I live in the state of Ohio and the Department of Taxation for my state said that I must tax all of my Ohio customers tax based on the county they live in. My servers are located in texas, but my business is registered in ohio, and my office is in Ohio.
The thing is, I'm not sure if she knew what she was talking about. I don't see why it would be taxed if it's not a tangible product. Does anyone else have a business that is operated from ohio/registered in ohio that may know the answer to if Web Hosting is taxable for Ohio registered businesses?
My company is based in Ohio and yes web hosting is taxed. (I learned that the hard way having to pay over $3,000 in late taxes for 2003, luckily the fines were minimal). If I had the category code handy I would give that to you, Ill see if I can locate it on my business forms.
Thank you for your insight on the subject. You have brought up some valid points. However, it can be disproved by web design not being a taxable service in the state of ohio, leading to my confusion.
At the same time, web design is a far cry from web hosting. With that being said, how am I possibly suppose to bill my "ohio" clients only the percentage of tax in their county at that given time on a regular basis? This process seems very impractical to me, and having a tough time of figuring out an automated way of taking care of my ohio sales tax for ohio customers.
Any more insight on this subject would be greatly appreciated.
Ahh, thank you for clearing that up edesignway. So how do you go about billing your month to month customers? Is there even a billing software that does such a thing? That isolates a certain states clients, then isolates them again down to county, then charges the correct percentage on top of their current bill based on their counties percentage rage. Then updating the counties percentage rates on a regular basis to stay current.
I have seen the forms though, if I'm not mistaken it has a line next to each county and you report how much tax you collected from each county correct? Thanks again.
lol well in most people's eyes tax is impractical period....lol
However, the difference between hosting, and web design is most likely based on the fact that hosting deals with network communications, where design does not. This would be my only guess. Otherwise, I think the designers in your area are getting away scott free, because your state does not understand the industry.
While it may seem impractical, I would suggest setting up a seperate billing application, or at least keep them as seperate as possible, for your ohio client base.
Thanks again Tim and Mark. You have given me a lot of useful information. Tim, when I spoke with the department of taxation they told me that I collect on the counties percentage rate instead of the states percentage rate since they are not coming to my place of business to do transactions.
Do you have to fill out the form with all of the counties on it?
Might I also suggest that you research to find out which county's tax is highest, and charge that amount of tax on your services, to your ohio clients.
The state will not care that you are paying more, I assure you, and this should help cut down on the headache of having to try and bill each client of each county seperately. I could just imagine the nightmare.
I would also explain this situation to your Dept. of Taxation, and tell them how impractical this is to bill a tax based on county, due to the automation of billing, in the hosting industry. Ask them for suggestions, or at least a suggested solution to this, and make sure that it is fine that you charge the highest county's tax to cover them all, as some states ironically frown on this. Again, however, I would explain to them that this solution would eliminate the mass confusion and headache of billing each county seperately.
Very interesting approach Mark. I would definently rather be covered than short as I don't want to have any suprises at the end of the year like Tim did. The only problem I see with that is the customer paying for the service gets screwed out of paying higher taxes than they have to. Even then, I'm sure the margin between the lowest and highest taxes isn't that large to begin with.
I'll also do what you suggested Tim and contact my county auditor as well. Thank you once again. I just needed a third source to help me figure out this puzzle other than myself and the department of taxation.
Here is the pdf that lists the tax rate by county... Honestly though, you would use either your county tax rate, but most likely the state's tax rate for web hosting, not the county the client is from.