« Back Ohio Governor Proposes Sales Tax on Rents Payable by Tenants

March 12, 2013

You may have heard from us or from others that the Governor of Ohio has proposed expanding the Ohio state sales tax to services.

What has not been widely publicized about the proposal is that it would apply to rents payable by tenants of properties other than those used as the tenant’s principal residence.

The proposal is contained in the proposed bill to amend the Ohio sales tax statute.

The Ohio state sales tax is currently 5.5% of the sale price or lease consideration of the taxed transaction. It is currently paid by the buyer in the sale transaction or the tenant in the lease transaction. The landlord is required to collect the tax at the time of entering into the lease to which the tax pertains.

The proposal includes a reduction of the state sales tax to 5% of the sale price or lease consideration of the taxed transaction.

Counties in Ohio add sales taxes to the 5.5% state sales tax. The county-imposed tax is collected at the same time as the state tax.

At this time we cannot tell you whether the Legislature will adopt the Governor’s proposal at all or whether it will make changes to it.

The proposal must be adopted by June 30, 2013 if it is to apply to the Ohio state budget for the two year period beginning July 1, 2013 and ending June 30, 2015.

We can tell you that the adoption of the proposal in its current form will result in widespread unexpected changes in the commercial real estate markets in Ohio.

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