In the midst of a slow economy, the Ohio Department of Taxation
(ODT) is targeting a little known and often ignored revenue-raiser:
use tax. Ohio's use tax is a sidekick to Ohio's sales tax.
Ohio businesses (and consumers) must report and pay use tax when a
vendor of goods or certain services fails to collect the sales tax
on a taxable transaction. Use tax liability commonly arises in the
following situations:
- purchases from an online vendor (i.e. Amazon, EBay, etc.);
- catalog purchases;
- purchases from a non-Ohio vendor that does not collect Ohio sales tax;
- purchases of service from an Ohio vendor that does not understand that sales tax should be charged (snow removal, landscaping, etc.)
The ODT estimates that up to 380,000 Ohio businesses may owe,
but have failed to file and pay, Ohio's use tax. The businesses
are not industry specific, but they have a known presence and have
not registered for a use tax account in Ohio. In an effort to raise
awareness of the use tax and encourage Ohio businesses to register
and pay the use tax they owe, the ODT has launched the Use Tax
Education Program (UTEP). UTEP grants business two windows of
opportunity to self-report any use tax liabilities before the risk
of audit.
In the first window, occurring now through August 1, 2011, any
business that comes forward before being contacted by the ODT,
signs a Voluntary Disclosure Agreement and pays its use tax bill
will only be liable for up to three years of back
tax and interest, but no penalty will be added. The second window
begins when the ODT will begin sending out letters to the estimated
380,000 unregistered businesses advising them about UTEP and
encouraging them to voluntarily come forward. Any business that
receives a letter and contacts the ODT will have its use tax
liability limited to no more than four years back
tax and interest (no penalty).
Any business that receives a letter and fails to respond or
otherwise fails to register with the ODT, will be under a threat of
audit which could render a business liable for up to seven years of
back tax plus penalty (generally 15%) and interest (currently
4%).
Click HERE for the voluntary disclosure guidelines
issued by the Sales & Use Tax Division of the Ohio Department
of Taxation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.