Ohio Home Builders, please note that masonry brick cleaning or etching, as well as finish grading, may both be subject to sales tax when they are performed as part of new construction. These guidelines clearly define when, and to whom, the tax should be assessed.
The Ohio Revised Code (“R.C.”) 5739.02 mandates that all retail sales made in the state of Ohio are assessed an excise tax. According to R.C. 5739.01(B)(1), “a sale includes all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred, or a license to use or consume tangible personal property is or is to be granted.” For a transaction to be considered not subject to the excise tax, it must shown to be outside the scope of this definition.
Masonry brick cleaning/etching falls within the definition, under the category of “building maintenance and janitorial services” in the Ohio Revised Code R.C. 5739.01 (II). The code defines this category as “cleaning the interior or exterior of a building and any tangible personal property located therein or thereon.”
In order for the brick cleaning to be a taxable service to the home builder, the cleaning must be performed by a third party and not the brick layer. If that’s the case, the home builder is the consumer and must pay sales or use tax on the transaction. However, if the cleaning is performed by the brick layer, than the transaction is not taxable to the home builder as the brick layer is the consumer who must pay sales or use tax on the transaction.
Finish grading is subject to sales tax if it falls under the Ohio Revised Code 5739.01(DD) definition of “landscaping and lawn care service” which includes “services to establish, promote, or control the growth of trees, shrubs, flowers, grass, ground cover, and other flora, or otherwise maintaining a lawn or landscape.” Final grading is not a taxable transaction if the grading is performed to insure proper drainage or to comply with building codes.
But all of the distinctions above are irrelevant in one instance. If the brick cleaning/etching or finish grading is provided by a person who has less than $5,000 in sales of such services during the calendar year, the service is exempted from sales tax.
Sources: The Ohio Revised Code http://codes.ohio.gov/orc/5739
Bill Poland can be reached at [email protected].