1. Smart Business Thought Leadership Webinar Series September 8, 2011
Ohio Use Tax Amnesty:
How much can you save?
By:
Chad Bice, CPA
Principal/Director of State & Local Tax
2. Agenda
Introduction to use tax
How use tax enforcement has changed
What is use tax amnesty
Applying for amnesty
What happens after you apply
Why you need amnesty
Don’t confuse with
general amnesty
3. You May Have Use Tax
Liability if…
You bought taxable goods and services,
and didn’t pay sales tax.
96% of Ohio use tax audits result
in use tax liability.
4. What’s Use Tax Anyway?
Sales tax companion
Every purchase should be taxed once unless
an exemption applies
Not all purchases have sales tax added
Sales tax may not have to
be charged
5. When is Use Tax Due?
When no sales tax is charged on
taxable goods or services
Internet purchases
Out of state purchases
In state purchases
Sales tax is charged on the front-end by the seller.
Use tax is due on the back-end by the purchaser, when
the sales tax collection process breaks down.
The use tax rate is equal to the sales tax rate.
6. Potentially Taxable Goods
Office Equipment – Postage meter rental
computers, software, monitors, charges
printers, scanners, fax,
staples, telephones
Advertising property –
(t-shirts, posters,
Office Supplies – etc.)
Paper, tape, business
cards, envelopes, folders Leases/rental of taxable
tangible personal property
Furniture –
Desks, chairs, Safety supplies/equipment
tables, lamps, television Internet access charges for
Cleaning Supplies – businesses
Mops, brooms, Decorations/Art work
cleaners, paper towels
Freight on taxable tangible
personal property
7. Potentially Taxable Services
Installation of taxable Janitorial
tangible personal property Storage (not inventory)
Repairs of taxable Maintenance contracts
tangible personal property
Motor vehicle towing
Employment (temps)
Cleaning/detailing of motor
Lawn care and landscaping vehicles (non-coin operated)
Exterminating Laundry cleaning
Automatic data processing Employment placement
Snow removal Other
8. Enforcement Has Changed
Use Tax Education Program (UTEP)
Data mining initiative.
Help businesses understand use tax laws.
Increase compliance, generate revenue.
The Ohio Department of Taxation will contact
380,000 businesses this summer!
9. VDA Program Suspended
Look back period limited to 3 years
Penalties waived
Interest charged
Conduct self audit
Submit in summary
format
Register for use tax
10. How Amnesty & VDA Differ
Amnesty
Includes full waiver of interest
Has a payment plan
Looks back to 1/1/09
Cannot be filed anonymously
Is completed all at once (no back and forth
with the state)
Is conducted through Ohio
Business Gateway
11. Use Tax Audits Suspended
Temporary situation
Will resume during the
amnesty period
Can apply for amnesty even
while under audit
12. The Use Tax Amnesty
Program
Self audit from Jan. 1, 2009
through application date
100% abatement of penalties &
interest
Payment plan available
Runs from Oct. 1 to May 1,
2013
No Amnesty = look back to Jan. 1,
2008 + interest & penalties
13. Who Qualifies for Amnesty?
Individuals and businesses who did not have a
use tax assessment prior to Sept. 29, 2011
Note: Those who registered for a use tax
account on or before June 1, 2011,
can still participate, but interest will
not be waived.
14. How Amnesty Works
1. Complete the spreadsheet available on
Ohio Tax’s website to calculate liability
Report the following:
» name and address of the supplier
» description of item or service
» price
» county where item used
15. How Amnesty Works
-
continued
2. Register for an Ohio
Business Gateway (OBG)
account (if don’t
already have)
3. Register for a consumer use tax account
(if don’t already have)
The application/return is accessible on OBG
once registered
Those who had a use tax account on June
1, 2011, must call (or have
representative call) to
arrange amnesty
16. How Amnesty Works
-
continued
4. Complete and digitally
sign the application
& return
Enter the total liability
calculated in step 1
4. Upload the spreadsheet
completed in step 1
17. How Amnesty Works
-
continued
7. Submit payment in full, or the first
month’s payment under a payment plan
You will receive a payment plan agreement,
if requested
7. Complete the payment plan agreement
and mail back, if applicable
18. How a Payment Plan Works
Liabilities greater than $1,000 pay
$1,000/month until fully paid
If not evenly divisible by $1,000, then final
payment will be the balance
First payment is due with application
Interest free plan
19. How a Payment Plan Works
-
continued
Maximum of 7 years (84 months) to pay
Example: If you owe $126,000, payment would be
$126,000/84 months = $1,500 per month
The catch…
Two people must agree to personally guarantee
the entire debt
One can (but does not have to) be an officer,
member, or partner of the business
Both must provide social
security numbers
20. Review of Submitted
Information
Tax Commissioner has right to review
application & supporting documentation
before accepting
Applications that seem
suspicious can be reviewed by
auditors
21. Apply But Don’t Qualify?
Will be sent an assessment for the
amount owed, plus interest
Unclear if penalties will be added (probably
will be)
No payment plan available
Submitted payment will be applied - balance
due immediately
22. Ongoing Use Tax Reporting
Liability before Jan. 1, 2009, is forgiven
Now current with filing through
participation date
New use tax returns must be filed on a
go forward basis
monthly or quarterly
23. No Use Tax Account?
You Need Amnesty
Puts you in the drivers
seat (self audit)
Limits liability
Less audit risk
Less penalties & interest
Less adversarial
How many years of tax liability will you save?
