With an estimated 380,000 Ohio businesses potentially owing use tax, Ohio is implementing a Use Tax Education Program (UTEP) aimed at small and mid-sized companies in an effort to bring businesses into compliance through education and financial incentives. As part of its educational efforts, the Ohio Department of Taxation (“Department”) plans to present various business association meetings, seminars and workshops. The Department additionally intends to contact and investigate businesses registered within the state but not registered for use tax to make them aware of their use tax responsibility. Use tax publications are currently available on the Department’s website for contractors, manufacturers, retailers and service providers. These on-line publications provide valuable information, including examples of potential use tax exposure, such as:
- Purchases from out-of-state vendors;
- Storage, snow removal, maintenance contracts, lawn care and landscaping;
- Employee safety shoes, gloves, hard hats and respirators; and
- Display fixtures, shelving units, cash registers and furniture.
In order to participate through UTEP, a business must enter into a voluntary disclosure agreement to pay use tax on untaxed purchases plus applicable interest and agree to prospective compliance. Benefits include a limited look-back period of four years, and, in the absence of fraud, waiver of the standard 15 % penalty generally assessed on unpaid use tax. In addition, the Department will agree to waive any use tax liability for those years falling beyond the look-back period.
Should a business enter into a voluntary disclosure agreement prior to being contacted by the Department, the look-back period will be limited to three years.
Businesses failing to take advantage of the voluntary disclosure opportunity may be the subject of a Departmental audit, which typically encompasses the prior seven years.
Businesses concerned about Ohio sales and use tax liabilities should consult with their state and local tax professional to determine how best to resolve those liabilities.
For further information, please contact Cathy Condrac, State and Local Tax Advisory Services.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.