Checklists are a very useful tool. With them, you can track your progress easily and always know what awaits you in the process that follows. The same goes for running a business. Although your checklist, or a ‘to do’ list might change from day to day, it can be an integral part of running a business. Why are we talking about this now? Well, this article looks into the subject of registering your business as well as registering for a sales tax permit in the state of Ohio. The Ohio government website has laid down the steps of this process in the form of a checklist, so we decided to adopt the same approach.
Now, since you are looking into the subject of tax permits, you are certainly on your way to starting your own business. This is a momentous decision on its own. Years of your career have been devoted to acquiring skills that will help you in successfully running your own company. You’ve already made your lists of distributors, potential clients, you understand the market dynamics and know where the market gaps are. You are planning on exploiting these market gaps. However, throughout your career, you have always been an employee that came in after the company was formed.
You have gathered extensive knowledge about the different forms of company model, but you have not been there during any of their formations. This is the process that many don’t know much about, but is an essential part of doing business legally. Luckily, the information is available and the processes can be often completed online. However, it is advisable to consult with an attorney if you have any doubts or are unsure about the process to avoid any legal issues later down the line.
So what is our checklist then? The steps of starting a business, the steps sales tax registration in Ohio, and possible tax exemptions that your business might be eligible for.
The state of Ohio has created ‘The 1st Stop Business Connection’, which is described as the easiest way to information about starting your business in the state. In addition to that, the focal point of your registration process will be the office of the Ohio Secretary of State, which also provides you valuable information about the process. This is actually the first step you take when registering a business in Ohio: you register with the Ohio Secretary of State. This can be done online or by downloading the relevant forms and mailing them to the SOS address.
During the process, you will be required to select a legal entity or structure for your business. This can range from sole proprietorship to a corporation, depending on the scale of the operation you plan on running. If you plan on running your business from home, maybe buy customer return pallets of merchandise from liquidation companies to resell on ecommerce platforms like Amazon, and intend on being the only employee, you might opt for the sole proprietorship. This business entity makes you, the owner, responsible for all the decisions as well as liabilities, as there is no distinction between the business and the owner. If you plan on running a bigger operation and having employees, you might want to look into other options, like limited liability company or a corporation.
In any case, you will have to register a name with the Secretary of State, and you have to make sure that you select a unique name compared to other trade names already registered.
The next step that the Ohio state requires you to take is to obtain an Employer Identification Number from the Internal Revenue Service (IRS). The state also urges you to set up a business bank account, using your EIN.
Once all these points have been checked off the list you will have to contact the Ohio Department of Taxation and get information about your tax obligations.
Keeping up with the tax regulations is a very important part of the process and the next point on our checklist. In general, any business that has a sales tax nexus in the state of Ohio is required to apply for a sales tax permit. Sales tax nexus is a significant presence in the state, which you would have if your business is located within the state, employees or agents, a person who would receive and process order of your goods and services.
You need to have a sales tax nexus if you make regular deliveries of tangible personal property. This is a wider subject as owning tangible personal property that is leased or rented also requires you to file for a sales tax permit, as well as owning and renting of tangible personal or real property. But, if you register with the secretary of state, or any other state agency, you are required to file for a sales tax permit.
Finding out whether you have a sales tax nexus in the state of Ohio is relatively straightforward. However, the next point on the checklist brings us to the question of whether the products and services you might potentially be selling are even taxable. Selling tangible property is generally taxable as well as a significant number of services. For more details you should visit the Ohio Department of Taxation.
Now that you have established that you have a sales tax nexus and the services and goods you will be selling are taxable, you should proceed with applying for an Ohio sales tax permit.
According to the regulations, anyone making retail sales of tangible personal property or taxable services is required to register for a sales tax permit by obtaining a vendor’s license. The are a couple of ways to register for an Ohio sales tax permit. First, it is possible to complete this process online through the Ohio Business Gateway, a one-stop shop for online tax filings. The other way is to gather all the information needed and mail it in. you will have to provide your business ID information, business entity, the location, the date you will start collection Ohio sales tax and the NAICS Code.
The cost of registering for a sales tax permit, called the vendor’s permit, is $25 and you can expect to have in within 10 days following the filing. Luckily, once you receive your sales tax permit, you are not required to renew it.
The last point on our checklist it the possibility to avoid paying taxes. While all retail sales are taxable, some of these sales might be tax exempt. But, more importantly, especially if you plan on purchasing larger quantities of merchandise for resale, you should learn about the possibility of avoiding to pay tax on the purchase.
This can be done in two ways. You either use the STEC U: Sales and Use Tax Unit Exemption Certificate if you plan to make a single purchase, or the STEC B: Sales and Use Tax Blanket Exemption Certificate, which can be used for multiple purchases. Both can be used if you are making a purchase for resale. Both have to be properly filled with the required information and signed in order to be valid.
The same way you used the exemption certificate, you might receive one as well. You can check the validity of the certificate by contacting the Department of Taxation. However, it is worth mentioning that keeping all presented resale certificates is important in case of an audit in the future.
While this guide provides you with important information and simplifies steps towards running your own business in Ohio, we urge you to contact local authorities, as there might be some issues you might have to sort on a local or county level and it is best to consult with professional advisers.
PO Box 182131
Columbus, Ohio 43218-2131
Phone: (888) 405-4039
180 East Broad Street, 16th Floor,
Columbus, Ohio 43215
Phone: (614) 466-2655
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