Use tax amnesty program
As part of the Ohio Department of Taxation’s increased enforcement of Ohio’s use tax, the department is implementing the Consumer Use Tax Amnesty program, which began on October 1 and extends until May 1, 2013.
In early 2011, the department announced a stepped up emphasis on collection of Ohio’s use tax. This increased effort is twofold: firstly, the department is focused on educating Ohio businesses about the use tax and how to comply, and secondly, identifying those businesses which should be paying the use tax and bringing them into compliance.
Ohio’s use tax has been in effect for decades and exists to protect Ohio vendors from unfair competition from out-of-state sellers. In-state merchants are required to collect Ohio sales tax when selling to an Ohio resident or business. Without enforcement of the use tax, Ohioans could simply utilize out-of-state vendors for office purchases, avoiding any sales tax and ultimately hurting Ohio businesses.
The most common use tax situation is a purchase made from an out-of-state vendor who does not charge sales tax; however, the use tax also applies to purchases made within Ohio when insufficient sales tax was charged. In that situation, the use tax due is equal to the sales tax rate of the county in which the consumer uses the property.
Service providers, including medical and dental offices, are not exempt from the use tax. Ohio specifically identifies dentists as falling within the definition of a consumer for the purposes of sales and use tax. The law outlines that the purchase of medical equipment, gloves, masks, scrubs and other supplies, along with office equipment such as computers, printers, desks, chairs and lamps, and the purchase of cleaning supplies, lawn care services and janitorial services are subject to the use tax. The department also considers the purchase of dental prosthetics from dental laboratories, with or without a prescription, to be taxable.
Under the new amnesty program, consumers with outstanding use tax liability may have the opportunity to pay the tax without interest, civil or criminal penalties. Should amnesty be granted, the Tax Commissioner will waive all use tax liability due prior to January 1, 2009, and the consumer must make a non-refundable payment of all of the use tax due on purchases made on or after January 1, 2009 through the end of month prior to the month in which amnesty is requested. Businesses who qualify for amnesty under the program, and who have at least $1,000 in tax due, may also qualify for a no-interest payment plan. Consumers who apply for amnesty will also be required to register for Ohio use tax and either file returns on a regular basis or report and pay the use tax on their annual tax returns.
A consumer may only apply for amnesty once during the program. Additionally, consumers are not eligible for amnesty if they have received an assessment for unpaid use tax, or if they are registered for Ohio use tax as of June 2, 2011. All applications and supporting documentation submitted are subject to review by the Tax Commissioner. If the department determines that the consumer is not eligible for amnesty, the department will issue an assessment for the balance of the consumer’s use tax liability, plus interest. However, those consumers may still qualify for the department’s Voluntary Disclosure Program. That program allows a business to enter into an agreement to register and begin remitting use tax on future purchases. The agreement will also require the business to pay any outstanding use tax incurred over the previous four years, plus interest. The department will, however, waive the 15 percent penalty and any tax due prior to the four year look back period as long as there is no finding of fraud.
More information regarding the use tax amnesty program and the voluntary disclosure program is available on the Ohi