Ohio Tax Ohio Sales & Use Tax In-depth Review of Major - - PDF document
26th Annual Tuesday & Wednesday, January 2425, 2017 Hya Regency Columbus, Columbus, Ohio Workshop CC Ohio Tax Ohio Sales & Use Tax In-depth Review of Major Developments Including New Audit Procedures Legislative &
26th Annual
Tuesday & Wednesday, January 24‐25, 2017
Hya Regency Columbus, Columbus, Ohio
Ohio Sales & Use Tax – In-depth Review of Major Developments Including New Audit Procedures Legislative & Litigation Developments Important to Ohio Sales & Use Taxes
Wednesday, January 25, 2017 11:00 a.m. to 12:30 p.m.
Biographical Information Edward J. ("Ted") Bernert, Partner, Baker & Hostetler LLP 65 E. State Street, Suite 2100, Columbus, Ohio 43215 ebernert@bakerlaw.com 614.462.2687 Fax 614.228.1541 Edward J. (“Ted”) Bernert concentrates his practice in the area of state and local taxes with a particular emphasis on the major Ohio taxes affecting businesses and business owners–sales and use, financial institution, personal income, commercial activity and real property taxes. He represents national companies concerning Ohio tax matters related to compliance, planning and tax legislation. Mr. Bernert regularly deals with various tax department officials upon audit or administrative appeals. He has an active tax litigation practice before the Ohio Board of Tax Appeals and upon appeal to the courts, including the Supreme Court of Ohio.
Tax Committee and is a past chair of the Ohio State Bar Association Taxation Committee and the State and Local Tax Section of the Columbus Bar Association. Mr. Bernert was appointed by the Governor to the Ohio Business Gateway Steering Committee to address the continued development of an electronic link for filing taxes and other matters affecting business. He also serves as a member of The Ohio Chamber of Commerce Taxation Committee. Mr. Bernert is an adjunct professor of state and local taxes at the Capital University Law and Graduate Center and served as Chief Editor of Ohio Tax Review, formerly published by the Center. He currently serves as the co-editor of the Guidebook to Ohio Taxes, published by Commerce Clearing House. He has repeatedly been named an “Ohio Super Lawyer” in the area of Taxation and holds an AV rating by Martindale-Hubbell. Allan R. Thompson, Manager - Corporate Taxes, AK Steel 9227 Centre Pointe Drive, West Chester, OH 45069 513-425-2685 Fax: 513-425-5251 allan.thompson@aksteel.com
Marshall College of Law at Cleveland State University (1980 - J.D., Taxation). He has 9 years of tax consulting experience in public accounting and over 25 years in tax management positions at several, large multistate manufacturers that are domiciled in Ohio. Mr. Thompson has over 30 years of experience with Federal, state and local tax audits - much of it involving Ohio taxes. During this time he has achieved equitable resolutions of compliance audits with representatives of taxing jurisdictions ranging from field auditors to tax commissioners, crafted voluntary disclosure agreements and presented at administrative appeal and litigation proceedings.
Education Services, the Ohio Society of CPAs and Institute for Professionals in Taxation. His primary subjects are the Ohio sales & use tax exemptions affecting manufacturers and best practices for managing compliance audits. His career includes two tours of duty as Chairman - Tax Committee of the Ohio Manufacturers’ Association. Chad G. Leon, Assistant Administrator, Audit Division Ohio Department of Taxation, PO Box 183014, Columbus, OH 43218 Chad.Leon@tax.state.oh.us (614)800-3967 Chad is an Assistant Administrator for the Audit Division of the Ohio Department of Taxation. He has over fourteen years of experience in Sales and Use tax. Chad began his career with the Ohio Department of Taxation in December, 2002 as a sales and use tax auditor in the Akron District
position until he received his current position in July of 2015. Chad has audited exclusively in Sales and Use tax throughout his career and has experience in numerous industries including manufacturing, contracting, automobile dealerships, restaurants and trucking. Chad is a graduate
26th Annual Ohio Tax Conference Workshop CC Ohio Sales and Use T ax – In-depth Review of Major Developments Including New Audit Procedures, Legislative & Litigation Developments Important to Ohio Sales & Use T axes Allan Thompson, Manager, Corporate Taxes, AK Steel Corp. Ted Bernert, Partner, Baker & Hostetler, LLP Chad Leon, Assistant Administrator, Ohio Department of Taxation 1
Information Services
Services
NEXUS – R.C. 5741.01(I) – effective 7/1/2015
distribution facility, warehouse, etc. whether operated by the seller or any other person (other than a common carrier).
nexus if a person regularly uses a person to conduct business, engage in a similar business, or to use trademarks/tradenames that are substantially similar to those of the seller.
