Dry Cleaning Services are now subject to sales tax in Ohio. This change, effective August 1, 2003, expands the sales tax base to include laundry and dry cleaning services, impacting both vendors and consumers. This comprehensive guide clarifies the tax implications of this amendment to Ohio Revised Code (R.C.) section 5739.01(B)(3)(d) and R.C. 5739.01(BB).
Understanding the Scope of Taxable Dry Cleaning Services
The updated law defines “laundry and dry cleaning services” as the removal of soil or dirt from fabrics belonging to others, including supplying items like towels, linens, and clothing. Self-service laundry facilities where customers clean their own items are exempt.
Key Considerations for Dry Cleaning Businesses
This expansion raises several important questions for businesses providing dry cleaning services. Here are some common scenarios and their tax implications:
Vendor Licensing Requirements for Dry Cleaners
Dry cleaning businesses operating in Ohio require a vendor’s license for each physical location. This license is obtained from the county auditor where the business operates. Out-of-state dry cleaners providing pick-up and delivery services within Ohio must collect Ohio sales tax and obtain a seller’s use tax registration from the Ohio Department of Taxation. Applications for both licenses are available on the Department’s website. Existing vendor licenses for businesses offering alterations or selling cleaning supplies cover dry cleaning services; no additional license is necessary.
Taxability of Pickup and Delivery Charges
Charges for picking up and delivering laundry and dry cleaning are considered part of the taxable service price under R.C. 5739.01(H)(1)(a)(iii) and (iv).
Applying Stain Repellents and Waterproofing
Applying stain repellents or waterproofing in conjunction with dry cleaning is a taxable service. However, if these applications are performed without dry cleaning, they are not taxable.
Handling Customer Exemption Claims
Customers claiming tax exemption must provide a valid exemption certificate to the dry cleaner. This certificate relieves the seller from collecting tax. Sellers should retain these certificates for audit purposes. Exemption certificate forms are available on the Department of Taxation website.
Specific Scenarios and Tax Implications
Several specific scenarios further illustrate the application of the sales tax on dry cleaning services. Hotels providing laundry services to guests should collect tax from the guest. The hotel’s contract with a third-party cleaner is exempt with a resale certificate. Similarly, cleaning companies performing flood remediation and subcontracting curtain cleaning can provide a resale certificate to the dry cleaner. The cleaning company then charges tax on the overall remediation service.
Dry Cleaner Exemptions for Equipment and Supplies
Dry cleaners can claim exemption on purchased items permanently transferred to the customer, such as starches, stain repellents, hangers, and plastic bags. However, equipment and supplies consumed in the cleaning process, like machinery, fluids, and stain removers, are not exempt.
Contacting the Ohio Department of Taxation
For further clarification, contact the Ohio Department of Taxation at 1-888-405-4039. Ohio Relay Service for the Speech or Hearing Impaired is available at 1-800-750-0750.
