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ODT updates Information Release on “true object” test for sales/use tax

Written on Sep 9, 2022

On Friday Sept. 9, the Ohio Department of Taxation updated Sales & Use Tax Information Release ST 1999-04 to reflect a March 2022 Ohio Supreme Court decision on the “true object” test.  

The pertinent update to the information release states: 

Section 5739.01(Y)(1)(d) of the Revised Code clarifies that electronic information services “…shall not include personal or professional services…” Section 5739.01(Y)(2) catalogues a non-exclusive list of such personal and professional services, which should be considered separate services from taxable electronic information services but not exemptions in and of themselves, as directed by the Supreme Court in Cincinnati Fed. S. & L. Co. v. McClain, Slip Opinion No. 2022-Ohio-725. A key consideration when determining if such a personal or professional exists is if an actual person was involved with the service.  

Transactions may contain elements of both taxable electronic information services and exempt personal or professional services. To determine the taxability of such mixed transactions, the “true object” test found in Revised Code section 5739.01(B)(3)(e) controls. Such transactions are taxable only when the consumer’s true object in entering the transaction is to obtain the work performed by the computer systems, that is, electronic information services, “rather than to obtain personal and professional services that are coupled with the work that is performed by computer systems.” Id. 

For more details on the Ohio Supreme Court’s decision in Cincinnati Federal Savings & Loan Co. v. McClain, please read Derek Heyman’s, JD, CPA, article in the July/August issue of CPA Voice.