A
seller’s delivery charges on a nontaxable item, e.g., food, will not make the item taxable, nor will the
delivery charge be taxed. If there are taxable and nontaxable items subject to the same delivery
charge, the charge may be apportioned among the items so only part of the delivery charge is
subject to tax. In contrast, if the customer is paying someone other than the seller for delivery, those
delivery charges are not part of the price for the item or service purchased from the seller under
any circumstance. As a result, the tax calculated for the purchase from the seller will not include tax
on the third-party delivery charges.3
Seller and price: current law summarized
The two key points of current sales and use tax law detailed above may be summarized as
follows:
▪ Delivery network companies with a substantial nexus are treated as the seller of an item for
sales and use tax purposes, due to the state’s requirements for marketplace facilitators;
▪ When the seller of an item also charges for its delivery, the delivery charge is part of the
taxable price of the item.
As a result, under current law, when a delivery network company, qualifying as a marketplace
facilitator, coordinates between a customer, local merchant, and delivery person to deliver a taxable
item, the company is treated as the seller and the delivery charge may be taxable as part of the price
of the item.
Waiver to separate the seller of the item and delivery service
The bill allows delivery network companies to opt-out of being classified as a seller by
obtaining a waiver, despite meeting the requirements of a marketplace facilitator. The bill then
treats delivery charges from the companies that obtain a waiver as a separate taxable sale.
Under the bill, a delivery network company may request the waiver from the Tax Commissioner
to be excused from being treated as the seller of goods sold by sellers on the company’s marketplace. To
do so, the company must be current on all taxes, fees, and charges administered by the Commissioner that
are not subject to a bona fide dispute. The company also must not have requested that a previously
granted waiver be canceled, or had such a waiver revoked, within the 12 months preceding the request,
or failed to file a required sales or use tax return.
3 R.C. 5739.01; Ohio Administrative Code 5703-9-52.
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A waiver that is not affirmatively granted or denied within 30 days of its submission is
automatically granted. Waivers are effective on the first day of the first month that begins at least
30 days after the waiver is granted, and remains valid until the first day of the first month that begins
at least 60 days after the waiver is revoked by the Commissioner or cancelled by the company.
A delivery network company that receives a waiver must notify each local business operating
on the company’s marketplace that the business, and not the company, will be considered the seller
with respect to the product the business sells on the company’s marketplace. As a result, the local
business becomes responsible for collecting and remitting sales or use tax on taxable products sold
on the marketplace.
The Commissioner may divulge any information related to the status of a waiver requested
by a local business operating on the marketplace, and may adopt any rule necessary to administer
the waiver.4
Taxability of delivery network services
With the option for a delivery network company to not be treated as the seller of local
products sold through its platform even though it is a marketplace facilitator, continuing law’s
provisions for the inclusion or exclusion of delivery charges from price apply differently. If a delivery
network company is treated as the seller because it does not obtain a waiver charges for its services,
those services will be included in the price of the goods delivered because the law treats the
company as the seller for sales and use tax purposes. If the delivery network company obtains the
bill’s waiver, the goods will be taxed according to their price, irrespective of the delivery charge, and
that tax will be collected by the local business and remitted to the state by the merchant providing
the goods.
For companies that obtain a waiver, the bill specifically defines delivery network services as
a taxable service. So, a delivery network company without a waiver authorized by the bill must
collect and remit tax on its delivery charges as part of the taxable price, which also includes the price
of taxable goods sold. In contrast, a company with the waiver must collect and remit tax on all its
delivery charges as a separate taxable service, regardless of whether the delivered goods are
taxable, but it need not collect and remit taxes on the price of those goods.5
Commercial activity tax situsing for motor vehicles
The commercial activity tax (CAT) is imposed on businesses for the privilege of doing business
in Ohio, and generally amounts to 0.26% of gross receipts from a business’ Ohio sales. In determining
whether a sale takes place in Ohio, and is therefore subject to CAT, a determination referred to in
tax terms as “situsing,” is not always straightforward and continuing law contains specific provisions
to help with the determination.
