Ohio Use Tax Audits of Unregistered Businesses Temporarily on Hold

The Ohio Department of Taxation, Audit Division recently put purchase audits (i.e., Ohio use tax audits) of unregistered busiinesses temporarily on hold. For these purposes, an unregistered business is a business that did not have an Ohio use tax account at any time during the audit period. Likewise, refund claims for sales tax paid to vendors from such unregistered businesses are also on hold. It is anticipated that this hold will last no more than one month. Ohio use tax audits of registered taxpayes and Ohio sales tax audits are not affected.

This hold on Ohio use tax audits presumably stems from a provision in the proposed Ohio Budget Bill (Sub. H.B. No. 153) that would prohibit the Ohio Tax Commissioner from assessing a consumer for Ohio use tax that was due before January 1, 2008. If enacted, this provision, which would become R.C. 5703.58(B), would put a significant strain on the Ohio Department of Taxation’s Use Tax Education Program as there would be less incentive for self-reporting Ohio use tax through a voluntary disclosure agreement (“VDA”) since the Department would not be able to assess consumers going back seven years, which is the current practice. There is still some benefit for a consumer to voluntarily disclose its liability, as the VDA would cover only the preceding thirty-six months and penalty would be avoided.

The Ohio Budget Bill was passed by the Ohio Senate last week and is going to a conference committee next week. The Budget Bill must be passed by the end of June.