Are your Ohio construction contracts at risk? | Hahn Loeser & Parks LLP

In Ohio, sales of taxable tangible personal property or services are subject to Ohio Sales Tax.

Likewise, use of taxable tangible personal property or services on which Seller has not charged sales tax is subject to Ohio use tax.

Ohio law requires that a businessperson who makes retail sales of tangible personal property or taxable services must register for sales tax by obtaining a salesman’s license. This can be done at Registration for a Seller License or Seller Use Tax Account | Department of Taxes (ohio.gov). Separate sales and use tax returns and registrations are required.

The party to a construction contract — who is legally responsible for paying any sales or use tax due in Ohio — depends on the specifics of the specific construction contract.

What construction contracts do you have?

For Ohio sales and use tax purposes: contractor are taxed on materials they purchase and incorporate into real estate (“real estate construction contracts”). This may include material used in property repairs, construction or additions.

In contrast, consumer are subject to Ohio sales and use taxes on materials and labor used in the installation of personal property or business facilities by a contractor (“Personal Property Contracts”). Items purchased or leased for temporary use during installation or construction are subject to the same. The contractor should calculate and collect Ohio sales tax on its invoice to the customer, calculated on an amount that includes the cost of materials, labor, installation, profit, markup and overhead.

See Ohio Revised Code, 5739.01(B) (definition of “sale” for sales tax purposes).

Is it a private property contract? Some examples are:

  • Surveillance cameras for warehouses
  • Parking lot lighting at car dealerships
  • HVAC and specialty floors for computer rooms
  • Certain computer wiring
  • window decorations
  • special cabinets
  • Sale and laying of carpets
  • Sale of landscaping services – including tree planting and shrubs
  • signage
  • Indoor Swimming Pool

Is it a real estate contract? Some examples are:

  • General parking lot lighting
  • Tile, wood and laminate floors
  • Refurbished flooring
  • outdoor pool
  • gates/dock levellers
  • Permanent fencing
  • Alarm systems to prevent access from outside
  • Card reader on the outside door
  • Security cameras on the outside
  • elevators

Is it an item that will be used temporarily to fulfill the contract? Some examples are:

  • electricity, lighting or water supply
  • protective fences
  • construction elevators
  • plywood
  • concrete forms
  • framework
  • Specific signage

Many construction contracts may involve real estate, personal property, leased property, or temporary property. And it may not be clear how many items you bought for use in a contract should be taxed.

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