Small Business Strategies To Increase Your Cash Flow

How to Become Compliant With Ohio’s Use Tax

Use Tax History

• Use tax law established in 1936 • Applies to storage, use or other consumption of��� goods and services

• Use tax rate same as sales tax rate

www.ohiousetax.com

Ohio Use Tax Compliance

• 300,000 small to medium size businesses likely��� owe Ohio use tax money

• 18,000 voluntarily comply with the use tax law

Source: Ohio Department of Taxation

www.ohiousetax.com

Use Tax Examples & Exceptions

• Out of state purchases (e.g. vehicles, supplies, etc.) • Not taxed or improperly taxed from in-state or ��� out-of-state purchase (e.g. repair/maintenance��� services, different county rates, etc.)

• Over 100 exceptions to use tax law

www.ohiousetax.com

Why comply now?

• Ohio’s recent budget $8.0 billion deficit • Use tax will be enforced on small and medium ��� size businesses (UTEP)

• The Ohio Department of Taxation compiled a list ��� of companies

• Businesses not in compliance will receive letters beginning in August 2011

www.ohiousetax.com

Use Tax Barriers to Overcome

www.ohiousetax.com

Companies unaware of use tax

Difficult to apply ���use tax law

Use Tax Education Program (UTEP)

96% of purchase audits show taxes due

Do Nothing About Use Tax

• Will likely receive an assessment from Ohio��� Department of Taxation

• Collection efforts will be outsourced to non-tax firms ��� through the Ohio Attorney General’s Office

• Records needed – invoices, receipts,��� cancelled checks, etc.

• Will be subject to penalties and interest

• Shareholders, officers, key employees, have personal��� liability for the use tax

www.ohiousetax.com

Should I Do Nothing?

www.ohiousetax.com

Research purchase history

Determine potential exposure

Establish procedures

immediately

Proactive Approach - Use Tax Amnesty

• Program dates: October 1st 2011 – May 1st 2013

• Potential benefits

- Limit look back period to January 1, 2009

- Abatement of penalties

- Abatement of interest - Payment Plan Option

www.ohiousetax.com

Taxpayers Previously Registered

• Consumers registered as of June 1, 2011 - No tax, penalty or interest will be assessed for periods prior to January 1, 2009

- Participant is responsible for interest and penalty on the delinquent use tax

- No criminal prosecution for those who participate

www.ohiousetax.com

Taxpayers NOT Previously Registered

• Consumers NOT registered as of June 1, 2011 - No tax, penalty or interest will be assessed for periods prior to January 1, 2009

- Penalty and interest will be fully abated

- No criminal prosecution for those who participate

• Consumers that do NOT participate in the Use Tax Amnesty Program will be subject to audit by ODT

www.ohiousetax.com

Other Budget Bill Provisions

• Limitation on consumer use tax assessments (may impact current audits)

• General Tax Amnesty

- May 1, 2012 to June 15, 2012

- Other taxes (sales, CAT, income, etc.)

- Abatement of penalty and ½ of the interest

www.ohiousetax.com

Recommendations

• Research all in-state and out-of-state transactions to��� determine tax liability

• Work with a use tax expert to self-report findings and minimize exposure

• Limit look back period to January 1, 2009

• Avoid all interest, penalties and make payments • Determine if refunds are available to offset use tax��� liability (four year refund period)

www.ohiousetax.com

Ohio Use Tax Open Forum for Your Questions

Contact Information Justin P. Mohler, CPA

Watson & Associates, Inc. 3749 County Road 55

Bellefontaine, OH 43311

Office: 937.592.6926 Fax: 937.592.5195

Mobile: 614.361.8458

jmohler@watson-tax.com www.watson-tax.com www.ohiousetax.com

www.ohiousetax.com

Thank You for Attending!

Contact Information Justin P. Mohler, CPA

Watson & Associates, Inc. 3749 County Road 55

Bellefontaine, OH 43311

Office: 937.592.6926 Fax: 937.592.5195

Mobile: 614.361.8458

jmohler@watson-tax.com www.watson-tax.com www.ohiousetax.com

www.ohiousetax.com