Ohio Use Tax
Ohio Use Tax
Is your business paying the proper sales tax?
Have you verified the proper amount of Ohio sales tax has been paid to ALL your vendors and suppliers?
If your answer is NO you may have a BIG problem.
Ohio's Department of Taxation is stepping up efforts to enforce its use tax law. If your company does not have a use tax account, it’s no longer a question of if, but when, the department will contact you.
What Is Use Tax?
Use tax is a tax that wasn’t paid, but should have been, on taxable property or services your business purchased. It most often occurs when a business purchases goods, out-of-state or over the internet, and the seller does not collect Ohio sales tax. If your business purchased a taxable item or service which was used in Ohio and did not pay Ohio sales tax on it and there is no specific exemption, exception, or exclusion from taxation, you owe Ohio use tax.
Ohio implemented the use tax so there’d be no competitive advantage to buying out of state. The law is simple: If individuals or companies in Ohio don’t pay sales tax on a taxable product or service, they must pay a use tax equal to what the sales tax would have been.
Simplicity, however, hasn’t translated into widespread compliance. Although the law has been on the books for 75 years, many individuals and businesses have ignored it with little fear of repercussion. All of that has changed.
How Does the State Know I Owe Use Tax?
Ohio has been successful in identifying a business subject to use tax. Ohio’s tax department is able to cross-reference its records of tax accounts against use tax and other types of state records. As a result, they will find businesses that don’t comply with the use tax law.
Examples of potential use tax exposure due to purchases from the internet, out-of-state vendors, storage, snow removal, maintenance contracts, lawn care and landscaping; cleaning supplies, display fixtures, shelving units, equipment and furniture, to name a few.
What Do I Need to Do Now?
If your business doesn’t have a use tax account, take action quickly to help avoid penalties and a longer look-back period. The agency set up a voluntary disclosure agreement program, or VDA, that is more favorable if entered into before the state contacts your company.
What is the Worst That Can Happen to Me?
A use tax audit would be time-consuming and costly for your business. An inquiry from the state forces you and your staff to search through receipts of purchases your business made over the past seven years. And the tax, interest and penalty are very severe.
If your company doesn’t have a use tax account, act quickly to avoid facing penalties and a longer look-back.
Amnesty program
The Ohio legislature has created a one-time opportunity for businesses to save thousands of dollars in use tax, interest and penalties through a use tax amnesty program. This program was created during the passage of Ohio’s biennial budget bill in July 2011 and is one of the most taxpayer-friendly programs ever enacted by the State of Ohio.
The new law eliminates several years of unpaid use tax liabilities for over 300,000 Ohio businesses, by shortening the statute of limitations, with no assessment on use tax due prior to January 1, 2009, and forward.
How Long Does Amnesty Last?
Ohio’s use tax amnesty program will operate October 1, 2011, through May 1, 2013.
What Does Amnesty Mean?
During the amnesty period, taxpayers can come forward, self-report and pay their use tax from January 1, 2009, forward with interest and penalties being abated. In return, Ohio will forgive use tax liabilities prior to January 1, 2009, and will register you for a use tax account. This program will eliminate a substantial amount of use tax for thousands of Ohioans.
The Phillips Organization urges all businesses to start identifying any non compliance and discuss your options. Ultimately the taxpayer is responsible for complying with use tax filing requirements and determining if the Consumer’s Use Tax Amnesty Program is worthwhile. Businesses that proceed cautiously will benefit most. Businesses applying for amnesty should be aware of potential issues and opportunities presented by the amnesty program before applying. The Phillips Organization staff is happy to discuss this with you and assist you in determining your use tax exposure.