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another person in Ohio (other than a common carrier) to receive/process orders, advertise/promote/facilitate sales, perform delivery/installation/assembly/maintenance services, or allow customer to pick up property.
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with substantial nexus located in Ohio (see affiliate definition for this division in 5741.01(I)(6)(a)).
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Creates “click‐ through” nexus if Ohio resident receives a commission for referred sales if total sales exceeds $10,000 in prior 12 months.
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presumption of substantial nexus for the circumstances stated in 5741.01(I)(2).
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substantial nexus to register as a seller prior to selling tangible personal property or taxable services to a state agency.
“controlled group”, and “state agency” for purposes of 5741.01(I).
INFORMATION RELEASE ‐ SALES AND USE TAX – USE TAX NEXUS STANDARDS: September, 2001; August, 2016.
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“selling” transactions by which:
electronic information services are or are to be provided for use in business”
computer services, or electronic information services, does not include personal or professional services.
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access to computer equipment by means
purpose of either of the following:
accessible to the computer equipment;
to be retrieved by designated recipients with access to the computer equipment.
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provided by a consumer credit reporting agency for purposes of the Fair Credit Reporting Act)
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equipment for the purpose of processing data.
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“personal and professional services” for the purposes of “automatic data processing”, “computer services”, and “electronic information services”.
and Internet Access ‐ January, 1999; Updated December, 2015; Updated September, 2016 .
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means of telecommunications equipment, to computer equipment that is used to enter, upload, download, review, manipulate, store, add, or delete data for the purpose of electronically displaying, delivering, placing, or transferring promotional advertisements to potential customers about products or services or about industry or business brands.
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together for a single fee and utilizes vague description on its invoices or in its contract, the Department may see these services to be a mixed transaction. Without a breakdown of what makes up the charge, the entire amount would be subject to sales and use tax.
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Dayton Physicians, LLC. v. Testa, 2016‐Ohio‐5348 (Ct. App.)
adjust the material – but rather transcribed word for word.
that go into the patient record.
data processing.
includes in the definition of a “sale” and “selling” transactions by which:
is or is to be provided”
placement service is or is to be provided”
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743
Ohio with no tax being charged using the resale exemption.
entity.
that was issued.
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attached or affixed to the land or to a building, structure, or improvement, and that primarily benefits the business conducted by the occupant on the premises and not the realty.
and
specially designed, constructed, and used for the business conducted in the building, structure, or improvement. 21
goods storage tanks
inventory, etc.
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fixtures.
from this contractor were included in the auditor’s tax deficient listings.
purchases of tangible personal property.
being installed were taxable.
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the business fixture, believing such materials to be incorporated into realty, paid to the state of Ohio a use tax upon the contractors’ use of the materials in fulfilling a construction contract.
that its use tax assessment should be offset by the use tax previously paid.
business fixtures properly held as taxable in the company’s audit?
credit for tax paid by the contractor on the purchase of the materials? 24
the materials, the Department has no authority to grant the company’s request to apply this contractor’s overpayment of use taxes to its assessment.
require the Tax Commissioner to refund the erroneously paid taxes to the consumer when the consumer remitted the taxes directly to the Treasurer of State, to a vendor when the vendor collected and remitted the tax or to the customer directly, when a vendor collected and remitted the tax R.C. 5739.07 Vendor or consumer refunds.
consumer to the account of another.
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Direct Payment Permit Audits/Reviews
revocation of one’s DP authority.
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Direct Payment Permit Audits/Reviews
holders moving forward to verify procedures have not changed.
under the sales and use tax laws and rules.
the agreement within 30 days including changes in
systems, business models, locations, etc.
privilege granted to businesses to promote the efficient administration of Ohio’s sales & use tax law pursuant to R.C. 5739.031.
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Direct Payment Permit Audits/Reviews
documented in the DP agreement shall be considered an error and held taxable within an audit.
directly to the vendor.
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be non‐compliant.
geographic locations.
equitable.
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tax liability.
for penalty reduction prior to assessment.
history, cooperation during the audit and other items to make fair and consistent decisions.
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02/01/2016.
Worksheet.
31
32
current as possible.
possible (Prior Audit Representative Sample Analysis).
to an audit completion plan.
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agree to perform the steps of an audit together. An agreement along with a Participatory Audit Project Plan is created stating the basis for the participatory audit, who will complete what tasks and when.
a participatory audit and is agreed to and signed by the department and taxpayer.
identify: (i) the steps of the audit that will be conducted, (ii) who will be conducting those steps (auditor or taxpayer/representative) and (iii) when those steps need to be completed.
