Chapter 5703-29 | Commercial Activity Tax

Rule 5703-29-02 | Application of common owners and joint ventures.

• Effective: January 21, 2021
• Promulgated Under: Other

(A) Consolidated elected and combined taxpayer groups under sections 5751.011 and 5751.012 of the Revised Code are required to file as one taxpayer if persons in the group meet certain requirements. One of those requirements is that the persons have a specified portion of the value of their ownership interest owned and controlled by "common owners" included in the group. In addition to an ownership interest, the higher-tiered entity must have the ability through its voting rights to control the operations of the lower-tiered entities at each level of the vertical chain. There is a different "control test" for combined groups than for consolidated elected groups. For combined groups, the "control test" is that the higher-tiered entity must own more than fifty per cent of the lower-tiered entity at each level of the vertical chain and effectively, through its ownership, possess the voting rights to be able to control the lower-tiered entity. For consolidated elected groups, the "control test" is that the higher-tiered entity must own at least fifty per cent or at least eighty per cent of the lower-tiered entity at each level of the vertical chain and effectively, through its ownership, possess the voting rights to be able to control the lower-tiered entity. For purposes of this paragraph, "effectively" means that the entity has the ability to actually control the operations of the lower-tiered entity and is not required to be part of another combined or consolidated group.

(B)

(1) Subject to paragraphs (B)(2), (C), and (D) of this rule, if a person owns and controls, directly or constructively through related interests, more than fifty per cent of the value of the ownership interest of another person, the first person is a common owner of the second person, and those persons must be members of a combined taxpayer group unless they elect to be members of a consolidated elected taxpayer group. Consolidated elected taxpayers may choose to consolidate based on a fifty per cent or more ownership test or an eighty per cent or more ownership test, and choose to either include or exclude all foreign entities. Common owners are not limited to business organizations but also include individuals, trusts, and estates. Further, "common owner" includes an entity that is not a "person" as that termed is defined in division (A) of section 5751.01 of the Revised Code. Not being a "person" will not prevent such an entity from making an election to be in a consolidated elected group. If a person is a common owner of persons who report as a consolidated elected taxpayer group as well as persons who are in a combined taxpayer group, the common owner is to register as part of both groups but must report its taxable gross receipts as part of the consolidated elected taxpayer group.

(2) A de minimis test applies in determining whether an individual, a trust, or an estate must be included as a common owner in a combined or consolidated elected taxpayer group. If the individual, trust, or estate has less than four thousand five hundred dollars in taxable gross receipts for the calendar year, the individual, trust, or estate will not be required to be registered as part of a combined or consolidated elected taxpayer group for that year. However, the individual, trust, or estate is still a common owner for all purposes of the commercial activity tax.

(C) There are general rules that are to be applied when determining the common ownership of any person. These are applicable to all persons defined in division (A) of section 5751.01 of the Revised Code.

(1) The determination of whether a person owns and controls another person constructively through related interests shall be made using a vertical ownership test, based on voting rights, pursuant to paragraph (D) of this rule. Attribution rules under the Internal Revenue Code, such as attribution between a husband and wife, do not apply. The vertical chain shall continue as long as the ownership test is satisfied, separately or in the aggregate, by any one or more members of the group.

(2) In the event a person or a group of persons believes that the uniqueness of its organizational structure justifies that "common ownership" exists despite the strict application of this rule, the person may file in writing with the tax commissioner a request for a finding that common ownership exists. Such request must be made prior to the end of the reporting period for which the request is to become effective. The person making this request has the burden of proof to show that common ownership exists and must provide the commissioner with detailed probative evidence in support of its position.

(3) If the ownership test is met for any part of the calendar quarter or calendar year, as applicable, the group must include the taxable gross receipts of that person for the portion of the tax period in which the ownership test was met. A person who no longer meets the ownership test of the group shall report taxable gross receipts only through the date it qualifies as a member of that group. The person shall report all taxable gross receipts during the remaining portion of the tax period either as a separate taxpayer, as a member of a combined taxpayer, or as a member of another consolidated elected group if it satisfies the requirements with respect to such group.

(4)

(a) When an election under section 5751.011 of the Revised Code is made, the election remains in place for at least eight calendar quarters. During that time the composition of the consolidated elected taxpayer group is only changed when a person falls within or without the elected ownership threshold. At the end of the eight calendar quarters, the consolidated elected group must notify the commissioner in writing if it does not wish to renew its election. In the absence of such notification, the election to consolidate automatically renews for another eight calendar quarters.

(b) A separate taxpayer or a combined taxpayer may make an election under section 5751.011 of the Revised Code at any time after it has registered. However, once the election is made, it remains in place for at least eight calendar quarters. Such election is effective prospectively unless a retroactive application has been requested in writing by the taxpayer and approved by the tax commissioner in accordance with paragraph (C)(5) of this rule.

(5) The tax commissioner may approve a request for a retroactive election to file as a consolidated elected taxpayer group under section 5751.011 of the Revised Code if the taxpayer made a registration error or made the request through the voluntary disclosure program.

(a) Registration error. With respect to the tax periods affected by the election, the taxpayer's original commercial activity tax returns reflect that the taxpayer filed as a consolidated elected taxpayer group and reported the taxable gross receipts of all members required to be included in the group in accordance with section 5751.011 of the Revised Code, but the taxpayer failed to make a proper election on a form prescribed by the commissioner for the purpose of making the election. The taxpayers commercial activity tax returns as originally filed, from the date the taxpayer requests the election be effective up to and including the most recent tax period for which a return is due, must demonstrate that the taxpayer excluded intermember receipts and filed as a consolidated elected taxpayer group such that the application of a retroactive election will have no impact on the taxpayers tax liability as shown on its originally filed returns. To the extent the taxpayer included on its initial registration any entities that were not incorporated or formed under the laws of a state or of the United States and, subject to the same limitations as described in this paragraph, the taxpayer may include additional similar entities. A request for a retroactive election to file as a consolidated elected taxpayer group will be denied for a taxpayer that was not registered for the commercial activity tax prior to contact from the department of taxation through a commercial activity tax audit, compliance, or criminal investigation program.

(b) Voluntary disclosure program. The taxpayer requests retroactive consolidation through the commercial activity tax voluntary disclosure program and qualifies for the program. A taxpayer qualifies for the commercial activity tax voluntary disclosure program if the taxpayer enters into and executes the commercial activity tax voluntary disclosure agreement prior to any contact from the department of taxation through any commercial activity tax audit, compliance, or criminal investigation program.

(D)

(1) In the case of a corporation, the valuation is calculated with respect to only those classes of stock having voting rights. Interests held in a corporation are attributable to any shareholder in the corporation based on the percentage of total value of the voting equity interests in the corporation owned and controlled by that shareholder.

(2) In the cases of partnerships and entities with membership interests (e.g., a limited liability company) or beneficial interests (e.g., business trusts, or other unincorporated business interests), the value is calculated with respect to the fair market value of the voting interest in those entities.

(3) In the case of a limited partnership, only the value of general partnership interests will be considered.

(4)

(a) In the case of a trust to which section 677 of the Internal Revenue Code applies, commonly referred to as a "grantor trust," the grantor is the common owner of the trust described in that section.

(b) In the case of a trust to which section 678 of the Internal Revenue Code applies, the person, other than the trust, described in section 678 of the Internal Revenue Code is the common owner of the trust.

(c) In the case of a trust treated as a corporation for federal income tax purposes, including but not limited to real estate investment trusts and business trusts, the beneficiaries are treated as shareholders and the common ownership rules for corporations apply.

(d) In the case of any other trust, there is no common owner unless paragraph (C)(2) of this rule applies.

(5) In the case of two or more persons having an interest in an unincorporated business, including but not limited to rental property, where there is no formal partnership agreement between the persons, an implied partnership is deemed to exist. One implied partnership exists for all such commonly owned and controlled interests of the unincorporated business. The implied partnership is a separate entity for purposes of the commercial activity tax and the ownership interests are determined as follows:

(a) In the case where the owners file a federal income tax form 1065, paragraphs (D)(5)(b) and (D)(5)(c) of this rule do not apply and the ownership and control is based on the capital account contribution as reported at the end of the tax filing occurring in the previous calendar year.

(b) If, for some reason, the owners are not required to file a federal income tax form 1065, in the case of rental property, the common ownership is based on the deed to the property. If two persons are listed on the deed, the property is considered to be owned and controlled fifty per cent by each of those persons. The burden is on those persons to prove an alternate ownership structure.

(c) If paragraph (D)(5)(b) of this rule does not apply, the common ownership of the implied partnership is based on the number of persons in the group. The burden is on those persons to prove an alternate ownership structure.

(E) If, pursuant to paragraph (A) of this rule, a person elects to consolidate with all others in which it has at least fifty per cent common ownership and control, that person must include all taxable gross receipts of a joint venture so owned and controlled unless there is another fifty per cent owner of the joint venture that makes the fifty per cent election to consolidate. For example, if a fifty per cent owner of a joint venture, A, makes an eighty per cent election to consolidate with others or decides to be part of a combined taxpayer group or be a single taxpayer, and the other fifty per cent owner, B, makes the fifty per cent election, B is required to include all the taxable gross receipts of the joint venture except for any receipts the joint venture has from B. If both A and B make the fifty per cent election, the taxable gross receipts of the joint venture, after subtracting any receipts the joint venture received from its owners, are split evenly between the two consolidated elected taxpayer groups. However, each of the joint venture owners making a fifty per cent election are only able to exclude those receipts each received from the joint venture entity and should refrain from dividing or apportioning such receipts from the joint venture with the other owner. In addition, each owner cannot exclude receipts the joint venture has from the other owner since the other owner is not in the same consolidated elected taxpayer group.

(F) For purposes of a combined taxpayer group, a person who does not have nexus with the state of Ohio may nevertheless be a "common owner," but is not required to include its taxable gross receipts on the group's return for purposes of calculating the group's commercial activity tax. Such combined taxpayer groups only need to include persons with substantial nexus with the state of Ohio, as defined in divisions (H) and (I) of section 5751.01 of the Revised Code and those persons' taxable gross receipts.

(G) The commissioner may publish and make available on the department of taxations website, examples of the application of this rule.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.011, 5751.012
Five Year Review Date: 1/21/2026
Prior Effective Dates: 3/21/2006

Rule 5703-29-03 | Sampling.

• Effective: January 2, 2021
• Promulgated Under: Other

(A) As authorized pursuant to division (G) of section 5751.09 of the Revised Code, the tax commissioner hereby prescribes sampling methods for the commercial activity tax that the commissioner may use in lieu of a complete examination of records. The sampling methods include, but are not limited to, the following:

(1) Statistical sampling. Statistical methods of sampling are those procedures that utilize random selection and are capable of projecting population values with a known reliability; and

(2) Non-statistical sampling. Non-statistical sampling includes methods such as block sampling.

(B) The commissioner shall make a good faith effort to reach agreement with the taxpayer to select the most appropriate sampling methodology.

(1) The failure of the commissioner to reach an agreement with the taxpayer does not preclude the commissioner from sampling.

(2) In accordance with section 5751.12 of the Revised Code, a taxpayer that keeps records electronically is required to provide those records electronically to the department of taxation upon the commissioners request.

Supplemental Information

Authorized By: 5703.05, 5751.09(G), 5751.12
Amplifies: 5751.09(G), 5751.12
Five Year Review Date: 1/2/2026
Prior Effective Dates: 12/30/2005

Rule 5703-29-04 | Excluded person -- consolidated elected and combined taxpayer groups.

• Effective: February 16, 2024
• Promulgated Under: Other

(A) As used in this rule, "exclusion amount" has the same meaning as in section 5751.01 of the Revised Code .

(B)

(1) A consolidated elected taxpayer group is formed by an election pursuant to section 5751.011 of the Revised Code. To make the election, the group needs to register as such a taxpayer. For tax periods beginning before January 1, 2024, even if the groups total taxable receipts are below one hundred fifty thousand dollars, with or without taking into account gross receipts excluded because they are from other members of the group, the group still needs to pay the flat (minimum) tax.

(2) For tax periods beginning on or after January 1, 2024:

(a) Notwithstanding the binding eight-calendar quarters for which a consolidated election applies under section 5751.011 of the Revised Code, if a registered consolidated elected taxpayers taxable gross receipts will not exceed the exclusion amount in the calendar year, such taxpayer may cancel its account.

(b) If a group of persons who would be subject to the commercial activity tax if the group registered as a combined taxpayer, but whose aggregate taxable gross receipts would not exceed the exclusion amount in the calendar year if the group were to make a valid consolidated election under section 5751.011 of the Revised Code and exclude intermember receipts, the group of persons does not need to register for the commercial activity tax.

(C)

(1) A combined taxpayer group exists pursuant to the provisions of section 5751.012 of the Revised Code. This group is not formed by an election. For tax periods beginning before January 1, 2024, if the groups total taxable receipts are below one hundred fifty thousand dollars in a calendar year, such group does not need to register or pay the flat (minimum) tax. For tax periods beginning on or after January 1, 2024, if the groups taxable gross receipts do not exceed the exclusion amount in a calendar year, such group does not need to register or pay the tax in that calendar year

(2) For tax periods beginning before January 1, 2024, within thirty days of having taxable gross receipts of one hundred fifty thousand dollars or more, such combined taxpayer group needs to register for, and is subject to, the commercial activity tax.

(3) For calendar year 2024 and thereafter, within thirty days of having taxable gross receipts of more than the exclusion amount, such combined taxpayer group should register for and is subject to, the commercial activity tax.

