Watch our Webinar for a practical, no-nonsense designed specifically for Ohio businesses preparing for the August 1-14 sales tax holiday. Our experienced State and Local Tax specialists will walk you through the essential requirements, system considerations, and compliance strategies you need to succeed during this expanded two-week period.
Whether you’re a restaurant owner wondering how to handle mixed transactions, a retailer configuring your point-of-sale system, or any business selling tangible goods, this session will give you the clarity and confidence you need.
What was covered:
- What’s Changed: Understanding the Expanded Holiday Format
- System Requirements: POS Configuration and Common Pitfalls
- Restaurant-Specific Challenges: Handling Food vs. Alcohol
- Online Sales and Shipping Considerations
- Documentation and Compliance Best Practices
- Live Q&A with Real Scenarios
Don’t let system issues or compliance confusion turn this opportunity into a headache. Watch now to get the insider guidance that will help your business navigate Ohio’s sales tax holiday with confidence.
Ohio Sales Tax Holiday 2025: Comprehensive Business FAQ
When is Ohio’s 2025 sales tax holiday?
Ohio’s 2025 sales tax holiday runs from 12:00 a.m. on Friday, August 1, through 11:59 p.m. on Thursday, August 14, 2025. This represents a full two-week period, expanding from the 10-day period in 2024.
Can businesses opt out of participating in the sales tax holiday?
No. Participation is mandatory for all Ohio businesses selling tangible personal property. Businesses cannot choose to charge sales tax on qualifying items during the holiday period.
What items qualify for the sales tax exemption?
Almost all tangible personal property priced at $500 or less per item qualifies, including electronics, clothing, furniture, appliances, books, sporting goods, and restaurant meals consumed on-premises.
What items are excluded from the sales tax holiday?
The following items remain taxable during the holiday:
- Individual items priced over $500
- Motor vehicles
- Watercraft or outboard motors requiring titles
- Alcoholic beverages
- Tobacco products
- Vapor products (e-cigarettes, vapes)
- Items containing marijuana
- Taxable services (see below for some specific examples and caveats)
System and Point-of-Sale Considerations
How should businesses configure their POS systems for the holiday?
Your point-of-sale system must be programmed to automatically exempt qualifying items during the holiday period. Many systems require manual configuration or updates. Test your system before August 1 to ensure it correctly applies exemptions and properly handles mixed transactions.
What if my POS system can’t handle mixed transactions?
If your system cannot separate taxable and non-taxable items in a single transaction, you may need emergency programming updates or manual overrides. Contact your POS provider well before August 1 to discuss configuration options.
Can I split bundled items to qualify for the exemption?
No. Items normally sold as a unit must continue to be sold that way during the holiday. However, items that are normally priced separately can remain separate during the holiday.
Repairs, Installation, and Labor Services Considerations
For bundled services like parts and labor, how should I handle itemized invoices?
Some services in Ohio are taxable or tax exempt based on what the specific service is applied to. It’s important to understand this distinction, especially for repairs and installations. Here is where it gets tricky:
Pre-Holiday Rules (Still Apply): If the item being repaired or installed is normally exempt (such as farming equipment or manufacturing machines), then both the parts being used and the repair or installation services are exempt. The holiday doesn’t change this existing exemption.
Holiday Impact on Normally Taxable Services: Some repairs and installations are normally taxable because the item being repaired is taxable (such as your car or a TV). These situations are impacted by the holiday rules.
Lump Sum vs. Itemized Invoicing: If you invoice the product, materials, and installation, repair, or labor as a lump sum, these will continue to be taxable and are not impacted by the holiday.
However, if you itemize parts and labor on your invoice, each component can be evaluated separately. Parts under $500 would be exempt, and the labor for those separately stated items would then also be exempt. This is a new interpretation by Ohio Tax this year. It was assumed that these services with derivative tax treatment were captured in the general treatment of services.
Practical Examples:
- TV costs $400, labor to install is $200: Both the TV and installation labor are exempt (total $600 exempt)
- TV costs $700 (over $500): Both the TV and installation labor remain taxable
- Repairing an expensive TV ($700): If you’re selling a $25 replacement part with $200 labor to install that part, then both the part and the labor are exempt because the part being sold during the holiday is under $500
Key Requirements:
- Separate itemization on the invoice
- Focus on what is being sold during the sales tax holiday period
- Labor must be directly tied to the exempt parts being sold
What about general services like cleaning or washing that aren’t tied to specific parts?
General taxable services like vehicle washing, cleaning, or maintenance that aren’t directly tied to the installation or repair of specific parts remain taxable during the holiday. Only labor directly connected to exempt parts qualifies for the exemption.
Restaurant-Specific Questions
How do restaurants handle food and alcohol on the same check?
Restaurants must separately itemize food and alcoholic beverages. Food items under $500 are tax-exempt when consumed on-premises, while alcoholic beverages remain taxable. Your POS system must be capable of handling this split taxation.
Do carryout and delivery orders qualify for the exemption?
