Ohio Concludes that Taxpayer’s Survey Respondents Service is Subject to Sales Tax

August 27, 2020

As businesses provide more services through technology and software platforms, it becomes essential to consider the sales tax implications, because those services may be subject to tax based on state taxable service classifications.

By: Tina Chunn, SALT Senior Manager

On July 1, 2020, the Ohio Tax Commissioner (Commissioner) issued an opinion (similar to a letter ruling) regarding the application of sales and use tax to a taxpayer’s survey respondents service, and concluded that the service is subject to Ohio sales tax as an electronic information service.[1]

The taxpayer is an online provider of market research/platforms/services (i.e., software as a service) and professional consulting services. In addition, the taxpayer provides a third service described as a “panel” or “survey respondents” service, which is the subject to the opinion. This service allows the customer to pay for survey respondents to take surveys according to certain demographics selected by the client. Specifically, the client uses the taxpayer’s platform to select its target survey respondent market and to define the survey questions. The taxpayer then finds the pool of respondents who complete the survey. The client can review the results of the survey on its dashboard or stats page.

In Ohio, sales and use tax are imposed on “electronic information services . . . to be provided for use in business.”[2]  This service means “providing access to computer equipment by means of telecommunications equipment for the purpose of either of the following: (i) Examining or acquiring data stored in or accessible to the computer equipment; (ii) Placing data into the computer equipment to be retrieved by designated recipients with access to the computer equipment” and do not include personal or professional services.[3]

The Commissioner concluded that the taxpayer’s service qualifies as a taxable electronic information service, because the end-product purchased by the customer is the survey results or data that it can view or retrieve utilizing the taxpayer’s online platform. The services were not viewed as personal or professional services since they did not fall into specific statutory categories and the selection of a pool of survey respondents based on demographic criteria did not otherwise involve any cognitive thought or intellectual act.

The taxpayer also requested guidance on how to determine where these charges would be sourced, if taxable.  The Commissioner clarified that the sales would be sourced to the location where the service is received. If the service is concurrently available for use in more than one jurisdiction, the taxpayer can use any reasonable, consistent, and uniform method of apportionment available. However, the taxpayer must obtain a certification from the customer confirming the accuracy of the apportionment used. Alternatively, if the customer provides an exemption certificate claiming multiple points of use or is a direct payment permit holder, the taxpayer is not responsible for collecting any sales tax and the customer is required to remit any applicable tax directly to the state.

As more states expand their sales tax rules to include the taxation of certain types of services, it is important to analyze how those services are defined. States often define taxable services such as electronic information services or data processing services using broad terms, and as a result, many different services are viewed as falling within those taxable classifications.

Aprio’s SALT team is experienced with reviewing service transactions and determining whether such services would be subject to sales tax based on each state’s taxable service classifications. We can assist your business to ensure that it is compliant with its sales tax obligations and does not incur unexpected tax liabilities and penalties. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Tina Chunn, SALT Senior Manager at tina.chunn@aprio.com or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the August 2020 SALT Newsletter.

[1] Ohio Department of Taxation, Opinion of the Commissioner, Opinion No. 20-0002, July 1, 2020.

[2] Ohio Rev. Code § 5739.01(B)(3)(e).

[3] Ohio Rev. Code § 5739.01(Y)(1).

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About the Author

Tina Chunn

Tina is a senior manager with Aprio’s State & Local Tax group. She has over 24 years of experience assisting companies and their owners to minimize their tax liability and maximize their profitability. Some of the industries Tina serves include professional services, manufacturing, warehousing and distribution, telecommunications, real estate, retailers and wholesalers. Tina has extensive experience dealing with corporate tax issues, including state and local tax returns; state and federal tax credits; state and local sales; and use, income, escheat, business licenses and property tax issues.