A Brighter Way
A Brighter Way
Clarification: In July 2011, the state signed this legislation into law. To see more up-to-date information, please read about Ohio's Use Tax Amnesty Program.
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.
Ohio's current use tax voluntary disclosure agreement 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.
As of the publication date, this proposal is not yet enacted into law.
The program will most likely begin July 1, 2011 and end May 1, 2013.
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. And as mentioned, all penalties and interest related to the period of January 1, 2010, to the current date are waived.
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.
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 it intends to administer the law, we will have some additional information to share with each of you.
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.
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.
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.
Note: This content is accurate as of the published date above and subject to change. Please seek professional advice before acting on any matter contained in the article.
