Sales Tax – When the University Is Exempt and When the University is Required to Collect and Report Sales Tax

Overview

Ohio University is exempt from Ohio sales tax when making qualified purchases for official University business, when the purchase is paid directly with University funds, and when Ohio University is listed as the purchaser. The rules differ depending on whether the University is making a purchase (as a buyer) or making a sale (as a seller). Below, we will address both scenarios as well as other essential information about sales tax compliance, process, roles, and responsibilities.

When the University is the Buyer (Tax-Exempt Purchases)

• Purchases Made by the University or by an Employee in Ohio - The University is exempt from sales tax within the State of Ohio for University-related purchases. Employees take advantage of this tax exemption by making a purchase through an approved University payment method such as BobcatBUY (BCB) or a University Payment Card (Pcard). The tax-exemption is not necessarily automatic, you must request it before the purchase. Most vendors will require a copy of the University tax-exemption certificate to prove that the sale qualifies for exemption. For a copy of the current Exemption certificate, please visit Tax Exempt Purchases | Ohio University.
  • Special note: Purchases made with cash or with a personal credit card are subject to sales tax. Employees should not use personal funds if the purchase can reasonably be made with a University method. If an employee makes a business purchase and pays for it personally, the sales tax can be reimbursed provided it is for a business purpose, has appropriate supporting documentation, and is approved by the department. Reimbursement of sales tax is allowed only because the tax exemption cannot be extended to individuals, not because paying tax is preferred. Employees may not purchase services with personal funds under any circumstances. Services must be purchased through a University-approved method [ex., on a Short Form Services Agreement or a Purchase Order (PO)]. Services generally may not be paid on a PCard unless specifically authorized under University policy and procedure.
• Purchases Made from University Departments - It is common for one University department to purchase goods or services from another University department. When making a purchase from a University department with your PCard, make sure to always state that you are using your PCard and making a tax-exempt purchase. Even on campus, most customers are subject to sales tax for goods and services, so the cash registers are programmed to automatically charge it. It is the individual employee's responsibility to ensure that campus purchases are not charged sales tax. Paying unnecessary taxes, when the purchase is legitimately exempt, is a waste of University resources.
• Purchases Made in Other States - Purchases made in other states may also be exempt from sales tax. Purchases made online or by mail order that are shipped to Ohio, are exempt from sales tax by providing the Ohio University Sales Tax Exemption Certificate. For in-store purchases physically made in another state, the sale may or may not be taxable. To claim sales tax exemption, make sure to notify the vendor that you are making a purchase for Ohio University and that the University is exempt from sales tax in the State of Ohio. You will most likely be asked to provide a sales tax exemption certificate, so be prepared.
  • Special Note: Ohio University sales tax-exemption does not automatically apply in other states, as tax laws vary by state. However, the University may claim exemption in states with reciprocal agreements, or by using specific exemption certificates or documentation if the other state recognizes out-of-state government entities. The University maintains a list of states that honor the University sales tax-exemption status. To see copies of these certificates please go to Tax Exempt Purchases | Ohio University .

Regardless of where you purchase, you must always ask for the exemption to avoid paying taxes for something that the University is generally exempt from. If a state does not have a reciprocal agreement, or if a vendor declines to accept the exemption documentation, the University may be required to pay the applicable state or local sales tax. 

When the University is the Seller (Collecting Sales Tax)

Many departments at the University choose to sell goods or services to external parties. External sales can be made to exempt organizations (generally non-profits or other governmental entities), which are those organizations that have a legal exemption from paying sales tax. Sales may also occur with non-exempt organizations, which include for-profit businesses and individuals. In many cases, these sales are subject to the collection of sales tax.

It is important to understand the difference between sales to nonprofit organizations, for-profit organizations, and individuals.