24. Don’t Just Open a Use Tax
Account
State is wise to this approach
You can be audited back to Jan. 1,
2008 – and the statute of limitations
never runs on those years
Post amnesty, a more aggressive
audit & estimated tax due notice
method of enforcement
will resume
25. Post Amnesty
If the law changes and Amnesty no longer
exists, anticipate
increased look back period, interest & penalties
Aggressive audits
Estimated tax due notices – you will have to
“prove it”
Third party collection agencies
Amnesty is a once in a
lifetime opportunity!
26. A General Amnesty Program
Separate from use tax amnesty
Covers unreported & underreported tax
delinquencies
Seller’s use tax vs. Consumer’s use tax
Not available on taxes assessed, billed or
under audit
Available to both individual & business
taxpayers
27. General Amnesty Details
Applies to state-collected taxes due
before May 1, 2011
Runs from May 1-June 15, 2012
Waiver of full penalty & ½ interest
amount
Returns must be filed
Payment must be in full
28. Smart Business Thought Leadership Webinar Series – September 8, 2011
Questions?
Contact
Chad Bice, CPA
Principal/Director of State & Local Tax
Chad.Bice@ReaCPA.com
740.454.3198
Editor's Notes
Use tax is a tax on the storage, use or consumption of a tangible personal property and certain taxable services in Ohio. 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.
The old use tax education program has been modified as a result of the Ohio legislature passing a Use Tax Amnesty law as part of their biennial budget bill. Legislators wanted to refocus the message on taxpayers, reduce the financial hit to taxpayers, and make it even easier to come forward.
The use tax VDA program has been suspended, except for taxpayers who do not qualify for the new amnesty program. Taxpayers who had a use tax assessment issued prior to 9/29/11 are not eligible for the amnesty program and can continue using the VDA program. If you have a VDA in process, it will be terminated unless you do not qualify for amnesty (then you will be allowed to continue). All taxpayers who qualify for amnesty need to use the amnesty program and complete a new application.
Amnesty includes full waiver of interest (VDA charged interest) Amnesty has a payment plan (VDA required payment in full) Amnesty looks back to 1/1/09 (VDA looked back a full three years from the application date)
* Note that this is for new audits that will commence in the future, if you are currently under audit and have had an assessment issued you may be ineligible for the program.
Once in a lifetime opportunity!! Letter mailing campaign – 10,000 at a time every two weeks
You can only participate in amnesty once during the amnesty period. [Internal Note – The default effective date of the law for provisions not specifically mentioned is 91 days after the date of enactment, which was 6/30/11. The 91 st day after 6/30/11 is 9/28/11. Eligibility is destroyed if you are assessed on or before the effective date. Thus assessments issued on 9/29/11 and later do not destroy amnesty eligibility.]
*Note that this form is not yet available, but will go live in September. It will be similar to the document used to report under the old VDA program which is shown here. The forms will auto-calculate the amounts due if you provide the above information. The period you have to report and pay tax on is from 1/1/09 to the last day of the month preceding the month you submit the application (so if you file on October 1, 2011 then your period would be from 1/1/09 through 9/30/11).
If your liability is under $1,000 then the entire amount is due with your amnesty application.
It is very important to confirm your eligibility for amnesty, you or your tax representative can call Ohio to confirm your eligibility.
If you have an average monthly liability of $5,000 or more, your filing frequency will be monthly, else it will be quarterly. Note that you must file your future use tax returns timely, even if you have no liability for a particular period. Once you participate in amnesty you can never go back, your business will be locked into filing an Ohio use tax return as long as it is doing business in Ohio.
Mention Rea’s proves methodology – education, review of data, completion of amnesty steps, clean slate moving forward – no more under or overpayments of tax.
One important distinction on use tax. Consumer’s use tax is imposed on the use in Ohio of items or services that are covered by Ohio sales tax on which no sales taxes were paid (anywhere). Seller’s use tax is the collection of tax by an out of state seller of Ohio purchaser’s use tax on the transaction (its very similar to sales tax collection). Seller’s use tax (which is like sales tax) is eligible for General Amnesty just as sales tax is. Consumer’s use tax is ONLY covered by the separate use tax amnesty program. Seller’s use tax is NOT COVERED by the separate use tax program. Each type of use tax is only covered by one program.
We mention this here because the programs are similar and were enacted by the same legislation. They are easy to mix up. Key differences – General amnesty has a very limited application window which doesn’t start until May of next year. General Amnesty applies to almost all tax types (other than consumer use tax). General Amnesty only waives ½ of interest. Returns must be filed under General Amnesty. Payment in full is due under General Amnesty.