BEFORE THE HOUSE
WAYS & MEANS COMMITTEE

Proponent Testimony

Thursday – October 25, 2001

Madam Chairman and Members of the Committee,

My name is Daniel Navin and I am the director of taxation & public finance for the Ohio Chamber of Commerce. I am here today to testify in support of Sub.SB 143, legislation which in particular revises Ohio law with respect to sourcing sales of tangible personal property (TPP) and services.

Generally speaking, in the field of taxation, businesses look for two things – uniform rules so that similarly situated taxpayers are treated equitably and a minimal administrative burden in complying with state and local tax laws. We believe the provisions of this bill will somewhat ease the burden of tax compliance on Ohio businesses.

Under current Ohio law, depending upon whether the sale involves TPP or services, or the type of service sold or the type of vendor making the sale, any of these factors affects the situs of the sale, i.e., in what taxing jurisdiction (state, county or other form of local government) did the sale take place and, therefore, what tax rate should be charged the purchaser. Such decisions also affect local governments, particularly counties, because accurate situs determinations are crucial so that those jurisdictions who should receive the tax revenue collected from the sale actually receive it. Unfortunately, such situs determinations can be complicated if the “consumer” was a manufacturer or other consumer who was a direct payment permit holder that does not remit the tax to the vendor through whom it purchases the product or service, but rather pays the sales tax directly to the state Tax Commissioner. Further, there are other circumstances/transactions where determining the situs of the sale is problematic and difficult.

The bill revises Ohio law by adopting the uniform sourcing standards according to the interstate agreement. Whenever a significant change such as this is made, the new rules are initially confusing to company personnel who are charged with the responsibility of collecting and remitting the tax and accurately filing the required returns. However, in the long run, we believe the new sourcing rules are based on common sense and simplify the process of identifying the jurisdiction in which a sales transaction takes place.

Finally, we applaud the revision of Ohio’s hard-copy exemption certificate process. Allowing exemption certificates to be provided in electronic form and eliminating the signature requirement are clearly steps in the right direction of easing the tax compliance burden.

Madam Chairman, that completes my testimony, and I will be happy to answer any questions.