Ohio Use Tax Amnesty Program (“UTAP”)

Recently the Ohio Budget Bill (House Bill 153) created, among other things, “The Use Tax Amnesty Program” (the “UTAP”).

Use taxes are the half-brothers of sales taxes.  Goods purchased outside Ohio, whether by an individual or business, whether directly or “on-line”, for Ohio use or consumption are subject use taxes which replicate the sales taxes that would have been paid had the goods been purchased within Ohio.

As governments struggle financially, they are more attuned to finding revenue than addressing their spending habits.   As use tax compliance is notoriously low, Ohio officials seized on unpaid use taxes as a readily available funding source.  But, a poor use tax compliance history also alerted the Ohio Legislature to the need for incentives if Ohioans are to “voluntarily” pay previously unpaid use taxes.  Hence the UTAP provides some of that incentive.

Previously Ohio engaged in a “voluntary disclosure program” (the “VDA”) for use tax compliance and payment.   However commencing on October 1, 2011, the VDA is replaced by the UTAP.

Under the UTAP, so long as a use tax assessment has not occurred prior to October 1st (even if an audit is in progress), taxpayers can comply with their use tax obligations without conventional penalty and interest burdens.  Specifically, the UTAP provides—

  • If the taxpayer has no previously established use tax account (i.e. prior to June 1, 2011), the taxpayer can pay all unpaid use taxes for all periods beginning on or after January 1, 2009 without any penalties or interest; and unpaid use taxes for periods beginning prior to January 1, 2009 are waived;
  • If the taxpayer previously established a use tax account (i.e. prior to June 1, 2011) the taxpayer may still participate in the UTAP but penalties and interest on the January 1, 2009 and later unpaid use taxes are not waived;
  • Time payment programs for unpaid use taxes may be authorized by Ohio’s Tax Commissioner; and
  • It appears currently that consumers who don’t participate in the UTAP program may only be subject to payment of use taxes owed from and after January 1, 2008; however, the Department of Taxation may attempt to “chip away” at this benefit.

At this writing the Ohio Department of Taxation has not established forms for UTAP participation.  Watch this space for updates on forms and additional UTAP details.