Last updated February 16, 2024 at 8:13 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01, 5751.011, 5751.012
Five Year Review Date: 2/16/2029
Prior Effective Dates: 12/30/2005, 2/9/2015

Rule 5703-29-05 | Commercial activity tax taxpayers must file and pay electronically.

• Effective: March 26, 2021
• Promulgated Under: Other

(A) Except as provided in paragraph (B) of this rule, each person required to file a commercial activity tax return shall file such return and remit payment of the tax liability as follows:

(1) The returns shall be filed electronically by using the Ohio business gateway as defined in section 718.01 of the Revised Code. Alternatively, a calendar year taxpayer may utilize the Ohio telefile system;

(2) The payment shall be made electronically by using the Ohio business gateway , or in the manner prescribed by rules adopted by the treasurer of state under section 113.061 of the Revised Code. Alternatively, a calendar year taxpayer may utilize the Ohio telefile system.

(B)

(1) Any person may apply to the tax commissioner to be excused from the requirement to file and pay electronically under paragraph (A) of this rule. If a form is prescribed by the commissioner for such purpose, which shall be posted on the department of taxations web site, the person shall complete such form.

(2) The commissioner will notify the person in writing of the commissioners decision. Unless an earlier date is specified in the notice, the excuse shall continue to apply until revoked in writing by the commissioner. The denial or revocation of an excuse under this paragraph is not a final determination of the commissioner and is not subject to further appeal.

(C) Nothing in this rule affects any persons obligation to timely file all returns and timely pay all amounts required by Chapter 5751. of the Revised Code.

Last updated April 8, 2021 at 12:29 PM

Supplemental Information

Authorized By: 5703.05, 5751.07
Amplifies: 5751.03, 5751.051, 5751.07
Five Year Review Date: 3/26/2026
Prior Effective Dates: 12/2/2013

Rule 5703-29-06 | Transfers of property into the state.

• Effective: December 25, 2016
• Promulgated Under: Other

(A) This rule provides the circumstances when a taxpayer/purchaser will be required to include the value of property that is transferred into this state within one year from the receipt of the property outside of this state pursuant to section 5751.013 of the Revised Code.

(B)

(1) Subject to paragraph (B)(2) of this rule, the value of property brought into this state within one year after it is received outside this state does not have to be included as a taxable gross receipt by the purchaser. However, upon audit, the tax commissioner may require the value of such property to be included as a taxable gross receipt if the commissioner finds that such transfer within one year was intended in whole or in part to avoid the commercial activity tax.

(2) The commissioner may identify and post on the department of taxations website one or more descriptions of transfers that the commissioner deems are intended to avoid the commercial activity tax. If a transfer is one so described, the taxpayer must include the value of the property transferred as a gross receipt for that tax period in which the transfer is made. The property shall be valued at its fair market value at the time of transfer. The taxpayer may file a refund claim if the taxpayer believes that it can show that the acquisition and subsequent transfer was not intended in whole or in part to avoid the commercial activity tax.

(C) No penalty shall be imposed by the commissioner under paragraph (B)(1) of this rule. A penalty may be imposed by the commissioner under paragraph (B)(2) of this rule.

Last updated November 15, 2023 at 2:16 PM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.013
Five Year Review Date: 11/4/2026

Rule 5703-29-08 | Request for member of a combined taxpayer group to file separately.

• Effective: December 21, 2023
• Promulgated Under: Other

(A) This rule provides the procedure that a member of a combined taxpayer group under section 5751.012 of the Revised Code needs to follow to file as a separate taxpayer and not as part of the combined group.

(B)

(1) A member that is not the reporting person of a combined taxpayer group, together with the reporting person of the group, may contact the tax commissioner and request approval that the member be allowed to file separately from the group. For the member to file separately, the member and the reporting person need to agree to all of the following:

(a) The member will not claim any of the groups annual exclusion amount, and is not entitled to claim its own annual exclusion amount. For calendar years prior to 2024, the exclusion amount is one million dollars. For calendar year 2024, the exclusion amount is three million dollars. For calendar year 2025 and thereafter, the exclusion amount is six million dollars.

(b) The member will file as a separate taxpayer and will be subject to the applicable tax rate on all of the members taxable gross receipts. For example, for the period July 1, 2015 through September 30, 2015, if a member had thirty thousand dollars of taxable gross receipts, the tax would be seventy-eight dollars, the rate of twenty-six one hundredths percent times the entire thirty thousand dollars of taxable gross receipts.

(c) The member is financially sound and currently able to pay the commercial activity tax and other obligations as determined by the commissioner.

(d) The member remains jointly and severally liable for the groups tax liability.

(2) The commissioner will provide a copy of the commissioners written denial or approval to both the member requesting to file separately and to the reporting person of the combined taxpayer group. If approved, the separate filing will start at the beginning of the next tax period for the combined taxpayer. The commissioner, upon request, may grant special approval for the separate filing to begin with the current tax period.

(3) The commissioner may prescribe a form to apply to file separately from the group as provided by this rule.

(C) The commissioner may revoke separate filing approval at any time.

Last updated December 21, 2023 at 7:47 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.012
Five Year Review Date: 7/23/2026

Rule 5703-29-09 | Option for quarterly taxpayers to make estimated payments.

• Effective: May 10, 2020
• Promulgated Under: Other

(A) Division (C) of section 5751.05 of the Revised Code allows the tax commissioner to grant written approval for a calendar quarter taxpayer to use an alternative reporting schedule or estimate the amount of tax due for the calendar quarter if the taxpayer demonstrates the need for such deviation. In addition, this section also grants the commissioner the authority to adopt a rule to allow a group of taxpayers such deviation without prior written approval. Pursuant to this authority, the commissioner hereby grants authority for all calendar quarter taxpayers to make estimated payments of their tax if done pursuant to the procedures prescribed in the following paragraphs.

(B) A calendar quarter taxpayer is allowed to file its commercial activity tax return and make an estimated payment of tax due thereon by the tenth day of the second month after the end of the calendar quarter if all the procedures set forth in this rule are followed.

(1) A calendar quarter taxpayer electing to make an estimated payment shall do all of the following for this rule to apply:

(a) File the "rule estimation" return, report the appropriate estimate of taxable gross receipts, and pay the appropriate amount of estimated tax. Taxpayers seeking to use the "statutory estimation" provided for under division (A)(2) of section 5751.051 of the Revised Code shall file that return and shall not use this rule for any calendar quarter in that entire calendar year.

(b) Make an estimated payment of the tax using the tax rate in effect for the calendar quarter for which the estimated payment is being made. Any minimum annual tax amount that is owed is in addition to the estimated tax determined pursuant to this rule.

(c) On or before the due date of the return for the following calendar quarter, the taxpayer must reconcile its actual tax for the calendar quarter for which the estimate was made, using either a form prescribed by the commissioner for such purpose or the actual return. The taxpayer must calculate its actual tax using the tax rate in effect for that quarter for which the estimated payment is made, file its reconciliation report reconciling its actual tax with its estimated tax for that quarter, and, if applicable, pay any underpayment of the actual tax owed for that quarter. If the taxpayer's estimate results in an overpayment of tax, such overpayment will be applied to the next tax return/report. If, after applying the overpayment to such next tax return/report an overpayment remains, such remaining overpayment may be refunded or carried forward to the subsequent return/report filed by the taxpayer. A taxpayer making an election under this rule must file the return for the following calendar quarter. The return for that calendar quarter may again be estimated in accordance with this rule.

(d) In order for this rule to apply, both the estimated payment return/report and the reconciliation report/return, along with all applicable payments for those tax periods, must be made timely, and the taxpayer must not have any outstanding commercial activity tax liability.

(2) A taxpayer electing to make an estimated payment, as prescribed by paragraph (B)(1) of this rule, must estimate its taxable gross receipts as at least ninety-five per cent of the taxable gross receipts from the previous quarter. However, in no event shall a taxpayer's estimated payment for a given calendar quarter be less than seventy per cent of its actual tax liability for that calendar quarter. In the event a taxpayer's previous calendar quarter's taxable gross receipts exceed its current quarter's taxable gross receipts, such taxpayer's estimated tax liability for the quarter is only required to equal or exceed one-hundred per cent of its tax liability for that period.

(C) Any taxpayer who elects to estimate its tax using this rule shall not estimate its tax using the statutory estimation procedure contained in division (A)(2)(b) of section 5751.051 of the Revised Code for any calendar quarter in that entire calendar year.

(D) Interest and penalties will not be imposed on payments made pursuant to this rule provided the taxpayer fully complies with this rule. In other words, such payments will be considered to be made timely. A taxpayer who elects to estimate its tax under this rule agrees to have any overpayment automatically be applied to the taxpayers next commercial activity tax report filed.

(E) A calendar year taxpayer may not use this rule.

(F) For example, assume a taxpayer for the second calendar quarter of 2020 elects to make an estimated payment pursuant to this rule. For this example, the taxpayer's actual taxable gross receipts for the first calendar quarter were $8,000,000. By August 10, 2020, the taxpayer files its second calendar quarter return and selects the "rule estimation" return. In making the estimated payment, the taxpayer calculates an estimated liability of $19,760 (.0026*$7,600,000). In order to be covered by the safe harbor, the taxpayer makes an electronic payment of $19,760. Such taxpayer meets the ninety-five per cent threshold required to avoid the imposition of interest and penalties when it reconciles its report at the beginning of the third calendar quarter.

When reconciling the second calendar quarter return by filing its third quarter return, the taxpayer determines its actual taxable gross receipts for the second quarter were $8,500,000. The taxpayer applies the effective tax rate for the second quarter to its actual taxable gross receipts, resulting in a tax liability of $22,100 (.0026*$8,500,000).

By November 10, 2020, the taxpayer will be required to electronically file its reconciliation report, reflecting an additional $2,340 tax due ($22,100 actual tax liability for the second calendar quarter, less the $19,760 estimated payment). At the same time, the taxpayer must timely file its third calendar quarter return/report and may elect to make an estimated payment for the third quarter (based on the taxpayer's second calendar quarter actual taxable gross receipts).

Supplemental Information

Authorized By: 5703.05, 5751.05
Amplifies: 5751.05, 5757.051
Five Year Review Date: 5/10/2025
Prior Effective Dates: 3/13/2006

Rule 5703-29-10 | Nonprofit organizations and contributions.

• Effective: February 1, 2024
• Promulgated Under: Other

(A) Division (A) of section 5751.01 of the Revised Code defines "person" for purposes of the commercial activity tax. The definition excludes nonprofit organizations. This rule defines a "nonprofit organization."

(B) Solely for purposes of the commercial activity tax, "nonprofit organization" means an entity that meets both of the following:

(1) The entity is organized other than for the pecuniary gain or profit of, and the entitys net earnings or any part of them are not distributable to, the entitys members, directors, officers, or other private persons, unless otherwise permitted by law. The payment of reasonable compensation for services rendered and the distribution of assets on dissolution as permitted by the laws under which the entity is organized is not pecuniary gain or profit or distribution of net earnings. If all of the entitys members are nonprofit organizations, distribution to its members does not deprive the entity of the status of a nonprofit organization.

(2) The entity is operating consistent with its organization.

(C) Nonprofit organizations include, by way of example, but are not limited to, those entities organized under the nonprofit provisions in Chapter 1702., 1707., 1711., 1713., 1715., 1716., 1717., 1719., 1721., 1724., 1725., 1727., 1729., or 1733. of the Revised Code or similar nonprofit provisions of other jurisdictions.

(1) Rural electric companies and telephone cooperatives are deemed to be nonprofit organizations under Chapter 1702. or 1729. of the Revised Code for purposes of the commercial activity tax.

(2) Organizations formed for the purpose of funding political campaigns are deemed to be nonprofit organizations for purposes of the commercial activity tax. These organizations include those authorized under federal law, and certain entities receiving contributions that are defined in Chapter 3517. of the Revised Code or under comparable laws of other states. These entities would include a campaign committee, a continuing association, a political action committee, a legislative campaign fund, and a political committee.

(3) A charitable lead trust is deemed to be a nonprofit organization during the lifetime of the grantor. Upon the death of the grantor, the charitable lead trust will no longer be deemed to be a nonprofit organization.

(4) A limited liability company ("LLC") meeting the conditions of paragraph (B) of this rule is deemed to be a nonprofit organization. For purposes of the commercial activity tax, a single member LLC is separate and distinct from its owner. Therefore, in order for it to be considered a nonprofit organization, it does need to meet the conditions of paragraph (B) of this rule separate and apart from its owner. For example, if a nonprofit organization is the owner of a single member LLC and that LLC does not meet the conditions of paragraph (B) of this rule, the LLC does not qualify as a nonprofit organization.

(D) Receipts of certain contributions and fees are excluded under divisions (F)(2)(f) and (F)(2)(j) of section 5751.01 of the Revised Code regardless of whether the person is a nonprofit organization. To exclude contributions under division (F)(2)(f) of section 5751.01 of the Revised Code, the contributions need to be received by persons described in section 501(c), 501(d), or 401(a) of the "Internal Revenue Code of 1986," 100 Stat. 2085, 26 U.S.C.A. 1, as amended. For example, certain pension plans do not qualify as nonprofit organizations. While the contributions and fees made to those pension plans would be exempt from the commercial activity tax, gross receipts from the business operations of those pension plans may be taxable gross receipts.

Last updated February 1, 2024 at 9:02 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01
Five Year Review Date: 2/1/2029
Prior Effective Dates: 6/15/2006

Rule 5703-29-13 | Commercial activity tax definition of "agent".

