Many contracts for the purchase of tangible personal property include a lump sum purchase price and a phrase such as “all tax included” or “includes applicable sales tax”. However, this language is not sufficient to protect a consumer from collection of unpaid sales tax by the Ohio Department of Taxation (the “Department”). The Department has the option of collecting unpaid sales tax from either the vendor or consumer. Of course, the consumer will always obtain credit for tax actually remitted by the vendor. Yet, if the vendor fails to remit the applicable sales tax, and the tax is not separately stated in the contract or invoice, the consumer could be held liable for unpaid sales tax despite language stating applicable sales tax was included in the lump sum contract price.
Although the consumer may have a contractual remedy against the vendor for reimbursement or indemnification, if the vendor becomes insolvent, the consumer will be left to pay the bill to the Department. Therefore, in order to ensure credit for sales tax paid in a lump sum purchase price, the contract, invoice or other purchase documents must reflect Ohio sales tax as a separately stated sum. The potential pitfalls of a failure to separately state Ohio sales tax is illustrated in a recent BTA decision, Equilon Enterprises LLC v. Levin, Ohio BTA Case No. 2007-V-441 (February 9, 2010).