Are You Paying Ohio Use Tax?

Chad Bice | March 2nd, 2011

Ohio’s Department of Taxation is stepping up efforts to enforce its use tax law in 2011. 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, and How Is It Identified?

So what is use tax? It’s a tax that you didn’t pay, but should have, on items your business purchased. It most often occurs when a business purchases goods out-of-state or over the Internet and the retailer does not collect Ohio sales tax.

In other words, if your company bought an item and paid Ohio sales tax on it, you do not owe use tax. However if your business purchased an item and did not pay Ohio sales tax on it, you owe use tax. Remember that use tax is also applicable to purchases made from in-state vendors in addition to Internet and out-of-state purchases.

With today’s computerized systems, every business has a documented, verifiable electronic footprint. 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.

The department already identified 380,000 companies in Ohio without use tax accounts. Starting in May, the agency will send letters to these companies.

Pay Now or Possibly Much More Later

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.

Here’s how it works:

ACTION LOOK-BACK PERIOD PENALTIES
Enter VDA now 3 years Waived
Enter VDA after department contacts you 4 years Waived
Ignore notice and don’t enter a VDA 7 years Up to 50 percent of the amount owed

 

How To Get In Compliance

Are you unsure if you have a use tax liability? If so, then now is the time to contact Rea & Associates to determine what, if any liability, your company may be facing. For additional information on the Ohio Department of Taxation’s new enforcement efforts, or for any questions, contact Chad Bice, CPA at 740.454.3198 or click here to email Chad. In a brief consultation he can review your situation and determine the best way to proceed.

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