Ohio Use Tax Audits on the Rise– June 20, 2014 by Tracy Monroe

Use tax, a self-assessed tax that is due when sales tax is not paid but should have been, is becoming a big problem lately for many Ohio businesses. The Ohio Department of Taxation (ODT) has ramped up its efforts to enforce use tax compliance. As a result, our state and local tax group has witnessed a significant increase in the number of use tax audits over the past year, with many resulting in fairly substantial taxes and penalties assessed.

Electronic information, temporary labor and janitorial services are a few of the key exposure areas in which use tax is often overlooked. For example, a business uses a janitorial service that does not charge tax on the monthly invoice. Even though sales tax is not charged, this service qualifies as a taxable service. Therefore, it is the responsibility of the business to self-asses that tax, which at that point becomes a use tax.

One of the biggest red flags to invite an audit on this issue is not having a registered use tax account at all, whether or not you actually owe any tax. When the state sees CAT and other business tax returns, it is now often checking to see if the business also has a registered use tax account. In the current state of heightened sensitivity to use tax compliance, it is imperative to determine if your business has a use tax account and is consistently filing with the state, whether or not tax is actually owed. If do not have an account or are not consistently filing even zero-balance returns, contact your service team to determine your exposure level and an immediate course of action.

Visit the state’s website to learn more about Ohio sales and use tax; however you should consult with your service team prior to registering for an account.

We want to hear from you! We encourage you to share this blog post on social media, contact Tracy Monroe at tmonroe@cohencpa.com or a member of your service team for further discussion.

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.