• Effective: July 17, 2020
• Promulgated Under: Other

(A) An "agent" is defined in division (P) of section 5751.01 of the Revised Code to include a person authorized by another to act on its behalf to undertake a transaction for the other. In certain circumstances, portions of the amounts received by a person defined as an "agent" are excluded from the definition of "gross receipts" under division (F) of section 5751.01 of the Revised Code. The agent is only required to report as a "gross receipt" the portion of the amount received that it retains as a commission or fee rather than the entire amount.

(B)

(1) The supreme court of Ohio has held that an agency relationship "exists only when one party exercises the right of control over the actions of another, and those actions are directed toward the attainment of an objective which the former seeks." See Hanson v. Kynast (1986), 24 Ohio St.3d 171, 173, citing Baird v. Sickler (1982), 69 Ohio St.2d 652, 654, Councell v. Douglas (1955), 163 Ohio St. 292, and Bobik v. Indus. Comm. (1946), 146 Ohio St. 187, 191-192. Also see Memorial Park Golf Club, Inc. v. Lawrence, 2000 Ohio Tax LEXIS 471 (BTA No. 99-K-633). An agency relationship is defined as a "consensual fiduciary relationship between two persons where the agent has the power to bind the principal by his actions, and the principal has the right to control the actions of the agent." See Evans v. Ohio State Univ. (1996), 112 Ohio App.3d 724, 744, citing Funk v. Hancock (1985), 26 Ohio App. 3d 107, 110, in turn citing Haluka v. Baker (1941), 66 Ohio App. 308, 312. In a principal-agent relationship, the agent has the legal authority to act on behalf of the principal, and generally the principal is bound by and is liable for those actions. See N&G Construction, Inc. v. Lindley (1978), 56 Ohio St.2d 415, 418, citing Gulf Oil Corp. v. Kosydar (1975), 44 Ohio St.2d 208 (paragraph two of the syllabus) and Canton v. Imperial Bowling Lanes, Inc. (1968), 16 Ohio St.2d 47 (paragraph four of the syllabus). The party asserting the existence of an agency relationship bears the burden of proof in that regard. See Gardner Plumbing, Inc. v. Cottrill (1975), 44 Ohio St.2d 111, 115, citing Union Mutual Life Ins. Co. v. McMillen (1873), 24 Ohio St. 67. Also see Memorial Park Golf Club, Inc, supra. In determining whether an agency relationship exists, the rules of statutory construction applicable to exemptions from taxation must be followed. Ohio law in this regard is well-established; exemptions from taxation are strictly construed against the claim of exemption and in favor of the taxing authorities. See Natl. Tube Co. v. Glander (1952), 157 Ohio St. 407, 409; Beckwith & Assoc. v. Kosydar (1977), 49 Ohio St.2d 277, 279, and Canton Malleable Iron Co. v. Porterfield (1972), 30 Ohio St. 2d 163, 166. Also see Memorial Park Golf Club, Inc., supra. Thus, in determining whether an agency relationship exists, the facts must be determined under a strict, narrow reading of the definition. Absent proof of an agency relationship, the entire gross receipt must be reported by the person receiving the gross receipt for purposes of the commercial activity tax.

(2) The commissioner will look beyond the wording of the contract to the actual facts and circumstances of the situation to determine whether an agency relationship actually exists. See H.R. Options, Inc. v. Zaino (2004), 100 Ohio St.3d 373.

(C) Division (P) of section 5751.01 of the Revised Code defines "agent" to include certain individuals acting on behalf of another. Each of the following individuals is included in the list in that division and qualifies as an "agent" for purposes of this rule:

(1)

(a) In the case of a person enumerated in division (P)(1) of section 5751.01 of the Revised Code who receives a fee to sell financial instruments, only the fee received to perform this service shall be a gross receipt of the agent pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code.

(b) For example, an out-of-state dealer (i.e., a person without an office or other place of business in Ohio) orchestrates the sale of a bond on behalf of Franklin county, Ohio. The dealer contracts with the county to purchase bonds at a discount to sell them on the countys behalf. The cost of the bond is one thousand dollars; the dealer sells the bond to the client for one thousand fifty dollars. The dealer remits the full purchase price of one thousand dollars to Franklin county, Ohio and retains fifty dollars as an administrative fee. Even though the dealer actually received one thousand fifty dollars from the client, the dealer would be required to include only the client's fifty dollar fee in calculating the dealer's total taxable gross receipts for purposes of the commercial activity tax.

(2)

(a) In the case of a person enumerated in division (P)(2) of section 5751.01 of the Revised Code who retains a commission or fee from a transaction performed on behalf of another person, only the fee retained by the agent shall be a gross receipt of the agent pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code. For purposes of this paragraph and paragraph (B) of this rule, the agency relationship should be explicitly stated in a contract that is available to the tax commissioner to inspect. Absent such proof, it will be presumed that no agency relationship exists and the person claiming the agency relationship will include the total amount received in its gross receipts.

(b) For example, a general contractor enters into a lump sum contract with a property owner for the general contractor to construct an office building. The general contractor agrees to provide specified services for a fixed price of five hundred thousand dollars, and the general contractor bears all risk involved in completing the project in a cost-effective manner. The general contractor may perform the necessary services itself, or it may bid out some or all of the work to subcontractors. Because the general contractor is not required to act in the owners best interests with respect to cost issues, and because the general contractor does not have to disclose cost details with the owner, the general contractor does not qualify as an agent for purposes of the agency exclusion. For this reason, the entire contract price is includable in the general contractors gross receipts.

(c) Alternatively, for example, a general contractor enters into a costs-plus contract with a property owner for the general contractor to construct an office building. Under the terms of the contract, the owner agrees to pay the general contractor for work completed by the subcontractors at cost plus a five per cent fee. The general contractor is required to act in the owners best interests with respect to cost issues. The general contractor, when bidding out the work to subcontractors, has an agreement in writing with the subcontractors that states that the general contractor is acting as the owners agent and not as an agent of the subcontractor. The general contractor acts as a conduit with regard to any payments made to the subcontractors, in that the general contractor remits monies received from the owner to the subcontractors, provided that certain conditions are met. Accordingly, the general contractor may exclude the money that the general contractor receives from the owner to pay the subcontractors from its gross receipts. However, the five per cent fee retained by the general contractor would be included in its calculation of gross receipts for purposes of the commercial activity tax.

(3)

(a) In the case of a person enumerated in division (P)(3) of section 5751.01 of the Revised Code who issues licenses and permits under section 1533.13 of the Revised Code, only the portion of a fee retained by the issuer shall be included in the gross receipts of the agent pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code.

(b) For example, an independent agent at a bait and tackle shop is authorized under section 1533.13 of the Revised Code to issue hunting and fishing licenses to Hocking county residents. The agent collects a fee of twenty-five dollars for issuing a license and later remits this amount to the chief of the wildlife division of the Ohio department of natural resources. The independent agent will not be subject to the commercial activity tax. If, however, the agent retained a five dollar fee for administering the license, this amount would be included in the agent's calculation of its gross receipts for purposes of the commercial activity tax.

(4)

(a) In the case of a lottery sales agent enumerated in division (P)(4) of section 5751.01 of the Revised Code who holds a valid license issued under section 3770.05 of the Revised Code, only the portion of the fee retained by the lottery sales agent shall be included in the gross receipts of the agent pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code.

(b) For example, a convenience store clerk is licensed under section 3770.05 of the Revised Code to sell lottery tickets as part of its store operations. As part of an agreement with the director of the state lottery commission, the convenience store may retain one per cent of the gross receipts received from the sale of lottery tickets as an administrative fee. The convenience store clerk sells a ticket to a customer for two dollars and remits one dollar and ninety-eight cents (or ninety-nine per cent) to the director of the state lottery commission. The convenience store will include the two cent (or one per cent) administrative fee it retains in its gross receipts, in addition to its other receipts from store operations to the extent required by Chapter 5751. of the Revised Code.

(5)

(a) In the case of a person enumerated in division (P)(5) of section 5751.01 of the Revised Code who acts as an agent of the division of liquor control under section 4301.17 of the Revised Code, only the portion of the fee retained by the agent shall be included in the gross receipts of the agent pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code.

(b) For example, the owner of a state liquor agency in Sandusky, Ohio is a statutory agent of the division of liquor control and is granted the authority to sell spirituous liquor to its customers. In the contract and as compensation for this relationship, the division agrees that the agent may keep five per cent of its annual sales of these beverages as its commission. The state liquor agency sells five hundred thousand dollars worth of spirituous liquor in one year and remits a payment of four hundred seventy-five thousand dollars to the division of liquor control. The market owner is only required to include the remaining twenty-five thousand dollars (or five per cent of the market owners total sales of spirituous liquor) in calculating its gross receipts with regard to the agent relationship. The provisions of division (P)(5) of section 5751.01 of the Revised Code only apply to state liquor stores or agencies and do not apply to local markets selling beer, wine, or other types of alcoholic beverages.

(D)

(1) In the case of a restaurant or other establishment that collects gratuity on behalf of another, the portion of the amount received that is considered "tips" or "gratuity" is not included in the establishment's gross receipts pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code. This portion of the gross receipts may be a gross receipt of the person ultimately receiving the tip if the other requisite requirements under section 5751.01 of the Revised Code are met.

(2) For example, a restaurant in Columbus, Ohio employs a server to assist in serving its customers. The restaurant collects a total of one thousand two hundred dollars, including a twenty per cent gratuity of two hundred dollars. The restaurant only passes one hundred eighty dollars of the gratuity on to the server and retains the remaining twenty dollars. The restaurant is considered an agent for the one hundred eighty dollar portion of the gratuity that it passes on to the server. The twenty dollar portion retained is a gross receipt of the restaurant. (The server does not have any gross receipts for the one hundred eighty dollar portion of the gratuity it receives from the restaurant, as such amount is considered compensation and is specifically excluded under division (F)(2)(g) of section 5751.01 of the Revised Code.)

(E)

(1) In the case of a person who advances fees on behalf of a client, the person may exclude the reimbursement of these fees from the persons gross receipts when the reimbursement is received from the client.

(2) For example, an individual retains an attorney to represent the individual in a personal injury suit against a company. The attorney advances a filing fee to the court in order to allow the client to file a complaint against the company. In addition to the attorneys hourly rate, the attorney charges the client the filing fee, as well as copying charges for copies made and telephone charges for calls made all on the clients behalf. When calculating the attorneys commercial activity tax liability, the attorney may exclude the court fees that were advanced on the clients behalf from the attorney's gross receipts pursuant to division (F)(2)(l) of section 5751.01 of the Revised Code but may not exclude the copying fees or the telephone charges for calls made on the clients case.

(F)

(1) In the case of a property owner who charges common area maintenance fees to its tenants or another third party or bases the fees on the square footage contained within a particular portion of the building, an agency relationship does not typically exist. Therefore, when the property owner collects these fees, they are considered gross receipts for purposes of the commercial activity tax. These fees reimburse the property owner for expenses to the property owner and expenses may not be deducted from the taxpayers gross receipts.

(2) For example, a property owner leases a commercial building to a tenant for one thousand dollars and charges the lessee an additional one hundred dollars per month for common area maintenance, including snow plowing, landscaping, trash removal, and heating and cooling services. The property owner collects one thousand dollars in rent and one hundred dollars for the tenants common area maintenance fee. The property owner is required to report the entire one thousand one hundred dollars as a gross receipt for purposes of the commercial activity tax.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01
Five Year Review Date: 7/29/2018
Prior Effective Dates: 4/24/2008

Rule 5703-29-14 | Commercial activity tax definition of "cash discounts".

• Effective: June 20, 2019
• Promulgated Under: Other

(A) For purposes of the commercial activity tax, "cash discounts" (i.e., reductions in gross revenue) are excluded from a taxpayer's "gross receipts" pursuant to division (F)(2)(bb) of section 5751.01 of the Revised Code.

(B) For purposes of this rule, "cash discounts" include the following:

(1) "X per cent, y-day" discounts, where the purchaser may take a percentage cash discount on the invoice price if payment is made within a specified period of time of the invoice date; otherwise the entire invoice price is due by the net date;

(2) Provided they are only based on making timely payments or volume purchases;

(a) Incentive-based rebates received by a purchaser, but not the purchaser's customer; and

(b) Discounts allowed and taken by a purchaser, but not the purchaser's customer.

(3) Unilateral or negotiated price adjustments that are not based on, or do not require, the provision of anything of material value on the part of the purchaser as consideration for the price adjustment.

(C)

(1) For example, an Ohio retailer purchases its products from the manufacturer and receives an invoice with a two-ten, net-thirty cash discount option. If the retailer pays the invoice within ten days of the invoice date, the retailer may deduct from its payment to the manufacturer two per cent of the invoice price. In such case, the manufacturer would be entitled to exclude such amount for such reduction in the invoice and could report the ninety-eight per cent of the invoiced price that it received from the retailer as a gross receipt. If the retailer fails to pay the invoice within ten days, the entire invoice amount is due within thirty days of the invoice date and the manufacturer would report the one hundred per cent of the invoiced price that it received from the retailer as taxable gross receipts.

(2)

(a) As another example, for promotional purposes and in order to boost its sales, a car manufacturer announces that it will provide an incentive-based rebate of one thousand dollars per "Model A" car to all dealers that sell at least one hundred "Model A" cars in a given quarter. A car dealer located in Columbus, Ohio sells two hundred "Model A" cars in the first quarter of 2006. In accordance with its incentive program, the manufacturer sends the dealer a check for two hundred thousand dollars. The two hundred thousand dollar incentive-based rebate does not have to be included in the dealer's gross receipts for purposes of the commercial activity tax and the manufacturer can exclude the rebate amount from its gross receipts.

