What is the Use Tax? | Tax Tip of the Week | No. 114

Ohio Offering a Tax Amnesty Program

The use tax was enacted in 1936, one year after Ohio sales tax went into effect.  Since then all individuals and businesses have been subject to paying use taxes.  The problem is, very few individuals and businesses are paying this tax. What is it?  The use tax is a complement to the sales tax---same tax rate, same tax base.  Use tax should be paid to Ohio for any taxable goods or services delivered to Ohio.  The best example is products purchased from an internet supplier who ships to you in Ohio, but does not collect Ohio sales tax at the time of purchase. Beginning October 1, 2011 until May 1, 2013 the Ohio Department of Taxation (ODT) is offering an amnesty program to businesses to solve a tax problem they may not know they even have.  The amnesty program allows businesses that owe use tax to pay back taxes incurred since January, 2009 with no penalty or interest.  The program also provides the option of entering into a payment plan, if the amount of tax owed exceeds $1,000.  In exchange, businesses that sign up for amnesty must register for a use tax account and going forward, must comply with all provisions of use tax law.  Note:  Currently, the amnesty program is only being offered to businesses. ODT Commissioner Joe Testa recently said, “Despite its long history, the use tax is a relatively new issue for many businesses.  With the growth of the Internet and mail-order commerce, more and more companies are buying products and services from suppliers outside Ohio, who don’t collect sales tax.  It can be complicated keeping track of what’s taxable and what’s not.  The amnesty program is designed to give taxpayers time to build a greater understanding of the tax and pay off any outstanding taxes.” On September 28, 2011 ODT began mailing over 200,000 invitations to businesses encouraging them to take advantage of the amnesty program. 

We expect that small businesses will be the target of audit activities since many do not have the tax expertise to address and understand this tax. You will definitely want to give us a call on this if you have any questions.  Ohio wants YOUR taxes! You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt - the guy behind TTW...until next week.