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URGENT OHIO BUSINESS MATTERS
In recent months, the State of Ohio has been increasing its tax audit and collection activity. We have seen the effect of this increase in our practice. This notice is to inform you of the very recent developments in Ohio related to both collection enforcement and changes enacted by the legislature in some very key areas.
Ohio Use Tax & Use Tax Amnesty – Latest Developments
Ohio Use Tax is a tax on the storage, use, or other consumption of tangible personal property and certain taxable services in the State of Ohio. The Ohio Use Tax is a complement to the Ohio Sales Tax. In general, if you have paid Ohio Sales Tax on a taxable item, then you do not owe Ohio Use Tax. If you have not paid tax on a taxable item such as an out-of-state purchase, then you have a responsibility to report and remit Ohio Use Tax to the State of Ohio.
The Ohio Legislature has written a Use Tax Amnesty provision into the biennial budget bill. This bill has become law with the signing by Governor Kasich on June 30, 2011. This use tax amnesty period will commence October 1, 2011 and expire May 1, 2013. Though it is not certain at this time how the Ohio Department of Taxation will administer the amnesty, the Tax Commissioner will adopt rules and issue forms and instructions shortly. At the time of this writing, what we do know is the following:
- Any participant can resolve its Ohio use tax liability by paying all Ohio use tax owed on and after January 1, 2009.
- Participants that did not have a use tax account as of June 1, 2011, will receive full waiver of use tax on liabilities prior to January 1, 2009 and waiver of interest and penalties on any tax due on or after January 1, 2009.
- Participants that did have a use tax account as of June 1, 2011, will receive full waiver of use tax on liabilities prior to January 1, 2009 but no waiver of interest and penalties on any tax due on or after January 1, 2009.
- If a taxpayer is issued an assessment prior to October 1, 2011, they are ineligible to be a participant in the program.
- If a taxpayer chooses not to participate in the amnesty program, they will be potentially subject to audit for Ohio use tax due on and after January 1, 2008 and liable for applicable penalties and interest.
It should be noted that taxpayers currently under audit are not precluded from participating in the Use Tax Amnesty Program. As long as the taxpayer has not been issued an assessment prior to October 1, 2011, they are eligible to participate. It is not expected that the Ohio Department of Taxation will accelerate assessments on current audits in order to beat the October 1st start date of the program. Thus, the program will provide an extremely favorable benefit to many taxpayers currently under audit.
All businesses that operate in the State of Ohio, or hold funds due to Ohio residents, are required to annually file an “Unclaimed Funds Reporting Form”, Form OUF-1, and remit such unclaimed funds to The Ohio Department of Commerce, Division of Unclaimed Funds. This Form is due by November 1, for accounts dormant as of the preceding June 30th. Dormancy periods as defined by the Ohio Revised Code vary by type of fund and range from 1 to 5 years. Unclaimed Funds Reports can be filed and paid online via the Ohio Business Gateway. If a business determines it is not holding any Unclaimed Funds, it must still file a negative (None) report.
New Small Business Investment Credit
The bill creates a Small Business Investment Credit representing a nonrefundable credit against the personal income tax for persons investing in a small business operating in Ohio. A small business is defined as having a minimum of 50 employees in Ohio or a majority of its US based employees in Ohio and either has assets of $50 million or less or sales of $10 million or less. Investments must be made after July 1, 2011 and require a holding period of 2 years. The credit is limited to the lesser of 10% of the investment or $1 million.
Please feel free to contact our office if the above issues might apply to you or your business. We stand ready and willing to offer you assistance in applying these tax laws to your specific situation.