Ohio enacts exemption for digital advertising services
Overrides department information release taxing digital advertising
TAX ALERT |
On July 12, 2016, Ohio Gov. John Kasich signed House Bill 466, adding the provision of digital advertising services to the definition of personal and professional services, other than automatic data processing, computer services or electronic information services, and therefore, exempted from the imposition of the sales and use tax.
In December 2015, the Ohio Department of Revenue issued revised Information Release ST 1999-04 – On-line Services and Internet Access, interpreting taxable ‘electronic information services’ under existing law to include various internet-related services. Those services included inventory advertising, online chat features, mass e-mails and credit reporting. The revised release provided an example of a taxable electronic information service when a business purchases advertising services on an internet website. The department concluded that the charges for advertising would be taxable when a purchaser logs into an on-line account to perform various functions such as maintaining contact information, including hours of operation and address, uploading pictures and videos, attaching descriptions of products, adding taglines or slogans, and manipulating inventory to show accurate real-time inventory.
House Bill 466 aims to supersede the revised information release in regards to digital advertising and clarify that those services are not subject to tax in Ohio. The legislation also defines digital advertising services to include the means of providing access, by means of telecommunication equipment, to computer equipment that is used to enter, upload, download, review, manipulate, store, add, or delete data for the purpose of electronically displaying, delivering, placing or transferring promotional advertisements to potential customers about product or services or about industry or business brands.
Digital advertising services join other exempt advertising services such as charges for recommendations for advertising themes or for merchandising plans, placing of advertising matter in or the purchase of space or time from advertising media, and the writing of copy or news releases for broadcast television or radio. Taxpayers providing digital advertising services in Ohio should consider whether House Bill 466 impacts the collection of tax on those services.