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Ohio Supreme Court Says Electronic Accounting Transactions are Not Exempt Accounting Services

Slip Opinion No. 2022-Ohio-725, Ohio (3/15/22). In an Ohio case involving a financial institution that claimed it was providing either nontaxable “personal or professional services” or nontaxable customized software rather than taxable “automatic data processing” (ADP) or “electronic information services” (EIS), the Ohio Supreme Court (Court) affirmed that the bank failed to show it was providing nontaxable accounting services under state law but also remanded the case back to the Ohio Board of Tax Appeals (BTA) to determine whether the “true object” of certain electronic transactions is providing customized software versus taxable data processing services. In doing so, the Court explained that under the provided facts, the computerized accounting transactions at issue did not involve analysis performed by individuals or include any activities requiring professional licensure and thus did not comprise nontaxable accounting-related services. However, the Court held that the BTA should have applied the clear directive of Ohio Rev. Code section 5739.01(B)(3)(e) and determined the true object of some transactions by examining whether specific charges related to transactions in which obtaining software customization constituted the true object of the transaction as opposed to receiving ADP and/or EIS. Please contact us with any questions.