Current through all regulations passed and filed through September 16, 2024
(A) As used in this rule:
(1) "Automatic data processing" means:
(a) Processing others' data, including all
activities incident to processing of data such as keypunching, keystroke
verification, rearranging, or sorting of previously documented data for the
purpose of data entry or automatic processing, changing the medium on which
data is stored, and preparing business documents such as reports, checks, or
bills; or
(b) Providing access by any means to computer
equipment for the purpose of processing data.
(2) "Computer services" means:
(a) Specifying computer hardware
configurations, which is the service of instructing others in the proper
set-up, installation, and start-up of computer hardware;
(b) Evaluating technical processing
characteristics, which is the service of reviewing, testing or otherwise
ascertaining the operating capacity or characteristics of computer hardware or
systems software. It does not include conducting feasibility studies or
analysis of hardware or software needs or alternatives;
(c) Computer programming, which is, for
purposes of the definition of "computer services," the service of writing,
changing, debugging, or installing systems software; or
(d) Training computer programmers and
operators in the operation and use of computer equipment and its system
software.
Computer services are to be provided in conjunction with and to support
the sale, lease, or operation of taxable computer equipment or systems to fall
within the scope of this rule.
(3) "Electronic information services" has the
same meaning as in division (Y)(1)(c) of section
5739.01 of the Revised Code.
"Electronic information service" includes such services as providing Internet
access, providing access to database information, and providing access to
electronic mail systems.
(4)
"Systems software" includes all programming that controls the basic operations
of the computer, such as arithmetic, logic, compilation or similar functions,
whether it is an integral part of the computer hardware or is contained on
magnetic disks or other storage media. "Systems software," solely for purposes
of Chapters 5739. and 5741. of the Revised Code because of division (Y)(2)(e)
of section 5739.01 of the Revised Code,
does not include application software programs that are intended to perform
business functions or control or monitor processes.
(5) "Personal and professional services" has
the same meaning as in division (Y)(2) of section
5739.01 of the Revised
Code.
(6) "Provider", for purposes
of this rule, means a vendor or seller who provides or supplies automatic data
processing, computer services, electronic information services, or personal or
professional services for a consideration, and "provision" means the sale of
such services.
(7) "Business" means
the ongoing conduct of commercial, manufacturing, mining, agriculture,
professional, service, or similar enterprise, whether or not the person or
persons conducting such enterprise are for-profit or nonprofit entities and
includes any activity engaged in by any person with the object of gain, benefit
or advantage, either direct or indirect. Business does not include the activity
of an individual in managing and investing the individual's own
funds.
(B) For purposes
of Chapters 5739. and 5741. of the Revised Code:
(1) The provision of automatic data
processing services, computer services, or electronic information services in
this state for a consideration for use in business by the consumer is a sale
that is subject to the sales tax.
(2) The receipt of the benefit of these
services in this state for use in business by the consumer constitutes a use
subject to the use tax.
(3) When a
transaction includes the provision of automatic data processing, computer
services, or electronic information services:
(a) The true object of the transaction is the
receipt of automatic data processing, computer services, or electronic
information services if such services render a significant benefit to the
consumer;
(b) The true object of
the transaction is the receipt of personal or professional services to which
the automatic data processing, computer services, or electronic information
services are merely incidental or supplemental if:
(i) The automatic data processing, computer
services, or electronic information services are merely utilized by the
provider in the performance or delivery of such personal or professional
services;
(ii) The benefit sought
to be received by the consumer is the personal or professional service;
or
(iii) The automatic data
processing, computer services, or electronic information services themselves
provide no significant benefit to the consumer.
(4) A transaction may include separable
components such that the true object of one or more separately stated
components is the receipt of automatic data processing, computer services, or
electronic information services and the true object of any other separately
stated components is the receipt of personal and professional services or
consequential tangible personal property or other taxable services. A
transaction separable in this manner is a "mixed transaction." The various
components of a mixed transaction will be separately stated in the contract or initial
billing and the price applicable to each component will similarly
be separated. It will be sufficient for purposes of this rule to
separate components to the extent they are separate categories under division
(B) of section 5739.01 of the Revised Code.
Such categories include, but are not limited to, all tangible personal
property; all repair and installation services; all personal and professional
services; and all automatic data processing, computer services, and electronic
information services.
(5) The
provision of computer services for consideration is a sale, regardless of
whether the provider is also a vendor of computer equipment or software and
regardless of whether the work is performed on or off the premises of the
consumer, and whether the person performing the service acts under the
immediate supervision of the provider or the consumer. Services performed by an
employee for the employer are not sales.
(C) Every person in this state who is making
sales of automatic data processing, computer services, or electronic
information services for use in business needs to be
licensed pursuant to section
5739.17 of the Revised Code.
Every person outside this state who is providing automatic data processing,
computer services, or electronic information services in this state, and who
has substantial nexus with this state as provided in division (H) of section
5741.01 of the Revised Code
need be
registered as a seller pursuant to section
5741.17 of the Revised
Code.
(D) For purposes of Chapters
5739. and 5741. of the Revised Code, the provision of automatic data
processing, computer services, or electronic information services does not
constitute manufacturing.
(E) A
provider of automatic data processing, computer services, or electronic
information services may claim exemption on purchases of automatic data
processing, computer services, or electronic information services when both the
following are met:
(1) The purchased service
is an integral part of the automatic data processing, computer service, or
electronic information services being provided; and
(2) The total cost of the purchased service
will be included in the price of the service provided.
(F) A provider of automatic data processing,
computer services, or electronic information services may claim resale on any
purchase of tangible personal property that is or is to be transferred
permanently to the consumer of the service as an integral part of the
performance of the service.