(b) In contrast, assume a manufacturer provides an incentive-based rebate to the car dealer's customers and that the customer, whether required to or not, signs the rebate over to the car dealer. This incentive-based rebate may not be deducted by the manufacturer or the car dealer as a cash discount, as such rebate was paid to the purchaser's customer and not to the purchaser.

(3)

(a) As another example, a hardware store accepts a manufacturer's coupon for a one dollar discount of two boxes of "X Brand" nails. The hardware store remits the coupon to "X Brand" manufacturer and "X Brand" manufacturer reimburses the hardware store the one dollar discount taken, plus the eight-cent handling fee. When the hardware store receives the one dollar and eight cent rebate from the manufacturer, it must include that amount in its gross receipts for purposes of the commercial activity tax. "X Brand" manufacturer may not claim any exclusion from its gross receipts for such reimbursement because the reimbursement goes to the retailer that accepted a coupon from its customer and not a reimbursement directly to the retailer. It is also not a reimbursement to the purchaser based on timely payment or volume purchases.

(b) Assume, however, that the Ohio hardware store advertises a one dollar discount on two boxes of "X Brand" nails, and provides a store coupon for a one dollar discount on purchase of the two boxes of "X Brand" nails. The store is not reimbursed by "X Brand" manufacturer for any such coupons tendered. When the customer purchases the nails and is given a one dollar discount, the hardware store is not required to include that one dollar in its calculation of gross receipts for purposes of the commercial activity tax.

(4) As another example, for services rendered, assume a discount store receives a monthly shelving allowance/fee from certain manufacturers for displaying the manufacturer's products in a prime location in the discount store. The discount store is required to include this allowance/fee in its calculation of gross receipts for purposes of the commercial activity tax. In addition, the manufacturer may not exclude such allowance/fee from its calculation of gross receipts for purposes of the commercial activity tax.

(5) As another example, a fast food franchise receives a flat fee or a variable fee based on the number of products sold (e.g., hamburgers sold) for providing local advertising. The franchise may not exclude this type of fee from its calculation of gross receipts because such reimbursement is for an expense and is not based on making timely payments or on volume purchases.

(6) As another example, an unseasonably early winter causes a manufacturer to produce inventory in excess of the manufacturer's normal cold-weather demand. To unload the excess product, the manufacturer offers a twenty-five per cent off-invoice discount on all purchases for a limited time. The purchaser is not required by the manufacturer to offer a discount to its wholesale or retail customers, promote the manufacturer's product through advertisements, circulars, prominent placement, or otherwise, or provide any reciprocal promise or service to the manufacturer in order to receive the discount. The manufacturer may exclude the twenty-five per cent off-invoice discount from its calculation of gross receipts for purposes of the commercial activity tax.

(7) As another example, a large bakery sells its artisan breads to businesses from the largest chain grocery stores to small, family-owned diners. To show its appreciation for its small-business customers, the bakery offers special pricing to any customer that does not operate as a franchise and has only one business location. The special price is reflected on each invoice as a discount from the regular list price and is tracked in a general ledger expense account titled "Small business preferred pricing discount." The bakery may exclude from its calculation of gross receipts the difference between the list price and special price as reflected in the expense account.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01(F)(2)(bb)
Five Year Review Date: 6/20/2024
Prior Effective Dates: 8/11/2006

Rule 5703-29-15 | Highway transportation services - bright-line presence and situsing.

• Effective: June 20, 2019
• Promulgated Under: Other

(A) Pursuant to division (I) of section 5751.01 of the Revised Code, a person is deemed to have "bright-line presence" in this state for purposes of the commercial activity tax if the person meets one of the five tests listed in that section, one being that the person has property in this state with an aggregate value of at least fifty thousand dollars at any time during the calendar year. This rule is to address the application of the property test to highway transportation services.

(B) For purposes of paragraph (A) of this rule, a person providing highway transportation services will be presumed to have at least fifty thousand dollars of property in the aggregate during the calendar year if the person has property of such value in this state for more than thirteen days, which need not be consecutive.

(C) For purposes of paragraph (B) of this rule, "day" means a calendar day or any portion thereof. Multiple trips during the same day do not constitute more than one day.

(D)

(1) Persons providing highway transportation services must situs gross receipts from such services pursuant to division (G) of section 5751.033 of the Revised Code in proportion to the miles traveled by the carrier during the tax period within the state compared with the miles traveled by the carrier during the tax period everywhere. Even if a person has bright-line presence, however, that person must also have at least one hundred fifty thousand dollars in taxable gross receipts in order to be a taxpayer for purposes of the commercial activity tax. That threshold applies to a person who would otherwise be a separate taxpayer or to a group of persons who would otherwise be members of a combined taxpayer group, but does not apply to members of a consolidated elected taxpayer group. Please see rules 5703-29-02 and 5703-29-04 of the Administrative Code for further clarification on this issue.

(2) For example, assume a widget manufacturer located in Kansas contacts ABC trucking company (ABC), a Kansas transportation company, to arrange the transportation of one hundred thousand dollars worth of the manufacturers widgets to XYZ retailer (XYZ), located in Pennsylvania. The total trip is nine hundred miles, of which two hundred fifteen miles are traveled in Ohio, and ABC charges the manufacturer ten thousand dollars. ABC loads the widgets onto its trucks in Kansas and drives them through this state to XYZs Pennsylvania location. ABCs truck is worth eighty thousand dollars, and this is the only trip ABC makes through this state during the calendar year. ABC would not be deemed to have bright-line presence for purposes of the commercial activity tax because ABC is not in this state for more than thirteen days during a calendar year.

If, however, ABC contracted with the widget manufacturer to make bi-weekly trips to XYZ in Pennsylvania for purposes of transporting the widgets, and ABC drove through this state each trip, ABC would be deemed to have bright-line presence in this state for purposes of the commercial activity tax. It is important to remember, however, that ABC would not be considered a taxpayer subject to the commercial activity tax until ABC has at least one hundred fifty thousand dollars in taxable gross receipts (those gross receipts sitused to this state) during the calendar year. If ABC is a combined taxpayer, the entire group must add its taxable gross receipts together to determine if the group reaches the one hundred fifty thousand dollar threshold amount. (Please note that if ABC was a member of a consolidated elected taxpayer group, the one hundred fifty thousand dollar threshold would not apply.) In this example, assuming ABC meets the bright-line standard, ABCs ten thousand dollars of gross receipts would be sitused to this state based on the proportion of miles driven within this state compared with miles driven everywhere.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01(I)
Five Year Review Date: 6/20/2024
Prior Effective Dates: 8/11/2006

Rule 5703-29-16 | Qualified distribution center.

• Effective: March 26, 2021
• Promulgated Under: Other

(A) Pursuant to division (F)(2)(z) of section 5751.01 of the Revised Code, "gross receipts" excludes "qualifying distribution center receipts." Section 5751.40 of the Revised Code defines "qualifying distribution center receipts" and other terms used in that definition. While all the requirements of section 5751.40 of the Revised Code must be met, it essentially provides that certain receipts of a supplier from qualified property delivered to a qualified distribution center are excluded from that suppliers calculation of gross receipts for purposes of the commercial activity tax. The extent of this exclusion is based on the Ohio delivery percentage as determined by the qualified distribution center, and such percentage applies to all suppliers shipping to that location regardless of the percentage of that suppliers actual property that will be shipped outside the state.

(B) In order to meet the requirements to be a qualified distribution center, a warehouse, a facility similar to a warehouse, or a refining facility in addition to meeting all other requirements specified in section 5751.40 of the Revised Code, must meet both of the following requirements for the qualifying period:

(1) The operator of the warehouse, a facility similar to a warehouse, or the refining facility and members of the operators consolidated elected taxpayer group as described in section 5751.011 of the Revised Code must have had at least five hundred million dollars in cumulative costs from qualified property delivered to the distribution center by its suppliers during the qualifying period. Such costs only include costs of qualified property, which is tangible personal property delivered to a distribution center that is shipped there solely for further shipping by the distribution center to another location either within or without this state or in the case of gold, silver, platinum or palladium, delivered to a refining facility solely for refining to a grade and fitness acceptable for delivery to a registered commodity exchange. Only the cost of the qualified property, less any reductions in price (e.g., cash discounts) is considered for purposes of this calculation. Any costs or reimbursements for providing a service to the seller, such as management consulting services, are excluded from the calculation. Further, only purchases made by members of the same consolidated elected taxpayer group and received at the distribution center are included in the calculation of the five hundred million dollars. All purchases from members of the same consolidated elected taxpayer group must be excluded from the calculation and cannot be included in the five hundred million dollar threshold.

(a) For example, corporation A is the operator of a distribution center. Corporation A, corporation B, and corporation Z purchase qualified property that is shipped to the distribution center by independent, third-party suppliers during the qualifying period. Corporation A and corporation B are part of the same consolidated elected taxpayer group; corporation Z is not part of corporation As consolidated elected taxpayer group. The purchases of qualified property made by corporation A and corporation B that are shipped to the distribution center are aggregated in the calculation of the five hundred million dollar threshold. However, purchases made by corporation Z are not included in that calculation because corporation Z is not part of corporation As consolidated elected taxpayer group.

(b) In contrast, assume the same facts as in the previous example. The intercompany sales between corporation A and corporation B or between or among any other members of the operators consolidated elected taxpayer group are not aggregated with other purchases from outside suppliers to meet the five hundred million dollar threshold.

(2) The operator of such warehouse, a facility similar to a warehouse, or a refining facility must have had more than fifty per cent of the cost of the qualified property shipped to a situs outside this state under the provisions of division (E) of section 5751.033 of the Revised Code during the qualifying period. Any qualified property shipped from a qualified distribution center to a destination within this state is received in this state, even if the qualified property is subsequently shipped outside this state.

(C) If the warehouse, facility similar to a warehouse, or refining facility meets both requirements, the operator of such location must make an application to the tax commissioner and provide its Ohio delivery percentage. The Ohio delivery percentage equals the percentage of the cost of qualified property that is shipped to purchasers located within this state. The computation shall be carried out to six decimal places (e.g., 44.5678 per cent). If the calculation results in more than four decimal places, the percentage shall be rounded up whenever the fifth decimal place is greater than four. "Purchasers" of this property may be either members of the same consolidated elected taxpayer group or non-members of the group. The cost basis used for calculating the Ohio delivery percentage must be consistently applied in both the numerator and denominator and must be supported by the taxpayers records as they existed during the qualifying period.

(D) On the operators application, the calculations provided to establish compliance with the requirements identified in this paragraph and paragraph (B) of this rule must be certified by a certified public accountant in a format approved by the commissioner. Such certification must be attached to the operators application.

With the application, the operator must provide both: (1) the cost of the qualified property shipped to the distribution center by suppliers during the qualifying period; and (2) the Ohio delivery percentage cost attributable to each location, which is the proportion of the cost of the qualified property shipped to locations in this state compared with the cost of qualified property shipped everywhere. Only those suppliers that actually sell to such qualified distribution center qualify for the partial exclusion from their gross receipts.

(E) In the event an agency relationship exists such that a broker, for example, works with a supplier to sell to a distribution center, only the principal (the supplier) is entitled to take the partial exclusion from its gross receipts pursuant to division (F)(2)(z) of section 5751.01 of the Revised Code. The broker may be entitled to exclude the portion of the gross receipts it passes on to the principal/supplier as an agent under division (F)(2)(l) of section 5751.01 of the Revised Code. However, the person receiving the commission or fee could not apply the Ohio delivery percentage to its commission or fee in order to further reduce its commercial activity tax liability because such person is providing a service and the amount retained is not attributable to qualified property.

Last updated April 8, 2021 at 12:29 PM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01, 5751.40
Five Year Review Date: 6/20/2024
Prior Effective Dates: 6/20/2019

Rule 5703-29-17 | Situsing of certain services for purposes of the commercial activity tax.

• Effective: June 20, 2019
• Promulgated Under: Other

(A) In general, gross receipts from services are sitused to Ohio in the proportion that the purchaser's benefit in Ohio with respect to what was purchased bears to the purchaser's benefit everywhere with respect to what was purchased. Except as otherwise set forth in this rule, the physical location where the purchaser ultimately uses or receives the benefit of what was purchased is paramount in determining the proportion of the benefit received in Ohio. The tax commissioner will not require taxpayers to upgrade their systems in order to comply with the general provisions of this rule as long as the taxpayer makes a good faith effort to situs receipts from services in a reasonable, consistent, and uniform method that is supported by the taxpayers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(B)

(1) For purposes of this proposed rule, "a purchaser only located in Ohio" for an individual means a resident of Ohio having no business locations outside Ohio. "A purchaser only located in Ohio" for any other entity means that both of the following apply:

(a) The entity's headquarters/commercial domicile (which may be different from the state of incorporation or state of organization) is in Ohio; and

(b) The entity has no physical locations outside Ohio.

(2)

(a) For those enumerated services that allow for the situsing of gross receipts using a reasonable, consistent, and uniform method supportable by the service providers business records, the primary focus must be on the location where the purchaser ultimately uses or receives the benefit.

(b) In the event the commissioner disagrees with a taxpayers reasonable, consistent, and uniform method of situsing its gross receipts, a penalty will not be imposed if the situsing was found to be made in good faith. While different methods may be used for different types of services, the same method must be consistently used for all types of similar services.

