Use and Sales tax + Use tax rates + Business taxes | Ohio

FAQ’s

Please click on any question below to see the answer:

A. US Legal offers this perspective:
A use tax is a tax on purchases made outside the state for use in the state. Residents are responsible for paying the use tax on purchases for which no state sales or use tax has been charged. The use tax applies to transactions that would be subject to sales tax if the purchase were made in the state. The use tax rate is the generally the same as the sales tax rate that would apply to the purchase if it were made in the state.

A. For decades, many businesses failed to pay a dime of use tax. But as states like Ohio face substantial budget shortfalls, collecting use tax revenue is becoming more of a priority.

Why? In Ohio, estimates suggest more than 300,000 businesses have unpaid Ohio use taxes. Compare that to just 18,000 Ohio businesses with a use tax account. No wonder the state hired 90 auditors last year.

To make things easier for business owners, the State recently created the Ohio Use Tax Amnesty Program. It allows businesses to catch up on any use tax liability. Those who fail to take advantage of this historic opportunity could face an audit or blanket assessment from the state.

A. If your business is registered with the Ohio Secretary of State, then yes.
If your business has a Ohio Withholding Account Number, then yes.
If your business has a Ohio Sales Tax Identification Number, then yes.
If your business has a Ohio Commercial Activity Tax Account, then yes.
If your business makes purchases from out of state vendors, then yes.
If your business has a physical presence and conducts business in Ohio, then yes.

A. Ohio’s use tax is complicated tax law that requires precise expertise. Contacting an Ohio use tax expert can save you time and money. An Ohio use tax expert can help enroll you in the Ohio Use Tax Amnesty Program. An Ohio use tax expert will work with you to look at your previous purchases and identify any items where you didn’t pay use tax in ohio. An Ohio use tax expert will use their expertise to determine if tax is due on those transactions and to minimize any potential use tax liability in Ohio.

A. If you choose to do nothing, one of two things will happen. The Ohio Department of Taxation will audit you to determine exactly what you owe, or the Ohio Department of Taxation will send an estimated assessment of what they think you owe. Once an assessment has been issued and no payment is made, the collection responsibility shifts to the Ohio Attorney General’s office. That’s when things get complicated and costly in terms of time, money and hassle. The Ohio Attorney General’s Office outsources the collection responsibility to outside third party firms. These firms are not tax experts and only know they have to collect an assessment.

An audit is not much fun either. The Department of Taxation will be at your facility, looking through records and disrupting your business. They will be looking at a seven to ten year period, which could be a substantial challenge for any business, let alone one that struggles with keeping accurate records.

A. To avoid potentially serious consequences, businesses need to be proactive and take advantage of a grace period being offered by the Ohio Department of Taxation for clearing up any unpaid use tax liabilities in Ohio. Acting now will mean less work.

Plus, who knows if the laws will change? Take advantage of a historically business friendly opportunity while you can.

A. Targeted industries could include manufacturers, distributors and construction contractors, but the enforcement and audit includes any business not in compliance with the use tax.

A. JP Mohler will offer a free assessment to any Ohio business with Ohio use tax questions.

A. The Ohio use tax is a specialized area of tax law. It is different from other state taxes, federal taxes and income taxes.

Use tax analysis is also a specialized field. There are many exceptions and exemptions to the tax that even some certified public accountants might miss.

Plus, researching a business could take up to an entire week. It took years for many businesses to get into this hole. Digging out isn’t an overnight process.

Because of this complexity, software like QuickBooks®, TurboTax® and other tax calculators may not help. Most certified public accountants even struggle deciphering more than 100 Ohio use tax exceptions and exemptions.

For the sake of your business, this complicated tax question requires an Ohio use tax expert.

JP Mohler is a firm that specializes in Ohio’s use tax. Justin Mohler, CPA, specializes in state and local tax consulting and has extensive experience in all areas of state and local taxation, including Ohio’s commercial activity tax, multi-state income and franchise tax, sales and use tax, real and personal property tax, site selection and business credits/incentives, and unclaimed funds.

A.The Ohio Department of Taxation defines a taxable sale as a sale that “Includes any transaction in which title or possession of tangible personal property or the benefit of certain services is, or will be, transferred or provided for a price. All retail sales are subject to the tax unless they are specifically excepted or exempted in Ohio’s sales tax law.”

A.Several. For example, if you offer free coffee, pop or snacks to your employees at work, that is exempt from sales tax. So too are newspapers and magazine subscriptions.

There are dozens of other exceptions that aren’t so cut and dry. Here’s a short assessment to see if your business might owe back use taxes. It’s important to contact an Ohio use tax professional to ensure your finances remain in order.

A. Hotel rentals, landscaping, employment services and even some laundry services could be subject to Ohio’s use tax. It’s important for an Ohio use tax expert to look through your finances, identify any potential liabilities and correct the situation now before potential penalties kick in.

A.The tax base is reduced on price discounts, coupons and trade-in allowances on most motor vehicles, watercraft and outboard motors.

The tax base is not reduced on rebates for goods and services sold. The vendor should charge tax on the total amount when the sale occurs.

A. Yes.

The Ohio Department of Taxation lists the following exceptions:

  • The State of Ohio or one of its political subdivisions;
  • The federal government;
  • A house of worship or religious education;
  • A non-profit organization operated for certain charitable purposes as defined in the sales tax law;
  • Contracting for the original construction of a sports facility under section 307.696 of the Ohio Revised Code;
  • Contracting for a hospital facility entitled to exemption under section 140.08 of the Ohio Revised Code;
  • Contracting for real property located in another state when the materials are not subject to tax in that state;or
  • Contracting for a horticulture or livestock structure for a person engaged in the business of horticulture or producing livestock.
  • If one of these exceptions applies to your business, there is an exemption certificate you should have on file. Contact an Ohio use tax expert to make sure your business is protected.

A. According to the Ohio Department of Taxation’s website, “Farmers are entitled to claim exemption on the purchase of items of tangible personal property used directly in the production of a product for sale.”

To claim an exemption, you need a certificate on file with the state. Contact an Ohio use tax professional to optimize your exemptions and protect your Ohio business.