Use Tax Education Program

In an effort to inform Ohio businesses of their responsibilities to remit use tax, the Ohio Department of Taxation established the Use Tax Education Program or UTEP. The goal of the program is to help businesses understand what use tax is and when it must be remitted to Ohio. 

So what is Use Tax? Use tax is a tax on storage, use or other consumption of tangible personal property and certain services in Ohio. The use tax is similar to the sales tax.  Purchases that are properly exempt from sales tax are also exempt from the use tax. Use tax must be paid on all purchases made by Ohio businesses if the proper amount of sales tax has not been paid to the vendor, seller or service provider. The use tax rate is equal to the sales tax rate in effect in the county where the property is used or benefit of the service is received by the purchaser.

The most common situation that creates a use tax liability is when an Ohio business makes a purchase from an out-of-state seller that charges no sales tax. Use tax is also due when the purchaser improperly claims exemption from the state sales tax. 

In the first half of 2011, the Department will be providing educational opportunities through business association meetings, seminars and workshops. In the second half of 2011, the Department will use available information to: (1) identify businesses that are registered for other taxes but not the use tax and (2) identify businesses that are registered for the use tax but not registered for other taxes. 

Businesses will be able to register and begin remitting use tax on future purchases and enter into a UTEP agreement to clear up any past unpaid use tax liability.

The UTEP agreement:

• will limit payment of unpaid use tax (plus interest) for the last 4 years.  By law, the business could owe tax for up to 10 years although the Department’s practice is to audit for the last 7 years;
• the Department agrees, in the absence of fraud, to waive the use tax liability for all years beyond the look-back period; and
• the Department agrees not to apply the 15% penalty applicable to the unpaid use tax.

If your business owes use tax, you should contact your HW&Co. representative and ask about entering into a UTEP agreement.