OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B.224 Bill Analysis
135th General Assembly
Click here for H.B. 224’s Fiscal Note
Version: As Reported by Senate Ways & Means
Primary Sponsor: Sen. Schaffer
Effective date:
Kitty Sorah, Attorney
SUMMARY
▪ 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.
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?
1 R.C. 5739.01(XXX).
December 11, 2024
Office of Research and Drafting LSC Legislative Budget Office
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 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
2 R.C. 5741.01; R.C. 5741.07 and 5741.071, not in the bill.
P a g e |2 S.B. 224
As Reported by Senate Ways and Means
Office of Research and Drafting LSC Legislative Budget Office
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 for 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.
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.
3 R.C. 5739.01; Ohio Administrative Code 5703-9-52.
P a g e |3 S.B. 224
As Reported by Senate Ways and Means
Office of Research and Drafting LSC Legislative Budget Office
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 current
law continued to apply, a delivery network company that is treated as the seller would charge
for its services, and those services would 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 would be taxed according to their price, irrespective
of the delivery charge, and that tax would 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. 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
HISTORY
Action Date
Introduced 02-20-24
Reported, S. Ways and Means 12-10-24
ANSB0224RS-135/ts
4 R.C. 5741.072.
5 R.C. 5739.01(B)(13).
P a g e |4 S.B. 224
As Reported by Senate Ways and Means


Statutes affected:
As Introduced: 5739.01, 5741.01