• Sales to Non-Profit Organizations: Sales to nonprofit organizations may be exempt from Ohio sales tax if the organization qualifies under Ohio law and provides a valid, fully completed Ohio Sales Tax Exemption Certificate at the time of purchase. Departments must retain Exemption certificates in accordance with University record retention policies and have available upon request in the event of audit.
• Sales to For-Profit Organizations: Sales to for-profit organizations and business are almost always subject to the collection of sales tax, if the good or service is subject to sales tax in Ohio.
  • Special Note: Any sales made to resellers (a person or company that sells something they have bought to someone else) also require an Ohio Sales Tax Exemption Certificate to ensure the reseller is not charged sales tax at the time of the wholesale purchase. Certificates must be retained in accordance with records retention policies.
• Individuals: Sales to external individuals, students, or employees, for personal use, are almost always subject to sales tax, if the good or service is subject to sales tax in Ohio.
  • Special Note: Not all services are taxable in Ohio. If you are unsure whether a good or service is taxable, contact the Tax Department before making the sale.

Reporting Requirements

The University is required to file monthly and report all external sales (sales to internal University departments are excluded), even if no taxes are collected. Departments must report all external sales activity to the Tax Department, even if no tax has been collected. The University must file monthly even if there are $0 sales in a month and $0 in sales tax collected. 

Ohio University files monthly sales tax reports in the state of Ohio as well as the state of Pennsylvania (the University has established economic nexus in Pennsylvania). Economic nexus laws require organizations to collect and remit sales tax in states where they exceed certain sales thresholds, even if they do not have a physical presence in that state.

The following information is reported to the Department of Taxation each month:

• Gross Sales: Includes all sales of tangible personal property (goods) and taxable services before deductions, regardless of whether the sale is later classified as exempt. 
• Exempt Sales: Includes all sales exempt from sales tax under Ohio law, as well as sales to exempt organizations or resellers that provide valid exemption certificates.
  • Special Note: Ohio Sales Tax Exemption Certificates should be obtained at the time of sale to apply the exemption. To ensure compliance, departments are responsible for maintaining valid exemption certificates to support any exempt sales in the event of a review or audit.
• Tax liability: Is the greater of the tax collected or that which should have been collected. If a department over withholds in error, the amount over withheld must be reported and submitted to the Ohio Tax Department. Departments may not retroactively collect tax from customers once the sale is complete. If sales tax was not collected when it should have been, the department will be liable for remitting the tax from departmental funds. 
  • Special Note: Departments must reconcile their sales tax liability accounts monthly and promptly (as soon as you become aware) inform the Tax Department of any prior-month liabilities that have not yet been remitted to ensure accurate reporting.

Compliance Responsibility

State audits of sales tax compliance have become more frequent and detailed, as businesses are now required to comply with the tax laws of all states in which they have a physical presence or an economic nexus. If economic nexus is triggered the University will be required to collect and remit sales taxes and file returns in those states. Therefore, each University department engaged in external sales activities is responsible for ensuring they are properly charging, collecting, and reporting sales tax. This includes having practices in place to ensure full compliance with sales tax laws, University processes, and obligations. Departments must consult with the Tax Department before beginning new external sales activities.

Remember: Departments must notify the Tax Department before engaging in new sales activity or if external sales activities are discontinued.

Reporting Process and Due Dates

The Tax Department has established a standard monthly reporting process for taxable sales, as required by law. This process provides departments with sufficient time to compile and submit required information to the Tax Department. Timely reporting is essential to ensure the University remains in compliance with Ohio sales tax laws. Because the University files a single consolidated sales tax return each month for most departments, departments must meet internal reporting deadlines so the Tax Department has sufficient time to review, compile, and submit accurate information to the Ohio Department of Taxation and to the Pennsylvania Department of Revenue. Failure to meet internal deadlines may result in additional administrative work, amended returns, penalties, or other costs associated with resolving the issue, which will be the responsibility of the department generating the sales activity.

• Due Dates
  • Internal Due Date: 10^th of each month
  • External Due Date: 20^th of each month for the State of Pennsylvania
  • External Due Date: 23^rd of each month for the State of Ohio

Questions? We are here to help! 

If your department is planning to make external sales or is currently engaged in external sales and has questions regarding taxability, reporting requirements, or compliance obligations, please contact the Tax Department at tax@ohio.edu