A One-Time Opportunity? Proposed Ohio Use Tax Amnesty Program Explained

Chad Bice | June 28th, 2011
Ohio businesses may have a one-time opportunity to lessen their use tax liability due to a use tax amnesty measure in Ohio’s current budget bill. If passed, the law could be one of the most taxpayer-friendly laws ever enacted by the State of Ohio.

Note: Ohio has established its tax amnesty program since this post was originally created. Please click here for the most recent information.

Ohio’s current Use Tax VDA program already allows businesses to come forward on an anonymous basis, perform a self-audit and remit use tax due for the prior 36-month period.  Under the Use Tax VDA program, penalties are waived but interest is charged.  While Ohio’s Use Tax VDA program is taxpayer-friendly, Ohio’s Use Tax Amnesty program, as proposed within Ohio’s budget bill, sounds almost too good to be true.

The Ohio legislature is proposing a Use Tax Amnesty program within Ohio’s current budget bill.  The law would essentially eliminate several years of unpaid use tax liabilities for over 300,000 Ohio businesses.  Sound to go to be true? Probably not. We should know by June 30, 2011 – the date the bill should be passed in to law.

Proposed Budget Bill – Use Tax Amnesty Summary

(*Please not that this proposal is not yet enacted into law)

  • Would allow taxpayers to pay tax only for the amnesty period with penalties and interest waived, for businesses meeting certain requirements.
  • As proposed, no assessment may be issued for use tax due prior to January 1, 2008.  (This is essentially a shorter statute of limitations. The prior statute of limitations was 7 years for non-filers.)
  • For businesses that are currently under audit by the Ohio Department of Taxation (ODT), it appears as if the bill will allow for the shorter statute of limitations as described above.

When does the Use Tax Amnesty program begin?

  • The program will most likely begin July 1, 2011 and end May 1, 2013.

Additional Details

  • Under the proposed Use Tax Amnesty program, the Ohio Department of Taxation is required to abate all use tax for periods prior to January 1, 2010 for those taxpayers that come forward and participate in the program. This provision will eliminate a substantial amount of use tax for thousands of Ohio taxpayers.
  • As mentioned, all penalties and interest related to the period of January 1, 2010 to the current date are waived.

Who does the Use Tax Amnesty Program Apply To?

  • Businesses that do not have an Ohio use tax accounts.
  • Businesses that are not under audit, that have use tax accounts, but have discovered that they have unreported/unpaid Ohio use tax.
  • Businesses that are currently under audit for Ohio use tax (where an assessment has not yet been issued).

What is Use Tax?

Use tax is a tax on the storage, use or consumption of a tangible personal property and certain taxable services in Ohio. It is a complement to Ohio sales tax. Generally, if you have paid Ohio sales on an item, you do not owe Ohio use tax. However, if you have not paid Ohio sales tax, then you may have the responsibility to remit Ohio use tax. In fact, 96 percent of Ohio use tax audits result in use tax liability.

Remaining Gray Areas

This legislation is still pending and as a result, many details have yet to be worked out. Once this law is passed, and the Ohio Department of Taxation provides guidance on how they intend to administer the law, we will have some additional information to share with each of you.

What is Crystal Clear?

This legislation clearly presents a significant opportunity for businesses that have potential use tax liability for periods prior to January 1, 2010 to reduce their outstanding exposure – a once in a lifetime opportunity so to speak!

What if I Currently Have a Use Tax VDA Project in Process?

Good news!  It is our understanding that your 36-month look back is now reduced to approximately two years (January 1, 2010 forward).  We have reason to believe that the Ohio Department of Taxation will work closely with you and your service provider to convert your Use Tax VDA to the Use Tax Amnesty program.

Staying Informed

After the budget bill is enacted later this week, Rea & Associates’ State and Local Tax Team will provide an update on the final details of the Use Tax Amnesty program and how it could be beneficial to your business.

Contact Our Ohio Use Tax Professionals

If you are unsure what to do regarding the Ohio Use Tax Amnesty Program, then contact us now! For additional information please contact Chad Bice, CPA at  740.454.3198, or click here to contact Chad. In a brief consultation he can assess your situation and determine the best way to proceed.
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