(C) The following is a list of various services and the situsing method to be used for commercial activity tax purposes. This list is not meant to be comprehensive, but provides guidance on how to source each service listed. If a service is not specifically listed in this rule, the situsing provisions for a similar service may provide guidance. Situations which arise that do not match the examples provided may need to be handled on a case by case basis. The department of taxation reserves the right to review and adjust any apportionment of gross receipts made by a taxpayer.

(1) Accounting services

(a) If accounting services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, a Kentucky sole proprietor with only one retail store in Kentucky engages the services of an Ohio accountant to prepare its financial statements. The gross receipts from this service are sitused to Kentucky.

(b) If accounting services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are of benefit to specific operations located in Ohio.

For example, a national retailer hires an Ohio accounting firm to address an inventory problem that exists at its Ohio stores. The gross receipts from this service are sitused to Ohio

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, accounting services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual and such individual has no business locations outside of Ohio, at the individuals residence. The term "principal place of business" for those other than individuals refers to the location where the business unit being provided the service primarily maintains its operations. In determining the "principal place of business" of a purchaser, the following measures, if known, shall be considered in sequential order:

(i) The branch, division, or other unit where the client primarily receives the benefit of the accounting service;

For example, the New York division of a large, multi-national corporation with operations in Ohio pays an Ohio accountant accounting fees associated with the divisions product liability suit. Receipts from this service are sitused to New York, because the accounting services were primarily received by the New York division.

(ii) The primary location of the management operations of the purchasers business unit; and

For example, an accounting firm provides valuation services for the sale of one product line of a large, multi-state manufacturer. The product line being sold has locations in several states, but the management of the product line is located in Ohio. The gross receipts would be sitused to Ohio since the first default, i.e., the location where the purchaser primarily receives the services, would not be applicable, and the business units management operations are in Ohio.

(iii) The billing address, acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

For example, an accounting firm provides valuation services for the sale of one product line of a large, multi-state manufacturer. The product line being sold has locations in several states, with management of the product line located in most of the locations. The billing address may be used to situs the gross receipts as long as the address is associated with an operation of the manufacturer.

(d) If accounting services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(2) Advertising services

This provision only applies to those providing advertising services and not those actually receiving advertising revenue for allowing an advertisement to be placed in a newspaper, magazine, radio, television or similar media.

(a) If advertising services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

(b) If advertising services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, advertising services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the advertising service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If advertising services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(3) Agents/managers of athletes/entertainers

(a) If an agent/manager represents an athlete in negotiating a contract to play for an Ohio-based team, or for an individual to appear at an Ohio-based sporting event, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the negotiations occur.

For example, an agent negotiates a contract for an athlete (regardless of athlete's residence) to play on a sports team in Cincinnati, Ohio. One hundred per cent of the agent's fee is a taxable gross receipt.

As another example, an agent negotiates a contract for an athlete who resides in Ohio, but will play for a team based outside Ohio. None of the agent's fee is sitused to Ohio.

(b) If an agent/manager represents an entertainer in negotiating a contract to perform at an Ohio-based event, one hundred per cent of the gross receipts related to that event are sitused to Ohio regardless of where the negotiations occur.

For example, an agent books a performer for a three-day concert in Marietta, Ohio. The agents fee for that work is one hundred per cent sitused to Ohio.

(c) If an agent/manager represents an entertainer in negotiating a contract to perform at an Ohio location and locations outside of Ohio, the gross receipts are sitused to Ohio based on the number of known Ohio events compared to all known events.

For example, an agent books ten performances, two of which are at Ohio locations and eight of which are at non-Ohio locations. The agents fee is twenty per cent sitused to Ohio.

(d) If the agents/managers services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(e) If an agent/manager represents an athlete or entertainer in negotiating a contract to endorse some thing or some one in Ohio, the gross receipts are sitused to Ohio based on the number of known Ohio events compared to all known events. If no event locations are known, the gross receipts are sitused to where the athlete or entertainer resides.

For example, an agent receives a fee for a national endorsement for a golfer who is contracted to appear at a total of twenty known events, two of which are known to be in Ohio events. The agent's fee is ten per cent sitused to Ohio.

(4) Agency Other

(a) If agency services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, a Kentucky sole proprietor with only one retail store in Kentucky engages the services of an Ohio agent to facilitate the purchase of merchandise from an Ohio manufacturer. The gross receipts from this service are sitused to Kentucky.

(b) If agency services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are of benefit to specific operations located in Ohio.

For example, a national retailer hires an Ohio agency to develop an advertising campaign targeting its Ohio stores. The gross receipts from this service are sitused to Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, agency services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the "principal place of business" of a purchaser, the following measures, if known, shall be considered in sequential order:

(i) The branch, division, or other unit where the purchaser (customer) primarily receives the benefit of the agency service;

For example, the New York division of a large, multi-national corporation with operations in Ohio pays an Ohio agent fees associated with the divisions life insurance policy. Receipts from this service are sitused to New York, because the agency services were primarily received by the New York division.

(ii) The primary location of the management operations of the purchasers business unit; and

For example, an advertising agency works with a multi-state manufacturer to develop an advertising campaign for its customers. The company has locations in several states, but the management of the company is located in Ohio. The gross receipts would be sitused to Ohio since the first default, i.e., the location where the purchaser primarily receives the services would not be applicable, and the business units management operations are in Ohio.

(iii) The purchasers (customers) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

For example, an advertising agency provides magazine advertising services for one product line of a large, multi-state manufacturer. The product line being sold is located in several states, and the management of the product line is located in most of the locations. The billing address may be used to situs the gross receipts as long as the address is associated with an operation of the manufacturer.

(d) If agency services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(5) Appraisal services

(a) If the appraised property is located wholly in Ohio (regardless of where the purchaser is located), one hundred per cent of the gross receipts are sitused to Ohio.

For example, a local appraisal firm values three Ohio business properties and no properties outside of Ohio. The gross receipts from the appraisal services are sitused one hundred per cent to Ohio.

(b) If the appraised property is within and without Ohio, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided. As a default, the value of the appraised property in Ohio compared to the total value of the appraised property everywhere will be accepted.

For example, if forty per cent of the valuation is for Ohio properties and sixty per cent is for non-Ohio properties, only forty per cent of the gross receipts received for that service are sitused to Ohio.

(6) Architecture services (including drafting services)

(a) If architectural services are performed for a purchaser and the property being designed is to be located wholly in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, architectural services are performed for a property to be built in Youngstown, Ohio; one hundred per cent of the gross receipts for that service are sitused to Ohio.

(b) If architectural services are performed for property that will be located within and without Ohio, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided. As a default, the number of properties anticipated to be built in Ohio compared to everywhere will be accepted. If the services are not for standardized buildings, square footage may be used as a method of apportionment unless it creates a distortion.

For example, architectural services are performed for ten properties, three of which are in Ohio and seven of which are at non-Ohio locations. The architects fee is thirty per cent sitused to Ohio.

(7) Athletes (including owners of animals used in sporting events)

(a) If an athlete receives remuneration for participating in or obtaining prize monies from an Ohio based event, one hundred per cent of the gross receipts are sitused to Ohio. Remuneration includes, but is not limited to, money, fair market value of property, or fair market value of services.

For example, an owner receives ten thousand dollars for a horse that shows (places third) at a race conducted in Ohio. That receipt is one hundred per cent sitused to Ohio.

(b) If an athlete is paid for appearing at an Ohio-based event, one hundred per cent of the gross receipts are sitused to Ohio.

For example, a person is paid to attend a home and garden show in Ohio, one hundred per cent of that gross receipt is sitused to Ohio.

(c) If an athlete is paid for endorsing a thing or a person in Ohio, the gross receipts are sitused to Ohio based on the number of known Ohio events compared to all known events. If no event locations are known, the gross receipts are sitused where the athlete resides. In dealing with national endorsements, in general, four and one-tenth per cent will be accepted in accordance with Ohio's population.

For example, a basketball player receives a fee from a soft drink company and is contracted to appear at a total of eighty known events, forty of which are in Ohio. The basketball player's fee is fifty per cent sitused to Ohio.

(d) If the athletes services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(8) Barbershop/beauty salon/spa services

If barbershop, beauty salon, or spa services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

For example, a resident of Indiana receives a hair cut in Dayton, Ohio. One hundred per cent of that service is sitused to Ohio.

(9) Cable/satellite services

(a) Gross receipts from cable/satellite services are sitused to Ohio, in general, if the purchaser's (subscribers) place of primary use is in Ohio, regardless of where the cable and satellite services originate. In general, the purchasers (subscribers) billing address will be accepted as the primary use location unless the seller of the service knows the purchaser (subscriber) is using the service in multiple locations.

For example, a satellite radio service has one million dollars in gross receipts from addresses billed to Ohio customers. The one million dollars in receipts are one hundred per cent sitused to Ohio.

(b) If the cable/satellite service provider knows that the purchaser (subscriber) is using the service in multiple locations inside and outside Ohio, the gross receipts are sitused to Ohio based on the number of properties in Ohio where the purchaser (subscriber) receives these cable/satellite services compared to everywhere.

(c) If cable/satellite services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(d) Gross receipts from providing billing and other ancillary services for cable/satellite service providers shall be sitused to Ohio based on the location of the purchasers (cable/satellite service providers) customers. If not known, the location(s) of the purchaser may be used.

(10) Call center services

(a) Gross receipts from providing call center services on a fixed cost basis shall be sitused based on the location of the purchaser. Gross receipts from providing call center services on a variable (or per call) cost basis shall be sitused to Ohio based on the location of the purchasers customers. In determining the location of the purchaser and/or the purchasers customers, the following, if known, apply in sequential order:

(i) The location (e.g. home, branch, division, or other business unit) where the purchaser and/or purchasers customer primarily receives the benefit of the service;

(ii) The primary location of the management operations of the purchasers and/or purchasers customers business units; and

(iii) The purchasers and/or purchasers customers billing address is acceptable if provided in good faith. To determine the purchasers and/or purchasers customers billing address, a provider of call center services may rely on the area code and/or zip code of the purchaser and/or purchasers customer.

(b) If call center services relate to various operations both within and within Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(11) Child care (day care or education) services

If child care services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

For example, a West Virginia resident obtains day care services in Gallipolis, Ohio. One hundred per cent of the gross receipts are sitused to Ohio.

(12) Collection agency services (including repossession services)

(a) If collection services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, a Pennsylvania repossession agency that receives one hundred per cent of its gross receipts from an automobile finance company whose business location is in Ohio, will situs all of its gross receipts to Ohio.

(b) If collection services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, collection services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the client primarily receives the benefit of the collection service;

(ii) The primary location of the management operations of the clients business unit; and

(iii) The clients billing address is acceptable if provided in good faith. The billing address must be the site where the client has some actual operations, and not just a post office box.

(d) If collection services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(13) Computer programming services

(a) If computer programming services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio, regardless of where the service provider is located.

(b) If computer programming services are performed for a purchaser that will use the computer programming within and without Ohio, the gross receipts are sitused to Ohio if either of the following apply:

(i) The services performed are related to a purchasers specific operations located in Ohio; or

(ii) The services are performed that do not relate to a purchasers specific operation. The services are sitused to Ohio based on the purchasers number of users in Ohio compared with the number of users everywhere.

(c) If computer programming services relate to various locations both within and without Ohio, the gross receipts may be sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided or within a reasonable time thereafter.

(14) Construction contractors

(a) If construction contracting services are performed for a purchaser and the property being constructed is located wholly in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, if construction contracting services are performed for property to be built in Youngstown, Ohio, one hundred per cent of the gross receipts for that service is sitused to Ohio.

(b) If construction contracting services are performed for property that will be located within and without Ohio and there is no separation of costs per location, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided. As a default, the number of properties anticipated to be built in Ohio compared to everywhere will be accepted. If the services are not for standardized buildings, square footage may be used as a method of apportionment unless it creates a distortion.

For example, construction contracting services are performed for ten properties, three of which are in Ohio and seven of which are at non-Ohio locations. The contractors fee is thirty per cent sitused to Ohio.

(15) Contract manufacturing services

(a) For purposes of this rule, contract manufacturing includes a person who provides manufacturing services on a piece of property that the contract manufacturer does not own. Contract manufacturing should be sitused the same as the sale or delivery of tangible personal property under division (E) of section 5751.033 of the Revised Code.

(b) If the purchaser does not provide the location outside of this state (i.e. a minimum of city and state) where the product is to be shipped, the gross receipts in this situation are sitused to the location where the contract manufacturing is performed.

For example, a New York company ships metal tools both inside and outside Ohio. Gross receipts from contract manufacturing performed on tools shipped inside Ohio are sitused to Ohio as a taxable gross receipt. Gross receipts from contract manufacturing performed on tools shipped outside of Ohio are not Ohio taxable gross receipts.

As another example, a New York contract manufacturer makes an item that a seller located in Pennsylvania purchases from the contract manufacturer to sell to an Ohio customer. Upon completion of the contract manufacturing, the Pennsylvania seller instructs the contract manufacturer to ship the product directly to its customer in Ohio. Both the New York contract manufacturers gross receipts and the Pennsylvania sellers gross receipts are sitused to Ohio and, accordingly, are Ohio taxable gross receipts.

(16) Data processing services

(a) If data processing services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, an Indiana vendor provides data processing services for a business that is located only in Ohio. The gross receipts received from that Ohio business are sitused to Ohio.

