Sales Tax Application: Tips and Tricks

Sales Tax is a percentage-based fee added to the price of taxable goods or services at the time of sale. It is collected by the seller and remitted to the taxing authority. 

Earnings Operations selling taxable products or services to external customers must:

• Hold a valid Vendor’s License for each physical sales location from which taxable sales are made.
• Collect and record applicable sales tax in the same month the sale occurs.
• Report sales and tax collected to the Tax Office monthly.

Sales tax must be separately stated from the sales price and is due at the time of sale, regardless of payment method.

Process

1. Determine Taxability

   What IS Taxable

   • Tangible personal property (physical items you can touch and move):
     • Clothing
     • Tools
     • Electronics (TVs, laptops)
   • Delivery, shipping, and handling charges
   • Services in certain situations
   • Visit the State of Ohio FAQ for a comprehensive list of taxable goods/services.

   What is NOT Taxable

   • Food not consumed on premises (e.g., take-out)
   • Food sold to students in cafeterias, dorms, fraternities/sororities
   • Newspapers
   • Prescription drugs dispensed by licensed practitioners
   • Certain durable and non-durable medical equipment

   This list is not exhaustive. If unsure, contact the Tax Office.

   Additional Tax Considerations

   1. Admissions Tax - Operators of movie theaters, theme parks, professional sporting events, and other activities for which there is an admissions charge.
   2. Excise Tax - Excise tax is an indirect tax on specific goods, services and activities that target particular products such as fuel, tobacco, alcohol, airline tickets, heavy trucks and highway tractors, tires and certain luxury items.
   3. Unrelated Business Income Tax (UBIT) -  required to be paid on any activities that generate revenue that are not directly related to our tax-exempt mission (e.g. not related to research, educational activities etc.)
2. Determine the Correct Tax Rate to Apply
   • Sales to Ohio Customers
     • Physical Location Sales: Use the county rate where the sale physically occurs.
       • Example: Sales from a Delaware County office → use Delaware County rate.
     • Remote Sales (mail, phone, online): Use the county rate where OSU receives the order.
       • Typically Franklin County for central operations.
     • Sales Outside Ohio
       • Use the customer’s location (destination of shipment).
       • OSU generally does not collect tax on out-of-state sales, unless Economic Nexus thresholds are met.  Do not collect tax for out-of-state sales without first consulting the Tax Office.
       • Track all out-of-state sales monthly:
         • Number of transactions per state (note: this is not the item count but rather the count of out-of-state transactions).
         • Gross sale amount (taxable vs. exempt)
         • Tax collected (if any)
3. Apply Sales Tax & Bill Customer
   • Workday Accounts Receivable – Record the sales tax at the time the invoice is created on each item that is taxable. Enter the pre-tax sale amount, Tax Applicability and Tax Code, and workday uses the tax details to calculate the amount of the tax liability.  Workday records the accrued sales tax liability accounting on the invoice.
   • Point-of-Sale Systems – Systems such as credit card terminals, where the customers pay at the time of sale.
     • Credit Card Sales – Record accrued sales tax via a Cost Center Journal. Use the point-of-sale system to properly apply the tax and use sales reports to properly obtain the amount of tax collected.
     • Cash/Check – Record accrued sales tax via the Cash Sale (non-AR related) process. Enter the pre-tax amount of the sale on the line and select the Tax Applicability & Tax Code. Workday will calculate the associated sales tax and record the sales tax liability accounting.
   • External Accounts Receivable – will apply sales tax in their external billing system.  Should record a journal in Workday for accrued sales tax.
   • NOTE:  Charge tax unless a valid purchaser exemption applies
     • Collect a signed exemption certificate from the customer, Retain certificates for 4 years.
4. Record and Report
   • Record tax collected in the General Ledger via a credit to the accrued sales tax account (this differs based upon how you collect payment from customers – see Sales Tax Accounting Guide for details).  Note: Accrued sales tax must be recorded in the same accounting period as the sales month/when the tax was collected.  The deadline is business day 5 of the month following the sale (finance month close).
   • Report - Submit monthly to salestax@osu.edu:
     • OSU Sales Tax Reporting Form (contains two tabs: one to report Ohio sales and one to report out-of-state sales)
     • The deadline for sending the report to the Tax Office is also business day 5 of the month following the sale (finance month close).
   • Include:
     • Number of transactions (required to be reported for out-of-state sales only)
     • Gross Sale Amount
     • Exempt Sales Amount
     • Tax Collected
     • Refunded Tax (as separate line item).
5. Tax Office Remits Tax Collected to the State
   • After finance month end close, the Controller’s Office will run an allocation to sweep the accrued sales tax collected from unit worktags to central worktags.  The Tax Office will then prepare the consolidated sales tax return on behalf of the entire University and remit the sales tax collected to the State by the due date.

Roles and Responsibilities Associated with Sales Tax

Key Reports Associated with Sales Tax

Full Inventory of Operational Reports - view the Accounts Payable reports tab

Training, Job Aids, and Resources 

Notable Information

• Sales tax must be charged at the time of sale or invoice.
• A Vendor’s License is required for each physical location making taxable sales.
• Exemption certificates must be retained for 4 years.
• Monthly reporting is mandatory for both Ohio and out-of-state sales to the OSU Tax Office using the OSU Sales Tax Reporting Form.
• Sales Tax MUST be recorded in the month the sale occurred.
• Tax compliance is critical—failure to comply may result in audits or penalties.