The Ohio Department of Taxation has begun an effort to educate business taxpayers in the state regarding possible use-tax responsibilities on purchases of goods and selected services on which no sales tax has been paid. Similar to the voluntary disclosure agreement program, taxpayers will have an opportunity to register for tax payment going forward, and to limit liability for the tax for past periods. The program was created in an effort to raise revenue to address Ohio’s burgeoning budget deficit for the upcoming biennium. Further information can be found at http://www.tax.ohio.gov/divisions/sales_and_use/index_use.stm.
Generally, purchases of goods and many services are subject to the state sales tax. When the sales tax is not paid and an exemption does not apply, the purchaser has a responsibility to file use-tax returns and to pay use-tax to the state. However, many smaller taxpayers who may purchase goods from outside Ohio and who do not pay sales tax on those purchases may not be aware of their use-tax obligations. The goal of the Use-Tax Education Program (UTEP) is to contact and work with almost 400,000 small- and medium-size businesses with potential use-tax liabilities, to educate them about their responsibilities, and to get them registered to pay use-tax.
During the first half of 2011, the Department will make a number of presentations at association meetings, seminars and workshops to inform taxpayers of UTEP. During the second half of 2011, the Department will analyze information to identify businesses that (i) are registered for other taxes with Ohio, but not for use-tax; and (ii) are not registered for another tax, but which should be registered for use-tax. Businesses that are discovered will be contacted and asked to register and to begin paying use-tax.
Business will also have an opportunity to resolve any potential liability for use-tax for prior periods. Similar to a voluntary disclosure agreement, taxpayers will have the opportunity to enter into agreements pursuant to which the parties agree:
- The business will register for use-tax and begin making use-tax payments prospectively
- The business will pay use-tax and interest on taxable purchases for the prior four years (or less depending on when the business began operating in Ohio)
- The Department will, absent fraud, waive all tax due for periods beyond the look-back period
- The Department will not apply the 15% penalty for unpaid use-tax.
A business that participates in the program is subject to audit or verification of all information provided to the Department under UTEP. The Department also has prepared a number of individual publications that summarize the UTEP, explain what use-tax is, and discusses the use-tax obligations of various business sectors.