Ohio's Extended Tax-Free Holiday: What Restaurants and Businesses Need to Know

Ohio’s Extended Tax-Free Holiday: What Restaurants and Businesses Need to Know

This summer, the Buckeye State is rolling out an expanded tax-free holiday that promises to boost sales and offer substantial savings. But there are also some challenges that businesses should be aware of. From July 30 to August 8, 2024, Ohio will suspend sales tax on a wide range of items, including dine-in restaurant meals. Let’s dive into what this means for your business and how you can make the most of this opportunity and avoid potential problems.

A Bigger, Better Tax Holiday

This year’s tax-free period is longer and more inclusive than ever before. Here are the key points: 

  • Duration: 10 full days, from 12:00 a.m. on July 30 to 11:59 p.m. on August 8, 2024. 
  • Eligible items: Most tangible personal property priced at $500 or less per item, with some exclusions. 
  • No total purchase limit: Customers can buy as many eligible items as they want. 

Excluded Items 

  • All taxable services are excluded from the holiday as well as alcoholic beverages, tobacco, certain vapor products, and items that contain marijuana. 

What This Means for Restaurants 

For the first time, dine-in restaurant meals are included in the tax holiday. Here’s what you need to know: 

  • Any menu item not on the excluded list, such as alcohol, and that is under $500 is tax-free when consumed on premises. 
  • The exemption applies on an item-by-item basis, not the total bill. 
  • Alcohol is still taxable and must be rung up separately. 

For example, if a family orders four meals at $25 each and two alcoholic beverages at $10 each, the food ($100) would be tax-free, while the alcohol ($20) would still be taxed. 

Preparing Your Business 

All businesses selling tangible goods in Ohio, including restaurants, must take part in the tax holiday. This can have both a positive and negative impact. Here are some steps to take: 

  • Update your point-of-sale system to reflect the tax exemption for eligible items. 
  • Train your staff on the new rules, especially on alcohol sales in restaurants. 
  • Consider offering promotions to attract customers during this period. 
  • Prepare for potentially higher volume, especially on weekends. 

Reporting and Compliance 

When filing your sales tax return, include all sales that qualify for the holiday on line 2 of the UST-1 form. Remember, participation is mandatory, and non-compliance could lead to penalties or audit risks. Customers would be able to ask you for a sales tax refund in the future if you improperly collect sales tax during this period, or worse, can ask for a refund from Ohio which would put you on the state’s naughty list. 

Making the Most of the Opportunity 

This extended tax holiday is a chance to drive sales and build customer goodwill. Consider these strategies: 

  • Advertise the tax savings to attract more customers. Many will not be aware of the sales tax savings on dine in restaurant purchases. 
  • Create special menu items or promotions that highlight the tax-free benefit. 
  • Encourage customers to allocate their tax savings towards higher tips for your staff. 

The Bigger Picture 

While this holiday presents some logistical challenges, it’s ultimately a win-win for businesses and consumers. It’s an opportunity to boost sales during a typically slow period and offer savings to your customers when many are feeling the pinch of inflation. 

This tax holiday isn’t just for retail. It applies to a much broader range for this period. (See Ohio’s Department of Taxation FAQs (Frequently Asked Questions) for more information.) And as consumers ourselves, we all stand to benefit from these savings. 

Need Help? 

If you have questions about implementing the tax holiday in your business or need help deciding how to prepare, don’t hesitate to reach out. Our state and local tax experts are here to help you navigate this opportunity and ensure you’re fully compliant.  

Let’s make this tax-free holiday a success for your business and a treat for your customers! 

By Joe Popp (Dublin) and Kathy LaMonica (Cleveland)