(b) If data processing services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

For example, an Indiana vendor converts the sales invoices of an Ohio business into an electronic format. The Ohio business has a manufacturing plant in Indiana and has its sales operation in Ohio. The gross receipts received from that Ohio business are sitused to Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, data processing services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the data processing service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If data processing services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(17) Directors fees

Fees received by a director of a corporation for the performance of his/her duties are sitused to the headquarters of the corporation. Remuneration includes, but is not limited to, money, stock, fair market value of property, or fair market value of services.

(18) Electricity (including electric transmission and distribution services)

Electricity (including electric transmission and distribution services) must be sitused according to section 5733.059 of the Revised Code.

(19) Employment services

Employment services are sitused to Ohio if the employee is assigned to a post of duty (i.e., where employee primarily works) located in Ohio.

For example, if an employment services company based in Kentucky provides employment services for a company with a post of duty in Cincinnati, Ohio, the gross receipts are one hundred per cent sitused to Ohio.

(20) Engineering services

(a) If engineering services are performed for a purchaser and the property is located wholly in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, engineering services are performed for a property to be built in Youngstown, Ohio; one hundred per cent of the gross receipts for that service are sitused to Ohio.

(b) If engineering services are performed for property that is located within and without Ohio, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided. As a default, the number of properties located in Ohio compared to everywhere will be accepted.

For example, engineering services are performed for ten properties, three of which are in Ohio and seven of which are at non-Ohio locations. The engineers fee is thirty per cent sitused to Ohio.

(21) Entertainer services

(a) If an entertainer receives remuneration for participating at an Ohio based event, one hundred per cent of the gross receipts are sitused to Ohio. Remuneration includes, but is not limited to, money, fair market value of property, or fair market value of services.

(b) If an entertainer receives an appearance fee for appearing at an Ohio based event, one hundred per cent of the gross receipts are sitused to Ohio.

(c) If an entertainer is paid for endorsing a thing or a person in Ohio, the gross receipts are sitused to Ohio based on the number of known Ohio events compared to all known events. If no event locations are known, the gross receipts are sitused where the athlete resides. In dealing with national endorsements, in general, four and one-tenth per cent will be accepted in accordance with Ohios population.

For example, an entertainer receives national advertisement for participating in an event. Four and one-tenth per cent of the gross receipts from the endorsement are sitused to Ohio based on Ohios census population in 2006.

(d) If the entertainers services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(22) Entertainment/amusement services

(a) If the entertainment services being purchased are to be performed wholly in Ohio, one hundred per cent of the gross receipts are sitused to Ohio, regardless of where the services are purchased.

(b) If the entertainment services being purchased are to be performed within and without Ohio and originate and terminate from a location in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the purchaser makes the purchase of the services.

For example, an evening riverboat cruise leaves from Cincinnati, Ohio and returns to Cincinnati, Ohio. One hundred per cent of the gross receipts are sitused to Ohio.

(c) In the case of gross receipts from the selling of admission passes that can be used at locations within and without Ohio, gross receipts are sitused to Ohio if the admission is to be primarily used at locations in Ohio.

For example, if an admission pass can be used at several locations inside and outside Ohio, the presumption is that the receipt is an Ohio taxable gross receipt if the purchaser will primarily use the pass at an Ohio location. In general, the primary use of the admission pass is the closest facility to the purchasers location at time of purchase.

(d) If entertainment services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(23) Exterminating services

(a) If exterminating services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(b) If exterminating services are performed outside of Ohio, one hundred per cent of the gross receipts are sitused outside of Ohio.

(c) If exterminating services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time of the performance of the service or within a reasonable time thereafter.

(24) Facilities management services (including landscaping services)

(a) If the facility being managed is located wholly in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(b) If the fee is not per location and the service is provided in Ohio and outside Ohio, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided or within a reasonable time thereafter.

(c) As a default, the number of properties located in Ohio compared to everywhere will be accepted. If the services are not for standardized buildings, square footage may be used as a method of apportionment unless it creates a distortion.

(25) Financial planning services

(a) If financial planning services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, financial planning services are performed for an individual living in Youngstown, Ohio. One hundred per cent of the gross receipts for that service are sitused to Ohio.

(b) If financial planning services are performed for a business that is located within and without Ohio, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided or within a reasonable time thereafter. As a default, the number of locations in Ohio compared to everywhere will be accepted.

For example, financial planning services are performed for a business having ten locations, three of which are in Ohio and seven of which are outside of Ohio. The financial planners fee is thirty per cent sitused to Ohio.

(26) Funeral services

(a) Funeral services includes, but is not limited to, making arrangements for viewings, embalming, burying, interring, cremating, arranging transportation of the deceased, and all other services associated with providing funeral services.

(b) If all of the funeral services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(c) In general, if portions of the funeral services are performed within and without Ohio, gross receipts from the funeral services are sitused to Ohio if the burial or cremation takes place in Ohio.

(27) Gambling services

Winnings received from a wager placed at an Ohio location are sitused to Ohio.

For example, a Kentucky resident places a wager at an Ohio horse racing simulcast facility for a race outside of Ohio and that person wins one hundred sixty thousand dollars. The winnings are gross receipts sitused to Ohio.

(28) Healthcare provider services

If healthcare services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio. If a healthcare service is provided partly in this state and outside this state, a reasonable allocation for the services performed in Ohio must be made.

For example, a German resident comes to have a surgery performed at a hospital in Ohio. One hundred per cent of that gross receipt is an Ohio taxable gross receipt.

(29) Independent writers/artists services

(a) If the writer/artist delivers the item to the purchaser in tangible or electronic format, the gross receipts are sitused to Ohio if the purchaser receives the item in Ohio.

(b) If the writer/artist does not know the location of the purchaser receiving the item, then gross receipts are sitused to Ohio if the purchasers address to which the writer/artist sends the invoice is located in Ohio.

(c) If the writers/artists services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(30) Internet/web hosting services

(a) If Internet or web hosting services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the web host is located.

(b) If Internet or web hosting services are performed for a purchaser only located outside Ohio, one hundred per cent of the gross receipts are sitused outside Ohio regardless of where the web host is located.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, Internet or web hosting services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the Internet or web hosting service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If Internet or web hosting services are performed for a purchaser located both within and without Ohio, the gross receipts are sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(31) Investigation services

(a) If investigation services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

(b) If investigation services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) If investigation services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided or within a reasonable time thereafter.

(32) Legal services

(a) If legal services are performed that relate to Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, an attorney drafts a will in Ohio for a client residing in Kentucky. The gross receipts from the will are sitused to Kentucky since the services relate to a Kentucky estate. Similarly, if an attorney drafts a will in Kentucky for a client who resides in Ohio, the gross receipts from this service will be sitused to Ohio since the services relate to an Ohio estate.

As another example, a company located solely in Michigan sends its treasurer to Ohio for a meeting. The treasurer is involved in an accident on a highway in Ohio, and the company hires an Ohio law firm to represent the treasurer and the company in a proceeding in federal district court in Ohio. The gross receipts from this service will be sitused to Ohio since the services relate to an Ohio tort.

As another example, an attorney prepares a corporations (clients) case at the Ohio board of tax appeals. As part of the preparation, the attorney travels to the corporations (clients) Tennessee location to interview the clients employees. The gross receipts received by the attorney for all services, including those services related to interviewing the clients employees in Tennessee, are sitused to Ohio.

(b) Except as provided in paragraph (C)(32)(a) of this rule, if legal services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, an attorney drafts a contract in Ohio for a purchaser (client) residing in Kentucky to settle the clients dispute with the federal government over an employment contract. The gross receipts are sitused to Kentucky. If the client resided in Ohio, the receipts would be sitused to Ohio even if the contract was drafted in Kentucky.

As another example, an attorney makes an appearance in the federal sixth circuit court of appeals in Cincinnati, Ohio for a client located solely in Tennessee concerning the clients federal income taxes. Receipts from this service are sitused to Tennessee.

(c) If legal services are performed for a purchaser with operations in both Ohio and in another state or jurisdiction, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

For example, an international retailer with stores in Ohio hires an Ohio law firm with New York-licensed attorneys to address a New York workers compensation claim. The gross receipts from this service are sitused to New York. If the retailer hires a New York law firm with Ohio-licensed attorneys to address an Ohio workers compensation claim, the gross receipts from this service are sitused to Ohio.

(d) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, legal services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the legal service;

For example, the Ohio division of a large, multi-national company incorporated in New York pays an attorney legal fees associated with the divisions product liability suit. Receipts from this service can be sitused to Ohio, because the legal services were primarily received by the Ohio division.

(ii) The primary location of the management operations of the purchasers business unit;

For example, a large, multi-national Ohio corporation hires an attorney to defend its federal income tax return. Because the service benefits the entire corporation, rather than a specific division or business location, receipts from this service can be sitused to Ohio based on its managements operations.

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(e) If legal services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(33) Linen/uniform supply/dry cleaning services

If linen/uniform supply/dry cleaning services are delivered to or picked up at a location in Ohio, one hundred per cent of the gross receipts are sitused to Ohio. If the property is delivered to or picked up at a location outside of Ohio, one hundred per cent of the gross receipts are sitused outside Ohio.

(34) Magazines/newspapers

Subscription and advertising gross receipts are to be sitused to Ohio based upon the proportion of the purchasers (publications) circulation located in Ohio over the total of the purchasers (publication's) circulation located everywhere.

(35) Management consulting services

(a) If management consulting services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

(b) If management consulting services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the management consulting service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, such services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the management consulting service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If management consulting services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(36) Market research services

(a) If market research services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

(b) If market research services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, market research services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the market research service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If market research services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(37) Membership fees

(a) If the membership fees being paid are for the right to participate in events at a specific location or specific locations only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio, regardless of where the fees are paid.

For example, a golf course in Cincinnati, Ohio receives membership dues from an individual who resides in Kentucky. Since the membership to that Cincinnati course allows the Kentucky individual to golf at that resort, the gross receipts shall be sitused to Ohio, even though the individual resides outside of Ohio.

(b) In the case of gross receipts from the selling of admission passes that can be used at locations within and without Ohio, gross receipts are sitused to Ohio if the admission is to be primarily used at locations in Ohio.

For example, if an admission pass can be used at several locations inside and outside Ohio, the presumption is that the receipt is an Ohio taxable gross receipt if the purchaser will primarily use the pass at an Ohio location. In general, the primary use of the admission pass is the closest facility to the purchaser's location at time of purchase.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, membership fees may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the "principal place of business" of a purchaser, the following measures, if known, shall be considered in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily uses the membership for which the fee was paid;

(ii) The purchasers (clients) primary location of the management operations of the purchasers (clients) business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If the membership fees relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the fees were paid or within a reasonable time thereafter.

(38) Money order/wire transfer services

If money order/wire transfer services are delivered to or picked up at a location in Ohio, one hundred per cent of the fee for such services are sitused to Ohio, regardless of where the money order/wire transfer service originates.

(39) Moving/Storage Services

(a) If the moving service destination is to a location in Ohio, one hundred per cent of the gross receipts are sitused to Ohio. Fees for incidental storage during a moving service are not sitused to Ohio if both of the following apply:

(i) The storage does not occur in Ohio; and

(ii) The storage fee is separately billed from the moving service.

(b) Fees for packing and/or unpacking services shall be sitused based upon where such services are provided.

(c) Fees for storage services shall be sitused to Ohio to the extent the storage took place in Ohio.

(d) If moving, packing or unpacking, or storage services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(40) Payroll services

(a) If payroll services are performed for a purchaser with its employees only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio, regardless of where the services are performed.

(b) If payroll services are performed for a purchaser with employees within and without Ohio and the payroll services are provided for more than one state including Ohio, the gross receipts are sitused to Ohio based on the purchasers number of employees (covered by the services) located in Ohio to the number of employees everywhere.

(41) Promoters of arts/sports/similar event services

(a) If a promoter promotes an Ohio-based event, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the promoting services are performed.

(b) If a promoter promotes an event that will be held within and without Ohio, the gross receipts are sitused to Ohio based on the number of known events in Ohio compared to all known events. If no event locations are known, the gross receipts are sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service provider's business records as they existed at the time the service was provided or within a reasonable time thereafter.

(42) Radio/television broadcasting/internet advertising services

Broadcasting and Internet advertising gross receipts (including receipts from commercials and pay-per-click advertisements) are to be sitused to Ohio based upon the proportion of the television or radio station's audience or Internet providers subscribers located in Ohio over the total of the television or radio station's audience or Internet providers subscribers located everywhere.

(43) Real estate broker services

If real estate sold by a real estate broker is located in Ohio, the gross receipts earned by the real estate broker are sitused to Ohio, regardless of where the broker's services were performed. See division (F)(3) of section 5751.01 of the Revised Code to see which gross receipts of a real estate broker can be excluded.

(44) Repair/maintenance/installation services

(a) If the property to be repaired, maintained, or installed is dropped off and picked up at the service providers location in Ohio, the gross receipts are sitused to Ohio.

(b) If the property is shipped to the service providers location in Ohio from outside of Ohio but is then picked up at the location in Ohio, the gross receipts are sitused to Ohio.

(c) If the property is dropped off or shipped to the service providers location in Ohio and then shipped outside of Ohio, the gross receipts are sitused outside of Ohio.

(45) Security services

(a) If security services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(b) If security services are performed outside of Ohio, one hundred per cent of the gross receipts are sitused outside of Ohio.

(c) If security services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time of the performance of the service or within a reasonable time thereafter.

