Ohio Use Tax Amnesty

Ohio Use Tax Amnesty:Ohio Use Tax Amnesty:How much can you save?

Smart Business Smart Business Thought Leadership Webinar Series September 8, 2011 Thought Leadership Webinar Series September 8, 2011

By:Chad Bice, CPA

Principal/Director of State & Local Tax

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

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.

What’s Use Tax Anyway?

Sales tax companionEvery purchase should be taxed once unless

an exemption appliesNot all purchases have sales tax addedSales tax may not have to

be charged

When is Use Tax Due?

When no sales tax is charged on taxable goods or servicesInternet purchases Out of state purchasesIn 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.

Potentially Taxable Goods

Office Equipment – computers, software, monitors, printers, scanners, fax, staples, telephones

Office Supplies – Paper, tape, business cards, envelopes, folders

Furniture – Desks, chairs, tables, lamps, television

Cleaning Supplies – Mops, brooms, cleaners, paper towels

Freight on taxable tangible personal property

Postage meter rental charges

Advertising property – (t-shirts, posters, etc.)

Leases/rental of taxable tangible personal property

Safety supplies/equipment

Internet access charges for businesses

Decorations/Art work

Potentially Taxable Services

Installation of taxable tangible personal property

Repairs of taxable tangible personal property

Employment (temps)

Lawn care and landscaping

Exterminating

Automatic data processing

Snow removal

Janitorial

Storage (not inventory)

Maintenance contracts

Motor vehicle towing

Cleaning/detailing of motor vehicles (non-coin operated)

Laundry cleaning

Employment placement

Other

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!

VDA Program Suspended

Look back period limited to 33 years

Penalties waived

Interest charged

Conduct self audit

Submit in summary format

Register for use tax

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

Use Tax Audits Suspended

Temporary situation

Will resume during the amnesty period

Can apply for amnesty even while under audit

The Use Tax Amnesty Program

No Amnesty = look back to Jan. 1, 2008 + interest & penalties

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

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.

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

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

4. Complete and digitally sign the application & return

Enter the total liability calculated in step 1

5. Upload the spreadsheet completed in step 1


7. Submit payment in full, or the first month’s payment under a payment plan

You will receive a payment plan agreement, if requested

8. Complete the payment plan agreement and mail back, if applicable


How a Payment Plan Works

Liabilities greater than $1,000 pay $1,000/month until fully paidIf not evenly divisible by $1,000, then final

payment will be the balance

First payment is due with application

Interest free plan

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 debtOne can (but does not have to) be an officer,

member, or partner of the business Both must provide social

security numbers

How a Payment Plan Works - continued

Review of Submitted Information

Tax Commissioner has right to review application & supporting documentation before accepting

Applications that seem suspicious can be reviewed by auditors

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 availableSubmitted payment will be applied - balance

due immediately

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

No Use Tax Account? You NeedNeed 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?

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

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!

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

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

Questions?Questions?

ContactChad Bice, CPA

Principal/Director of State & Local Tax

[email protected]

Smart Business Smart Business Thought Leadership Webinar Series – September 8, 2011 Thought Leadership Webinar Series – September 8, 2011