News and Insights

Digital Advertising is Not a Taxable Electronic Information Service in Ohio

Tax Development Sep 28, 2016

The state of Ohio imposes sales and use tax on electronic information services (EISs) sold for use in business when the true object of the transaction is the receipt by the consumer of electronic information services, rather than the receipt of personal or professional services to which electronic information services are incidental or supplemental. EISs do not include personal and professional services such as accounting, legal, and training services.

In May, the Ohio Senate passed HB 466, which adds “digital advertising services” to the list of services considered personal or professional. As such, digital advertising services are not considered taxable EISs. Digital advertising is defined in HB 466 as “providing access, by means of telecommunications equipment, to computer equipment that is used to enter, upload, download, review, manipulate, store, add, or delete data for the purpose of electronically displaying, delivering, placing, or transferring promotional advertisements to potential customers about products or services or about industry or business brands.” This provision becomes effective on October 12, 2016.

Internet access providers (IAPs) and online access providers (OAPs) provide customers with the ability to view or acquire information from the Internet by means of access to telecommunications equipment. As such, the state of Ohio views these services as a taxable EIS, provided they are sold to the customer for business use. However, IAP and OAP sales of digital advertising would not be subject to tax. It is important to note, IAPs and OAPs may often find themselves selling taxable and exempt EISs to their customers. If they combine invoices into a single fee and use vague descriptions, the Department may view the invoice as a mixed transaction and apply tax to the entire charge.


Leslie Hahn

Jeremiah T. Lynch