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Pay Now or Pay More Later! —— Ohio Use Tax Education Program

The Ohio Department of Taxation is running a blitzkrieg to get businesses on the tax roll. Many Ohio companies do not pay nor are they registered to pay Ohio use tax. What is use tax and why do companies have to pay? Use tax is a tax that wasn’t paid, but should have been, on taxable property or services a business purchased. It is a complement to the state’s sales tax, and most often occurs when a business purchases goods out-of-state or over the internet, and the retailer does not collect Ohio sales tax. Use tax applies to all businesses, regardless of size, that purchase taxable property or services.

If your company purchased tangible personal property such as computers, office supplies, office equipment, furniture, cleaning supplies, or machinery and equipment from in state or out of state vendors, or over the internet, chances are you didn’t pay sales tax. Therefore you are liable for use tax.

Use tax is also applicable to certain services:

This list is not inclusive, and there may be specific exemptions available for certain types of businesses. Just because a company didn’t charge you sales tax doesn’t mean that you aren’t liable for use tax. If you are the end user or chief benefactor, you are liable.

What to do? If not presently registered, the Ohio Department of Taxation (ODT) will be targeting you. Up until August 1, 2011, a company can willingly enter into a program called a voluntary disclosure agreement or VDA. This allows for a waiver of penalties and the state will require only a three year look back for liability. Interest will be charged. If the ODT does contact you, then a VDA is still available but the look back period is extended to four years. Lastly, if you do nothing the state can look back indefinitely, but generally at least seven years, and they will charge substantial penalties and interest. They also may look at other tax compliance issues.

The state is presently educating businesses about use tax and more information can be obtained from their website: http://tax.ohio.gov/divisions/sales_and_use/index_use.stm After August 1, they will be contacting companies and conducting audits of those not registered. So think about contacting us before ODT does.

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