By Brett W. Neate, CPA, MT
For businesses with unreported Ohio Use Tax liabilities the wait is over!
The Ohio Consumer’s Use Tax Amnesty Program began on October 1, 2011 and will conclude on May 1, 2013. This program allows businesses to report and pay Use Tax liabilities on purchases made on or after January 1, 2009 while avoiding penalties and, potentially, interest. To entice businesses to participate, there will be no taxes, penalties, or interest assessed for periods prior to 2009 for businesses utilizing the amnesty program. In addition, a payment plan is available for liabilities exceeding $1,000.
Many business owners don’t fully understand the Use Tax or realize that they should be paying it. This lack of knowledge has resulted in thousands upon thousands of noncompliant businesses. So, now you should ask the question, “How do I determine if my business has an unreported Use Tax liability?”
Glad you asked. With limited exceptions, a business is liable for Use Tax on purchases of goods or services when Ohio sales tax is not charged by the vendor. Typically, a vendor only charges sales tax if they are required to do so by the state of Ohio. Many catalog, online, and out-of-state vendors are NOT required to charge sales tax on sales made to Ohio businesses. Therefore, when these sales occur, the consumer of such goods or services is obligated to file a Use Tax return and pay the related tax liability.
Another common scenario that creates a Use Tax liability is the purchase of goods or services under a sales tax exemption certificate. Businesses that utilize these exemption certificates do not pay sales tax at the time of purchase, since the goods or services being acquired are intended to be used in an exempt manner. Often, a portion of these otherwise exempt purchases become taxable when the goods or services acquired are used in a non-exempt manner. For example, a retailer pays no sales tax on inventory acquired for resale. However, if any of that inventory is consumed by the business, instead of being resold, it becomes subject to Use Tax.
If business owners have questions about their exposure, they should contact their trusted tax advisor who will aid them in determining if an unreported Use Tax liability exists and provide guidance on how to participate in the amnesty program to minimize taxes, penalties, and interest.
If you have questions about the Ohio Consumer’s Use Tax Amnesty Program please visit the Zinner & Co. LLP website, www.zinnerco.com, or call us at (216) 831-0733 to contact one of our tax professionals. Your Success Is Our Business!