Restaurant carryout, delivery, and drive-thru orders follow Ohio’s standard food taxation rules during the holiday. Most prepared food items that are normally exempt from sales tax continue to be exempt (because they are “to go”). However, soft drinks and other beverages that are typically taxable on carryout orders become exempt during the sales tax holiday period so long as they are individually under $500 (the total order can be over $500, just as in a restaurant during the holiday). Alcohol continues to be taxable.
What about soft drinks and non-alcoholic beverages in restaurants?
Non-alcoholic beverages served with meals and priced under $500 are exempt from sales tax during the holiday.
Pricing and Transaction Rules
If an item costs exactly $500, is it exempt?
Yes. Items priced at $500 or less qualify for the exemption. Items priced at $500.01 or more are fully taxable.
Can I offer discounts to bring items under the $500 threshold?
Yes. If your business discount (including loyalty programs) reduces the selling price to $500 or less, the item qualifies for the exemption.
Do manufacturer coupons affect the $500 threshold?
No. Manufacturer coupons that reduce the customer’s out-of-pocket cost do not change the selling price for sales tax purposes. Tax is calculated on the original price before manufacturer coupon discounts.
How are buy-one-get-one-free promotions handled?
BOGO promotions do not change the individual selling price of items. Each item’s eligibility is determined by its regular selling price, not an averaged price.
For package deals like steel building packages, do I evaluate each component separately?
This is another tricky situation. It will be important to discuss the details of this sale to determine what is or is not taxable. We recommend that you contact Rea for help with this kind of business-to-business sale.
Online Sales and E-commerce
Do online sales during the holiday qualify for an exemption?
Yes. Online sales of qualifying items during the holiday period are exempt, regardless of when the item ships, as long as payment is processed during the holiday period and the item is in stock.
What about backorders and rain checks?
Items on backorder during the holiday do not qualify for exemption. Rain checks issued during the holiday must be redeemed before the holiday ends (by 11:59 p.m. on August 14) to qualify for the exemption.
How are shipping charges handled for online orders?
If the entire order qualifies for exemption, shipping charges are also exempt. For mixed orders (some exempt, some taxable), shipping charges must be proportionally allocated between taxable and exempt items.
If a customer orders outside of Ohio but ships to an Ohio address, does the exemption apply?
Yes. The exemption applies to sales delivered to Ohio addresses during the holiday period, regardless of where the customer is located, as long as payment is processed during the holiday period.
Business-to-Business Sales and Payment Terms
Do B2B sales qualify for the holiday exemption?
Yes. Business-to-business sales of qualifying tangible personal property are exempt during the holiday, provided each item is $500 or less.
How do I handle sales to tax-exempt organizations during the holiday?
Sales to tax-exempt organizations should continue to use their regular exemption certificates. The holiday exemption is automatic and doesn’t require additional documentation, nor does it impact existing exemptions.
What happens if I invoice during the holiday but payment is received after the holiday ends?
This is a gray area and there are some inconsistencies in the guidance from Ohio Tax. It appears that the exemption is based on when payment is made, not when the invoice is issued. If payment is received after the holiday period, the sale is taxable. This applies even if you have standard Net 30 terms. This remains a gray area with some interpretation questions around credit transactions versus cash payments.
If a customer with Net 30 terms places an order before the holiday but pays during the holiday, is it exempt?
This again is an area that is gray and untested. The exemption appears to be based on when payment is made. If payment is processed during the holiday period, the sale appears to qualify for the exemption regardless of when the order was placed or invoiced. Note that credit card payments are considered completed when the card is charged, not when you pay your credit card bill.
What about credit account customers who are invoiced during the holiday but don’t pay until the following month?
These sales would be taxable because payment is not made during the holiday period. The exemption requires payment to be completed within the August 1-14 window.
For drop shipments, how do I handle the timing?
Drop shipments follow the same payment timing rules. The exemption applies if payment is made during the holiday period, regardless of when the order was placed or when the item ships.
Delivery and Fulfillment Timing
If I deliver an item on July 31 but don’t invoice until August 1, does it qualify?
The exemption is based on when payment is made during the holiday period. If you invoice on August 1 and receive payment during the holiday, it would qualify for the exemption.
What about same-day delivery during the holiday?
Same-day delivery orders qualify for the exemption if payment is processed during the holiday period and the items meet the qualifying criteria.
Industry-Specific Questions
Are software licenses and apps included in the exemption?
Yes. Software licenses and app purchases (like annual subscriptions from the Apple App Store) are considered tangible personal property for Ohio tax purposes. If purchased during the holiday period and priced under $500, they qualify for the exemption.
Are fencing materials considered tangible personal property?
Yes, fencing materials are considered tangible personal property and qualify for the exemption if each piece is priced and invoiced at $500 or less. A fencing package that includes all materials priced over $500, for example, would continue to be taxable.
How do I handle tire installation services?
For tire sales that include installation, you should itemize the components on your invoice. The tire itself (if $500 or less) would be exempt from sales tax. Because the installation labor is directly tied to the exempt tire being sold, that installation labor would also be exempt during the holiday.
