Supreme Court’s sales-tax ruling could mean millions for Ohio local governments

July 16, 2018 GMT

Supreme Court’s sales-tax ruling could mean millions for Ohio local governments

COLUMBUS, Ohio—Last month’s U.S. Supreme Court ruling that states can collect sales taxes on online purchases from out-of-state retailers could mean millions in extra money for Ohio counties and transit authorities.

But no one is expecting a flood of new local sales tax revenue to arrive anytime soon.

Until now, Ohio and other states have only been allowed to collect online sales taxes from businesses that have a physical presence in the state – such as Amazon, which operates warehouses and data centers here.

But on June 21, the Supreme Court upheld a South Dakota law requiring sales tax to be collected on all online sales from companies that do a certain amount of business within the state, whether or not they have a physical presence.

If Ohio decides to expand its tax-collection rules to more closely resemble South Dakota’s law, it could not only mean more money for the state, but also for Ohio’s 88 counties and eight transit authorities that impose their own, separate “piggyback” sales taxes on top of the state’s 5.75-percent tax.

Cuyahoga County alone could bring in about $4 million in extra revenue per year, according to Maggie Keenan, director of the county’s office of budget and management.

While that’s only a fraction of the $200 million-plus Cuyahoga County collects each year from its 2.25-percent sales tax, Keenan said the extra cash would be welcome, given county budget cuts and slashed state funding in recent years.

“We can do a lot for $4 million,” she said.

There are no estimates for how much counties and transit authorities could bring in statewide if sales taxes are collected on all online purchases. But a federal study estimated that state sales tax revenue in Ohio would have risen $288 million to $456 million last year. Given that local sales-tax revenue each year is usually about one-quarter of the state’s sales-tax earnings, that would mean local sales taxes would have brought in a total somewhere in the ballpark of $72 million to $114 million in additional cash.

“It’s obviously a very positive development for us,” said Jon Honeck, senior policy analyst for the County Commissioners Association of Ohio.

There’s one catch, though: for any of this additional tax revenue to come in, Ohio policymakers will have to decide how much they want to broaden sales-tax collection on online sales.

Rep. Gary Scherer, a Circleville Republican, said he’s working with state tax commissioner Joe Testa and others to see not only what Ohio should do in the wake of the Supreme Court ruling, but also how it should do it. Should Ohio alter its sales-tax collection rules to mirror South Dakota’s law, or impose less broad changes? Does the Ohio General Assembly need to pass legislation to make such changes, or can state officials work within existing law?

One thing that’s already certain is that no decision is likely to come soon. Even if state officials can agree quickly on what to do (which isn’t guaranteed), Scherer said any changes wouldn’t take effect right away, so businesses have plenty of fair warning and time to adjust to the new rules.

Honeck agreed, saying, “I don’t expect some dramatic change coming immediately in the coming months.”