Under current law, gross receipts from the sale of tangible personal property (TPP), including
motor vehicles, are sitused to Ohio if the purchaser receives the property in Ohio. In cases where
the property is delivered by motor carrier or other means of transportation, the place where the
4 R.C. 5741.072.
5 R.C. 5739.01(B)(13).
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property is ultimately received after all the transportation is completed is considered the place
where the purchaser receives the property, and thus the place where the gross receipts are sitused.
A related provision expands on this “ultimate destination rule” to extend it to property that
is accepted in Ohio but then taken directly out of the state by the purchaser. So, even though not
transported by motor carrier or other means of transportation, if property is accepted in Ohio and
immediately taken out of the state, the receipts are sitused as though the vehicle was transported
by motor carrier to a destination outside the state.6
The bill specifically addresses the situsing of gross receipts from the sale or lease of a motor
vehicle by a motor vehicle dealer, removing those transactions from the general TPP situsing
provisions described above. Under the bill, those gross receipts can only be sitused to Ohio if the
motor vehicle is issued a certificate of title showing the owner’s or lessee’s Ohio address.7 This
change applies prospectively and retrospectively to all CAT tax periods.8
Limitations on property tax challenges
The bill modifies a recent law that imposed limits on the filing of property tax complaints by
parties other than property owners. Among other changes, H.B. 126 of the 134 th General Assembly
limited the situations in which political subdivisions can file property tax complaints or appeal the
decisions of a board of revision (BOR) regarding those complaints.
Filing of property tax complaints
Sale requirement
Under current law, as enacted in H.B. 126, political subdivisions may only file a property tax
complaint with respect to property the subdivision does not own if (a) the property was sold in an arm’s
length transaction before the tax year for which the complaint is filed and (b) that sale price was at least
10% and $500,000 more than the auditor’s current valuation. The $500,000 threshold increases each year
for inflation, beginning in tax year 2023. These limits also apply to third party property owners in the county
who do not own or lease the property in question (“third party complainants”).
The bill further narrows this sale requirement, by specifying that the property sale must have
occurred within the two years preceding the year for which the complaint is filed. Current law requires
that the property was sold before that year, but does not expressly include any limit on when that sale
occurred.9
Property owner public comment
Existing law also requires that, before filing a complaint, a subdivision must adopt a
resolution authorizing the complaint, notify the property owner of the proposed resolution, and
adopt the resolution at a public meeting. The bill additionally requires the subdivision, at the public
6 R.C. 5751.033(E).
7 R.C. 5751.033(M).
8 Section 4.
9 R.C. 5715.19(A)(6)(a).
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meeting, to permit the property’s owner or their representative to provide public comments on the
resolution.10
Counter-complaints
Under continuing law, if a property tax complaint alleges a change in value of at least $50,000
in fair market value ($17,500 in taxable value), a school district may join the case by filing a counter-
complaint. The bill provides that a school district may only file such a counter-complaint if the
original complaint was filed by the owner or lessee of the property. Essentially, the bill prohibits
school districts from filing counter-complaints when the original complaint is filed by another
political subdivision or by a third party complainant.11
Appeals of BOR decisions
The bill expands an existing law, also enacted in H.B. 126, that prohibits political subdivisions
from appealing BOR decisions on property they do not own to the Board of Tax Appeals (BTA). Under
the bill, these appeal limitations also apply to third party complainants. In addition, the bill expressly
prohibits a subdivision from appealing a BOR decision regarding a complaint filed by a third party
complainant.12
Application
The bill’s new filing limits apply to complaints, counter-complaints, and appeals filed on or
after the bill’s 90-day effective date.13
HISTORY
Action Date
Introduced 01-31-23
Reported, S. Ways & Means 05-30-23
Passed Senate (32-0) 05-31-23
Reported, H. Ways & Means --
ANSB0039RH-135/sb
10 R.C. 5715.19(A)(7) and (8).
11 R.C. 5715.19(B).
12 R.C. 5717.01.
13 Section 3.
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Statutes affected:
As Introduced: 5739.01, 5739.02
As Reported By Senate Committee: 5739.01, 5739.02
As Passed By Senate: 5739.01, 5739.02