Additional fees like tire disposal fees should be evaluated separately – while the fee itself may still be required, it may not be subject to sales tax if it’s part of an exempt transaction.
Example: A customer purchases a $100 tire with $20 installation labor and a $5 tire disposal fee. During the holiday, both the tire and installation labor would be exempt from sales tax. The disposal fee would need to be evaluated based on whether it’s considered part of the exempt transaction or a separate taxable service.
What about rental payments during the sales tax holiday?
Rent-to-own payments made during the holiday period may qualify for the exemption if they represent purchases of tangible personal property under $500. However, true rental payments for ongoing use typically remain taxable.
Do boat rentals qualify for the exemption?
Boat rentals under $500 during the holiday period may qualify for the exemption, but this depends on the specific structure of the rental agreement and whether it’s considered a sale of tangible personal property.
Documentation and Compliance
How do I report exempt sales on my tax return?
Include all holiday-exempt sales on Line 1 (gross sales) of your Ohio sales tax return (UST-1), then subtract them on Line 2 (exempt sales) along with other exempt sales.
What documentation should I maintain?
Keep detailed records showing the date, time, and nature of all transactions during the holiday period. Ensure receipts clearly identify exempt items and properly separate any taxable items in mixed transactions.
Will dramatic changes in my exempt sales trigger an audit?
The Ohio Department of Taxation expects significant increases in exempt sales during the holiday period. However, maintain proper documentation to support your reported exemptions.
Common Problem Scenarios
What if I accidentally charge tax on qualifying items?
You must refund the incorrectly collected tax to customers. You cannot remit tax to the state on items that should have been exempt during the holiday.
How do I handle returns and exchanges after the holiday?
If a customer returns an item purchased during the holiday or exchanges it for the same item after the holiday ends, no tax should be refunded or charged. If they exchange for a different item after the holiday ends, normal tax rules apply.
What about layaway items?
Layaway items qualify for the exemption based on when final payment is made and the item is picked up, not when the layaway was initiated.
What if I pick up inventory from a vendor during the holiday but they don’t invoice me until afterward?
The exemption is based on when payment is made. If you’re not invoiced and don’t pay until after the holiday, the purchase would be taxable.
What if a vendor refuses to honor the holiday exemption?
If a vendor incorrectly charges you tax on qualifying items during the holiday, you should document the error and work with them to obtain a refund. The exemption is mandatory, not optional.
How do I handle returns without receipts during and after the holiday?
Returns without receipts during the holiday period should generally not include sales tax refunds on qualifying items. For returns after the holiday, follow your normal return policy procedures.
Use Tax Considerations
If I use inventory items from my warehouse for installation jobs during the holiday, do I owe use tax?
Items that qualify for the sales tax holiday are also exempted from Ohio use tax. As noted, use outside of the state of Ohio may trigger use tax in other states as is normally the case.
How does the holiday affect my use tax obligations?
Items that are purchased during the sales tax holiday that qualify for the holiday sales tax exemption are also exempt from Ohio use tax. However, remember that you must prove those facts during a use tax audit. If you need help with use tax policies or recordkeeping, contact Rea for assistance.
Getting Help
Where can businesses get assistance with holiday compliance?
Contact the Ohio Department of Taxation at 1-888-405-4039 for specific questions about holiday compliance. For TTY users, call 1-800-750-0750. Additional FAQs are available at https://tax.ohio.gov/help-center/faqs/sales-and-use-tax-sales-tax-holiday/sales%20and-use-tax-sales-tax-holiday.
Should I consult with a tax professional?
Given the complexity of system configurations, mixed transactions, and compliance requirements, consulting with Rea’s State and Local Tax specialists can help ensure proper preparation and avoid costly mistakes. Rea is here to help. Reach out to schedule a consultation.
What’s the biggest mistake businesses make during the holiday?
The most common error is inadequate system testing. Many businesses discover their POS systems can’t properly handle the holiday requirements only after the holiday begins, leading to compliance issues and customer frustration.
Planning and Preparation Tips
When should I start preparing for the holiday?
Begin preparation immediately. System modifications, staff training, and compliance documentation take time. Waiting until late July significantly increases the risk of problems.
What staff training is needed?
Train staff on which items qualify, how to handle mixed transactions, proper receipt procedures, and what to do if system issues arise during the holiday.
How can I use the holiday to boost sales?
Develop marketing campaigns highlighting tax savings, plan inventory around popular items under $500, and consider offering business discounts that bring higher-priced items under the threshold.
For additional questions about Ohio’s sales tax holiday or to discuss your specific business situation, contact Rea’s State and Local Tax specialists at Rea. You can also find many answers to your questions by visiting the Ohio Department of Taxation.
Disclaimer: The information contained within this article is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, legal, investment, or financial advice from a qualified professional. Consulting a qualified professional is crucial before making any decisions based on this information, as individual circumstances vary. While we use reasonable efforts to furnish accurate and up-to-date information, we do not warrant that any information contained in this article is accurate, complete, reliable, current, or error-free. We assume no liability or responsibility for any actions taken or not taken based on the content of this article. In no way does this article create a client relationship.