(46) Tax preparation services

(a) If tax preparation services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

For example, the gross receipts from the preparation in Kentucky of a federal income tax return for a client residing in Ohio will are sitused to Ohio. Similarly, the gross receipts from the preparation in Ohio of a federal income tax return for a client residing in Kentucky will be sitused to Kentucky.

(b) If tax preparation services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, tax preparation services may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the tax preparation service; the branch, division, or other unit where the purchaser (client) primarily receives the benefit of the tax preparation service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If tax preparation services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(47) Technical assistance services

(a) If technical assistance services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of where the services are performed.

(b) If technical assistance services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to specific operations located in Ohio.

(c) At the election of the service provider, and as long as it is applied in a reasonable, consistent, and uniform manner, technical assistance fees may be sitused according to the purchasers "principal place of business" or, if the purchaser is an individual not engaged in a business, at the individuals residence. The term "principal place of business" refers to the location where the business unit being provided the service primarily maintains its operations. In determining the location of the purchasers principal place of business, the following, if known, apply in sequential order:

(i) The branch, division, or other unit where the purchaser (client) primarily receives the benefit of the technical assistance service;

(ii) The primary location of the management operations of the purchasers business unit; and

(iii) The purchasers (clients) billing address is acceptable if provided in good faith. The billing address must be the site where the purchaser has some actual operations, and not just a post office box.

(d) If technical assistance services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time the service was provided or within a reasonable time thereafter.

(48) Telecommunications services (including ancillary telecommunications services)

(a) Except as provided in paragraphs (C)(48)(b) to (C)(48)(g) of this rule, gross receipts from the sale of telecommunications service or mobile telecommunications service shall be sitused to Ohio if the customers place of primary use of the service is in this state. In general, the customers "place of primary use" means the street address representing where the customers use of the telecommunications service primarily occurs, which must be the residential street address or the primary business street address of the customer. In the case of mobile telecommunications service, such address is the place of primary use only if it is within the licensed service area of the customers home service provider.

(b) Gross receipts from the sale of telecommunications service sold on an individual call-by-call basis shall be sitused to Ohio if either of the following applies:

(i) The call both originates and terminates in this state;

(ii) The call either originates or terminates in this state and the service address also is located in this state.

(c) Gross receipts from the sale of post-paid telecommunications service shall be sitused to Ohio if the origination point of the telecommunication signal, as first identified by the service providers telecommunication system, or as identified by information received by the seller from its service provider where the system used to transport such signals is not that of the seller, is located in this state.

(d) Gross receipts from the sale of prepaid telecommunications service or prepaid mobile telecommunications service shall be sitused to Ohio if the purchaser obtains the prepaid card or similar means of conveyance at a location in Ohio. Gross receipts from recharging a prepaid telecommunications service or mobile telecommunications service shall be sitused to Ohio if the purchasers billing information indicates an Ohio location.

(e) Gross receipts from the sale of private communication services shall be sitused to Ohio as follows:

(i) One hundred per cent of the gross receipts from the sale of each channel termination point within this state;

(ii) One hundred per cent of the gross receipts from the sale of the total channel mileage between each termination point within this state;

(iii) The gross receipts from the sale of service segments for a channel between two customer channel termination points, one of which is located in this state and the other outside this state, and which segments are separately charged, shall be sitused fifty per cent to Ohio and fifty per cent to the other state or jurisdiction in which the customer channel termination points are located; or

(iv) The gross receipts from the sale of service for segments of a channel located in this state and in more than one other states or equivalent jurisdictions, and which segments are not separately billed, shall be sitused to Ohio based on the percentage determined by dividing the number of customer channel termination points in the state or equivalent jurisdiction by the total number of customer channel termination points.

(f) Gross receipts from the sale of billing services and ancillary services for telecommunications service shall be sitused to Ohio based on the location of the purchasers customers. If not known, the location(s) of the purchaser may be used.

(g) Gross receipts from the sale of access fees, such as the carrier access charge paid by an interexchange carrier to connect to a local exchange network in Ohio, shall be sitused to Ohio as follows:

(i) Gross receipts from access fees attributable to intrastate telecommunications service that both originates and terminates in Ohio are sitused one hundred per cent to Ohio.

(ii) Gross receipts from access fees attributable to interstate telecommunications service are sourced fifty per cent to Ohio if the interstate call either originates or terminates in Ohio.

(iii) Gross receipts from interstate end user access line charges, such as the surcharge approved by the federal communications commission and levied pursuant to the Code of Federal Regulations, Title 47, Part 69, shall also be sourced one hundred per cent to Ohio if the customers service address is in Ohio.

(h) All terms in this section are as defined in divisions (AA) and (VV) of section 5739.01 of the Revised Code.

(49) Testing laboratories

(a) If testing services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(b) If testing services are performed outside of Ohio, one hundred per cent of the gross receipts are sitused outside of Ohio.

(c) If testing services relate to various locations both within and without Ohio, the gross receipts may be sitused to Ohio using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time of the performance of the service or within a reasonable time thereafter.

(50) Towing services

If the towing services originate from a location in Ohio, one hundred per cent of the gross receipts are sitused to Ohio regardless of the destination.

For example, a Pennsylvania residents car breaks down in Ohio and is towed back to Pennsylvania. The receipts for the towing services are sitused to Ohio, since the towing service originated in Ohio.

(51) Transportation services/brokers/logistics

(a) Gross receipts from transportation services are sitused to Ohio based on division (G) of section 5751.033 of the Revised Code. The provisions of paragraph (C)(51)(a) of this rule only apply to providers of transportation services. Sellers of tangible personal property itemizing transportations charges must situs such charges in the same manner as the tangible personal property.

(b)

(i) For purposes of this rule, "broker" means a person who, for compensation, arranges or offers to arrange the transportation of property by an authorized motor carrier; and "brokerage" or "brokerage services" means the arranging of transportation or the physical movement of a motor vehicle or of property. If consulting services are provided for logistics, please refer to management consulting services in paragraph (C)(35) of this rule.

(ii) Gross receipts received by a broker not providing any transportation services for the tangible personal property in question but arranging solely for the provision of transportation services shall be sitused to the location where the property is shipped.

(c) Logistics includes all the processes required to go from raw materials to end customer delivery, including purchasing, inventory management, warehousing, shipping, and customer returns, but does not include transportation or brokerage services.

(i) If the logistics services relate to shipping operations, the gross receipts shall be sitused based on the location where the product is shipped.

(ii) If the logistics services relate to inventory management and/or warehousing operations, the gross receipts shall be sitused based on the location of the inventory and/or warehouse.

(iii) If the logistics services relate to purchasing operations, the gross receipts shall be sitused to the location where the purchaser benefits from such service. In determining the location of the purchaser, the following, if known, apply in sequential order:

(a) The branch, division, or other unit where the purchaser primarily receives the benefit of the service;

(b) The primary location of the management operations of the purchasers business unit; and

(c) The purchasers billing address is acceptable if provided in good faith.

(d) For purposes of paragraph (C)(51)(c) of this rule, gross receipts from logistics services that relate to multiple types of logistics operations may be sitused using any reasonable, consistent, and uniform method of apportionment that is supported by the service providers business records as they existed at the time of the performance of the service or within a reasonable time thereafter.

For example, a Wisconsin branch of a multi-national manufacturer contracts with an Ohio logistics company to both provide for improvements in its inventory management and for providing the shipment of its goods to the purchasers customers. The logistic company's gross receipts are sitused in two different ways: the portion relating to inventory management is sitused according to the logistic services situsing provisions, in this case to the Wisconsin branch location; and the portion relating to the transportation services is sitused based on the companys miles traveled within Ohio to its miles traveled everywhere.

(52) Travel arrangement services

(a) If travel arrangement services are performed for a purchaser only located in Ohio, one hundred per cent of the gross receipts are sitused to Ohio, regardless of where the services are performed or the location of the travel destination.

(b) If travel arrangement services are performed for a purchaser with operations within and without Ohio, the gross receipts are sitused to Ohio if the services performed are related to a specific employee whose post of duty is in Ohio.

For example, a multi-national corporation has employees both within and without Ohio. The corporation uses one travel agent to arrange the travel plans for all of its nationwide employees. If the services are performed for an employee located in Ohio, the gross receipts from that service will be sitused to this state.

(53) Veterinarian services

If veterinarian services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

(54) Waste management services

If waste management services are performed in Ohio, one hundred per cent of the gross receipts are sitused to Ohio.

For example, a waste hauler in New York ships refuse to an Ohio landfill. The gross receipts received by the Ohio landfill are sitused to Ohio, because the benefit of the purchaser (i.e. the waste hauler) is having the refuse delivered to this state.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.033
Five Year Review Date: 6/20/2024
Prior Effective Dates: 12/21/2006

Rule 5703-29-18 | Records retention requirements.

• Effective: June 20, 2019
• Promulgated Under: Other

(A) Pursuant to the authority granted under section 5751.12 of the Revised Code, the tax commissioner hereby promulgates a rule that establishes a record retention policy for purposes of the commercial activity tax. Under that section, the commissioner may identify certain records that are necessary for a person to maintain in order to show whether, and the extent to which, that person is subject to the tax imposed by Chapter 5751. of the Revised Code.

(B) For purposes of determining gross receipts under division (F) of section 5751.01 of the Revised Code, all persons subject to the tax imposed under section 5751.02 of the Revised Code shall keep and maintain primary and supporting records including but not limited to the following: sales journals, financial statements, charts of accounts, cash journals, annual reports, general ledgers, income statements and tax returns, and invoices. In addition, all persons must maintain organizational structures that reflect ownership and control percentages as they exist in each filing period.

(C)

(1) With regard to records concerning net operating loss credits available under section 5751.53 of the Revised Code, persons must retain records relating to such credit until June 30, 2010. Since companies may generate net operating losses long before being able to claim a deduction for the loss, records relating to the calculation of the corporation franchise tax reports for all years between the year the Ohio net operating loss was generated and each year in which the loss is being applied against Ohio taxable income must be maintained until June 30, 2010. Further, the statute of limitations does not prohibit either the commissioner or the taxpayer from adjusting the net operating loss carried forward from a tax year closed to assessment to a year still open to assessment or refund. See Consumer Direct v. Limbach (1991), 62 Ohio St. 3d 180.

(2) For example, company A generated a net operating loss in Ohio corporate franchise tax year 1989 (taxable year ending in 1988). Because of previous losses and correlating loss carryforward amounts, company A does not begin to claim the loss generated in the taxable year ending in 1988 until Ohio corporate franchise tax year 2005 (taxable year ending in 2004). For purposes of claiming any credit for commercial activity tax purposes, company A is required to retain all records relating to the calculation of the credit, including all Ohio corporate franchise tax returns for the tax years 1989 through 2005 until June 30, 2010.

(D) All persons making purchases must maintain the purchase records and make them available to the commissioner for inspection in accordance with the provisions in section 5751.12 of the Revised Code. Such records must be maintained for at least four years from the later of the filing of or the due date of the return covering the period in which the purchases were made.

(E) For purposes of divisions (E) and (I) of section 5751.033 of the Revised Code, any invoices or documents relating to the situsing of receipts from the sale of tangible personal property or from the sale of services must be maintained for at least four years from the later of the filing of or the due date of the return covering the period in which the sales were made.

(F) This rule also applies to all records discussed in information releases and/or administrative rules relating to the commercial activity tax. Pursuant to section 5751.12 of the Revised Code, all records must be maintained for a period of four years from the later of the filing of or the due date of the return covering the period to which the records relate unless the commissioner either consents in writing to their earlier destruction or, by written order, extends the time period required for retention.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.01, 5751.02, 5751.033, 5751.12, 5751.53
Five Year Review Date: 6/20/2024
Prior Effective Dates: 12/28/2006

Rule 5703-29-19 | Changes in ownership.

• Effective: January 21, 2021
• Promulgated Under: Other

(A) Consolidated elections, generally.

(1) For purposes of the commercial activity tax, a group of two or more persons may elect under section 5751.011 of the Revised Code to be in a consolidated elected taxpayer group that includes all persons that are at least fifty per cent owned and controlled or at least eighty per cent owned and controlled by common owners. The group also may elect to include or exclude all non-United States entities that otherwise meet the requirements to be in the group.

(2) The percentage chosen by the members of a consolidated elected taxpayer group applies to all persons meeting the requisite common ownership requirements. For example, person A, a corporation, elects to consolidate at eighty per cent with its wholly owned subsidiary, B. Person B owns two of its own subsidiaries (C and D) at sixty per cent. Because A, the common owner, elected to consolidate at eighty per cent with B, entities C and D are not included in the consolidated elected taxpayer group of their common owners (A and B). Instead, C and D are part of a combined taxpayer group that is commonly owned by A and B. In addition, C and D may not make a separate election to consolidate at fifty per cent in order to exclude their receipts. Since A and B are members of both taxpayer groups, As and Bs taxable gross receipts are reported with the consolidated elected taxpayer group.

(B) Change of ownership and control.

(1) Any time the ownership structure changes such that a common owner no longer owns and controls a person by the requisite percentage chosen, that person shall be removed from the group. The group shall notify the commissioner of this change at the time it files its next return or in writing prior to the due date of that return. Taxpayers wishing to notify the commissioner of such change prior to filing the next return may obtain a form on the department of taxations website or notify the commissioner electronically through the Ohio business gateway. As applicable, the person no longer meeting the requirements shall register for the commercial activity tax as a stand-alone taxpayer or be added as a member of another group.

