May 24, 2011
Ohio businesses offered incentives to reduce tax risk
Use Tax Education Program aims to raise
awareness and compliance
The Ohio Department of
Taxation (ODT) is offering thousands of businesses in Ohio a limited-time
opportunity to minimize a risk they may not even be aware of.
ODT is estimating that up to
380,000 businesses may owe use tax, a little known and often complex tax
applied to purchases of goods and services. Use tax is levied at the same rate
as the sales tax and comes into play when a taxable purchase is made but no sales tax is collected.
ODT has launched the Use Tax
Education Program (UTEP) as an initiative with two goals: to raise awareness of
the use tax and help businesses understand how it works so they comply with the
law from now on; and to induce businesses to register and pay the use tax they
owe by, in part, offering incentives that can seriously shrink the amount of
tax potentially due.
In alignment with those
goals, ODT has set up the program with two windows of opportunity. The first window
is open now through August 1, 2011 while the department is getting the word out
about UTEP. Any business that comes forward during this education phase, signs
a Voluntary Disclosure Agreement, and pays its use tax bill will only be liable
for up to three years back tax and interest.
The second window opens when ODT
begins sending out letters to the targeted businesses advising them about the
UTEP and encouraging them to come forward. Any business that receives a letter
and contacts ODT will have its use tax liability limited to no more than four
years back tax and interest.
Any business that receives a
letter and fails to respond will be audited or sent a bill that estimates how
much tax it may owe, and could be liable for up to seven years back tax plus
penalty and interest.
Ohio Tax Commissioner Joe
Testa is encouraging businesses to come forward sooner to avoid a heavier price
later, “We know the use tax can be challenging. This program is designed to be
as business friendly as possible for companies that come forward voluntarily.”
Businesses interested in
participating in the Voluntary Disclosure Program or finding out more about
UTEP can visit the ODT web site for more information, or contact
the department at 614.466.7351.