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Understanding the Consumer’s Use Tax Amnesty Program

January 7, 2013

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We would like to remind you of the Consumer’s Use Tax Amnesty program currently offered by the Ohio Department of Taxation. This program began on October 1, 2011 and ends on May 1, 2013. For many companies, the Consumer’s Use Tax Amnesty Program is an excellent opportunity to satisfy unpaid Ohio consumer’s use tax liabilities. As we note below, the State will aggressively audit companies that choose not to participate; certain companies, however, will not be eligible for participation. It’s important to understand the program, its benefits, and participation criteria.

We can help you understand the Amnesty Program and ascertain ability to participate. If participation is appropriate, we can help you take full advantage of the Program’s benefits.

What is Ohio Consumer’s Use Tax and Why Might I Owe it?

Use tax is complementary to the Ohio sales tax. Generally, use tax is owed when no Ohio sales tax was charged on a taxable transaction. Tax is due on taxable “use” within Ohio by a purchaser; the tax is paid directly to the State through a consumer’s use tax return.

For example, use tax liability is typically incurred when an Ohio customer purchases goods from an out-of-state seller via mail order or the internet and no Ohio sales tax is charged. Use tax is also applicable to contractors’ purchases of tangible personal property that will be incorporated into real property.

Under Ohio law, purchases of both tangible personal property used in Ohio and certain specified services are subject to use tax unless Ohio sales tax has been paid or there is an exception or exemption that applies to the transaction.  The following are examples (not all inclusive) of tangible personal property purchases subject to use tax if sales tax has not been paid to the vendor:

•    computers
•    monitors
•    printers
•    scanners
•    fax machines
•    office supplies
•    furniture
•    cleaning supplies
•    medical and dental supplies

Also, the following are examples of service purchases subject to use tax if sales tax has not been paid to the vendor:

•    installation and repair of taxable tangible personal property
•    temporary employment
•    landscaping
•    exterminating
•    automatic data processing
•    janitorial
•    storage
•    maintenance contracts
•    employment placement

If your company has purchased such goods or services without the payment of Ohio sales tax, use tax may be due and owing.

How Can the Consumer’s Use Tax Amnesty Program Help Me?

For eligible participants, all use tax liabilities incurred prior to January 1, 2009 will be waived. Also, consumer’s use tax paid under amnesty is not subject to penalties and will not be subject to interest if the taxpayer did not have an active consumer’s use tax account in place as of June 1, 2011. Note, however, that businesses that have previously received a consumer’s use tax assessment are not eligible for amnesty. The amnesty program has generated $15.7 million from 1,680 businesses through October 2012, according to the Ohio Department of Taxation.

What if I owe Consumer’s Use Tax and I Don’t Participate in the Program?

The Department of Taxation has indicated that once the Amnesty program ends they will aggressively pursue businesses that are registered for any Ohio tax account (such as the CAT, Ohio payroll, or Ohio sales tax) but are not registered for the consumer’s use tax.

The State has indicated that businesses audited by the State that chose not to participate in the program could be subject to onerous penalties and interest in addition to use tax liabilities spanning multiple years.

For eligible companies, the Ohio Consumer’s Use Tax Amnesty Program offers a fantastic opportunity to bring outstanding use tax liabilities current and should be seriously considered. We invite you to contact your Clark Schaefer Hackett representative if you have any questions concerning the Program.

Related resource: http://www.tax.ohio.gov/sales_and_use/index_use.aspx

For more information contact William Hallmark at 937.399.2000 or at [email protected] or Diane Merk at 513.241.3111 or at [email protected]

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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