(2) It is important to note that a change in the ownership structure may impact the tax liability of a taxpayer group. For example, assume that a calendar year taxpayer acquires a person at some point during the tax period that has taxable gross receipts in excess of one million dollars. Since the calendar year taxpayer previously had only a minimum tax liability, by acquiring an additional person, the calendar year taxpayers tax liability will surpass its previous liability. If the calendar year taxpayer does not timely notify the commissioner of this change, there will be an underpayment, which is subject to statutory interest and may be subject to penalties. Therefore, when it is reasonably certain that a calendar year taxpayer will have taxable gross receipts in excess of one million dollars during the calendar year, that taxpayer shall switch to a quarterly taxpayer. In this situation, it is advised that the taxpayer notify the commissioner of the acquisition and/or change in filing frequency within a reasonable period of time. A form to make such notice may be obtained on the department of taxations website.

(C) Acquiring a member.

(1) If a consolidated elected taxpayer group acquires a person, such person will be included in the consolidated elected taxpayer group if that person meets the requisite ownership and control threshold requirements. It is important to note that if the group elected to consolidate at eighty per cent and the new person is owned and controlled by less than eighty per cent but more than fifty per cent, that person would become part of a combined taxpayer group along with any other potential members having less than eighty per cent but more than fifty per cent common ownership. For example, A elects to consolidate at eighty per cent with B, its wholly-owned subsidiary. A later acquires C at sixty per cent. Since A made an eighty per cent election, C is not included in the group; instead, C will be in a combined taxpayer group with its common owner, A.

(2) The rules in paragraph (C)(1) of this rule apply to a consolidated elected taxpayer group that acquires either a combined taxpayer group or another consolidated elected taxpayer group. In such case, the ownership threshold of the acquiring group controls. For example, consolidated elected taxpayer group A elects to consolidate at fifty per cent. Group A later acquires consolidated elected taxpayer group B, which, at the time of registration, elected to consolidate at eighty per cent. Since two separate consolidated elected taxpayer groups cannot coexist under a single common owner, As fifty per cent threshold controls and group B is included in its entirety. In contrast, if A had elected to consolidate at eighty per cent and became Bs common owner at sixty per cent, B would be required to file as a combined taxpayer group with A as the common owner.

(3) Alternatively, if a combined taxpayer group acquires a pre-existing consolidated elected taxpayer group, the common ownership of the acquiring group, i.e. the combined taxpayer group, controls. For example, group A did not elect to consolidate; instead, A owned and controlled enough of its lower-tiered persons such that A filed as a combined taxpayer group. When group A acquires group B, a consolidated elected taxpayer group, the new taxpayer is a combined taxpayer group in accordance with As status. Please note that as a combined taxpayer group, such group may elect to consolidate at any time pursuant to division (D) of section 5751.011 of the Revised Code.

(D) Canceling an election to consolidate.

Pursuant to division (A)(3)(b) of section 5751.011 of the Revised Code, a taxpayer group must notify the commissioner if it elects to cancel its election to consolidate before the final day in the eighth calendar quarter after the election is made, not the due date of the return filed for the period including that quarter. The cancellation will be effective beginning the first day of the quarter following the eighth quarter after the election is made. A form to notify the commissioner of the desire to cancel an election may be obtained on the department of taxations website.

Supplemental Information

Authorized By: 5703.05
Amplifies: 5751.011, 5751.012
Five Year Review Date: 1/21/2026

Rule 5703-29-20 | Situsing receipts from periodic payments for mobile property.

• Effective: June 9, 2020
• Promulgated Under: Other

(A)

(1) Gross receipts from the sale or other exchange of tangible personal property are sitused based on the location where the purchaser receives the property in accordance with division (E) of section 5751.033 of the Revised Code. When dealing with receipts from mobile property upon which lease payments are made, the location to situs such receipts may be unclear and paragraphs (B) and (C) of this rule shall be used in those situations.

(2) As used in this rule, the term "lease payments" also includes rental payments or other similar periodic payments.

(B) As a general rule, when lease payments are made regarding a piece of mobile property, such receipts shall be sitused based on the following:

(1) In the case of airplanes or other aircraft, receipts from the lease shall be sitused to the location where the aircraft is primarily hangared.

(2)

(a) In the case of motor vehicles used in business for the transportation of passengers or property in interstate commerce and railcars, receipts from the lease shall be sitused in accordance with division (G) of section 5751.033 of the Revised Code if that information is known. If such information is not known, receipts shall be sitused in accordance with paragraph (B)(2)(b) of this rule.

(b) In the case of all other motor vehicles, receipts from the lease shall be sitused based on the primary property location for the period in which the charges are incurred.

(3) In the case of all other lease payments, including those for construction equipment, receipts from the initial lease payment shall be sitused to the location where the lessee takes possession of the property. Receipts from all subsequent lease payments shall be sitused to the primary property location for the period in which the charges are incurred.

(C)

(1) In the event a taxpayer believes that a strict application of the standards set forth in this rule do not fairly represent the operations of the taxpayer, receipts may be sitused to this state using any reasonable, consistent, and uniform method of apportionment that is supported by the lessors business records as they existed at the time the lease payments were made. In the event the tax commissioner disagrees with a taxpayers reasonable, consistent, and uniform method of situsing its gross receipts, the commissioner will not impose a penalty if the situsing was found to be made in good faith. While different methods may be used for different types of leases, the same method must be consistently used for all types of similar leases.

(2) A taxpayer may file in writing with the commissioner a request to use an alternative means of situsing gross receipts from the sale or other exchange of mobile property that is reasonable, consistent, and uniform under paragraph (C)(1) of this rule. Such request must be made prior to the end of the reporting period for which the request is to become effective.

(D) For purposes of this rule, "primary property location" means an address for tangible personal property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith.

Supplemental Information

Authorized By: 5703.05, 5751.033
Amplifies: 5751.033
Five Year Review Date: 6/9/2025
Prior Effective Dates: 12/28/2006

Rule 5703-29-21 | Pre-income tax trusts, explained with revocation procedures.

• Effective: December 21, 2023
• Promulgated Under: Other

(A)

(1) Subject to paragraph (D) of this rule, each pre-income tax trust that made a qualifying pre-income tax trust election pursuant to section 5747.01 of the Revised Code had to have registered for the commercial activity tax imposed under section 5751.02 of the Revised Code by April 17, 2007. For tax periods beginning prior to January 1, 2024, all such trusts had to file tax returns and pay at least a minimum tax of one hundred fifty dollars for each year, regardless of the trust's taxable gross receipts under division (E)(7) of section 5751.01 of the Revised Code.

(2) For tax periods beginning January 1, 2024, and thereafter, the annual minimum tax has been eliminated. For tax periods beginning January 1, 2024, any qualified pre-income tax trust or combined or consolidated elected taxpayer that includes such trust whose taxable gross receipts do not exceed the exclusion amount in a calendar year may cancel its commercial activity tax registration. The cancellation for this reason does not revoke the trusts election to be subject to the commercial activity tax. If at any time after cancellation of the registration, the trusts or the combined or consolidated elected taxpayers taxable gross receipts exceed the exclusion amount in a calendar year, the trust or combined or consolidated elected taxpayer needs to reactivate its registration and resume filing and paying the commercial activity tax. For calendar year 2024, the exclusion amount is three million dollars. For calendar year 2025 and thereafter, the exclusion amount is six million dollars.

(B) As used in this rule, a "pre-income tax trust" has the same meaning as in section 5747.01 of the Revised Code.

(C) A "qualified pre-income tax trust" is a "pre-income tax trust" that made an election pursuant to section 5747.01 of the Revised Code prior to April 17, 2006. The deadline of April 15, 2006 specified in section 5747.01 of the Revised Code was extended pursuant to section 1.14 of the Revised Code that addresses due dates of certain documents filed with the state that fall on a weekend or legal holiday.

(D)

(1) If the trustee of a qualified pre-income tax trust wishes to revoke the trust's election, the trustee needs to do so prior to the tenth of May of the current calendar year. Such revocation is irrevocable and applies to the full taxable year for which the revocation is timely made.

(2) The trustee of a trust revoking its election needs to file a fiduciary income tax return for the trust for the taxable year for which the revocation is timely made and all applicable future taxable years and make all corresponding payments by the due date for such return in order to avoid the imposition of penalties.

(3) The trustee of a trust revoking an election may receive a letter acknowledging the revocation. Such letter does not signify that the trust meets the definition of a pre-income tax trust for purposes of the commercial activity tax. Therefore, even though a trust revoked its election, it may remain subject to both the fiduciary income tax and the commercial activity tax if it is later found not to be a pre-income tax trust.

(E) If a qualified pre-income tax trust would otherwise be the common owner of either a combined taxpayer group or a consolidated elected taxpayer group, and the trust has less than four thousand five hundred dollars in taxable gross receipts, such trust does not need to register for the commercial activity tax pursuant to paragraph (B)(2) of rule 5703-29-02 of the Administrative Code.

Last updated December 21, 2023 at 7:48 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 5747.01, 5751.01
Five Year Review Date: 12/21/2028
Prior Effective Dates: 5/10/2007

Rule 5703-29-22 | Explanation of the commercial activity tax credits.

• Effective: May 28, 2022
• Promulgated Under: Other

(A)

(1) For purposes of the commercial activity tax, the law provides different credits taxpayers may apply against their tax liability: (a) a nonrefundable jobs retention credit; (b) a nonrefundable credit for qualified research expenses; (c) a nonrefundable credit for a borrower's qualified research and development loan payments; (d) a credit for unused franchise tax net operating loss deductions, which operates as both a nonrefundable credit or a refundable credit, depending on the year in which the taxpayer claims the credit; (e) a refundable motion picture and broadway theatrical production credit; and (f) a refundable jobs creation or jobs retention credit. A taxpayer may not claim as a credit against the commercial activity tax any credit amount that such taxpayer previously (or simultaneously) claimed as a credit and received the benefit of such credit against any other tax, including but not limited to the individual income tax, financial institutions tax, insurance premiums tax, or, if applicable, any credit amount that a pass-through entity passed through to its owners to the extent the owners received the benefit of such credit. If authorized by statute, the recipient of a credit that is a pass-through entity may elect to pass through the credit to such entity's owners. A recipient that makes that election may not claim as a credit against its commercial activity tax liability any portion of the credit passed through to the pass-through entity's owners. Unless otherwise authorized by statute, credits are nontransferable. In addition, in no event may a taxpayer claim a nonrefundable credit against its commercial activity tax annual minimum tax liability.

(2) In the event a taxpayer is entitled to claim more than one credit against its commercial activity tax liability, section 5751.98 of the Revised Code dictates the order in which such taxpayer must claim each credit. If authorized by statute, a taxpayer may carry forward to future years any nonrefundable credits not used in the year generated; however, the carryforward period is often limited and varies from credit to credit. After the carryforward period for a particular credit expires, any credit amount that remains unused is lost. The unused amount of a particular credit carried forward to a later year must be used after any preceding credit listed in section 5751.98 of the Revised Code but prior to the same credit generated in the later year and prior to any credit subsequently listed in that section.

(3) Pursuant to section 5703.0510 of the Revised Code, a taxpayer claiming a credit against the commercial activity tax must do all of the following:

(a) Complete a schedule promulgated by the tax commissioner for the purpose of tracking the credits claimed. The schedule shall include identifying information that links the primary/reporting entity to the member claiming the credit, including the primary/reporting entity's name and address, commercial activity tax account number, and federal identification number, as well as the name(s) and account number(s) of those entities claiming the credit, if applicable. On the schedule, the taxpayer must indicate the amount of each credit the taxpayer claims for that period and include any other information requested by the commissioner to verify the credits claimed.

(b) Provide to the commissioner a copy of the certificate issued by the director of development for any tax credit for which a certificate is issued, including the jobs creation and retention credits, the motion picture and broadway theatrical production credit, and the credit for research and development loan payments. If the director of development provides an amended credit certificate, the taxpayer shall provide both the original and the amended certificate to the commissioner.

(c) If the taxpayer fails to provide a copy of the certificate(s), if applicable, and schedule with its return, the commissioner shall deny the credit until the taxpayer provides a copy of the certificate(s) and schedule.

(B)

(1) Pursuant to section 5751.51 of the Revised Code, the nonrefundable credit for qualified research expenses is available to taxpayers to apply against their commercial activity tax liability . The term "qualified research expenses" is defined in section 41 of the Internal Revenue Code. For purposes of this paragraph, "Internal Revenue Code" has the same meaning as in division (K) of section 5751.01 of the Revised Code.

(2) Regardless of a taxpayer's commercial activity tax filing frequency, a taxpayer must compute the credit for qualified research expenses based on expenses incurred during the calendar year (not the taxpayer's federal taxable year). Thus, a taxpayer must first claim the credit for qualified research expenses on its annual return due in May following the calendar year for which the credit is claimed, or, for calendar quarter taxpayers, on the fourth quarter return due in February of the year following the calendar year for which the credit is claimed. Any portion of the nonrefundable credit that remains unused after the taxpayer applies the credit against the commercial activity tax liability on a return in which the credit is properly first claimed may be carried forward to the subsequent return for no more than seven years.

(3) Eligible taxpayers may calculate the available nonrefundable credit under section 5751.51 of the Revised Code by multiplying seven per cent by the difference between the taxpayer's qualified research expenses incurred in Ohio during the calendar year and the taxpayer's average annual qualified research expenses incurred in Ohio during the three preceding calendar years.

Last updated May 31, 2022 at 7:58 AM

Supplemental Information

Authorized By: 5703.05
Amplifies: 122.17, 122.171, 5751.50, 5751.51, 5751.52, 5751.53, 5751.98
Five Year Review Date: 5/28/2027