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Audit Administration.
meetings as outlined in the audit project plan.
project plan.
the same taxpayer.
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application following the Refund Checklists (STAR C) in the tax forms section at tax.ohio.gov.
either in whole or in part, the Ohio Department of Taxation will calculate and include the appropriate amount of interest in the refund payment made to the applicant. The applicant should not include such interest in the “total amount of the refund claimed.”
section 5739.07.
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whom the service is provided, to whom the transfer effected
whom the admission is granted.
applications:
were paid in full, including the tax.
compatible spreadsheet. The spreadsheet must list every invoice separately and the total should equal the amount requested on the refund application.
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capitalized research and development equipment, you must prove that the equipment purchased is capitalized research and development equipment. Proof may consist of asset ledgers, depreciation schedules, etc.
the refund application, if you accrued tax on purchases in error.
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service or by whom the transfer effected or license given by a sale is or is to be made.
applications.
that they agree to await reimbursement of the tax until final determination of the refund claim, or some other proof that the accounts receivable was adjusted for the tax or account activity.
compatible spreadsheet. The spreadsheet must list every invoice separately and the total should equal the amount requested on the refund application.
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provided of your original and amended figures for the period(s) referenced on the refund application. The proof may consist of sales journals, cash register receipts, summary reports or any other document used to prepare the tax return.
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incomplete applications, documents and supporting schedules will be returned to the sender. The request may be resubmitted when it is completed.
5739.07 and 5741.10 and must be filed within four years from the date of the erroneous payment of the tax.
refund, you must complete Taxpayer Representative section
5741.10, it shall include interest thereon as provided by R.C. section 5739.132.
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filed.
refund is filed the refund will be denied.
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filed with the Department.
considered within Statistical Samples.
agreement, a refund will need to be filed with the Department for use tax accrued in error.
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sample (Expenses).
bulk credit.
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ST 2001-01 - USE TAX INFORMATION RELEASE - SALES AND USE TAX – USE TAX NEXUS STANDARDS: September, 2001; August, 2016 The purpose of this information release is to describe the standards the Department of Taxation will apply to determine whether an out-of-state seller is required to collect Ohio's use tax1. This release
Ohio’s use tax from its customers in this state. This information release does not relieve any person
encompassing or all inclusive description of this subject. This information release may be mod- ified by changes in either federal or state laws or by decisions of the U.S. Supreme Court, the Ohio Supreme Court, the Ohio Courts of Appeals, or the Ohio Board of Tax Appeals. This re- lease may also be modified and reissued either to incorporate nexus guidelines that may be published from time-to-time by agencies such as the Multistate Tax Commission or to clarify the Department's
tions relating to use tax nexus taken by the Department, those positions will remain in effect. This release is currently being updated to reflect the changes in Am. Sub. H.B. 64 of the 131st Gen- eral Assembly to the nexus standards. ISSUES ADDRESSED I. What is the standard the Department of Taxation will use to determine whether an
II. What activities by or on behalf of an out-of-state seller will create nexus in Ohio? III. How does a person overcome the presumptions set forth in Issue II? IV. Are there any safe harbor activities where nexus might exist but where the Depart- ment of Taxation will not require an out-of-state seller to collect and remit Ohio’s use tax from its customers in this state? V. Are these standards prospective or retroactive? VI. When is this information release effective? VII. What are the use tax registration and filing requirements for an out-of-state seller sub- ject to Ohio's taxing jurisdiction? VIII. Once nexus is established, how long does the filing requirement last? IX. Can an unregistered out-of-state seller subject to these nexus guidelines request a Voluntary Disclosure Agreement? X. Can an out-of-state seller lacking nexus voluntarily register to collect and remit Ohio’s use tax from its customers in this state? XI. What are my obligations if I am a seller without substantial nexus with Ohio but I (or my affiliate) is selling or leasing tangible personal property or services to a state agency? DEFINITIONS The following definitions are used in this information release:
1 As with all information releases of the Tax Commisioner, this document serves to communicate with taxapyershow the Department will administer Ohio taxes mandated by the Ohio Revised Code or relevant statutory changes. No information release has any force or effect of law.
porations as the seller or any other person that, notwithstanding the form of organization, bears the same ownership relationship to the seller as a corporation that is a member of the same con- trolled group of corporations. [Ohio Revised Code (hereinafter "R.C.”) 5741.01(I)(6)(a)]
nal Revenue Code. [R.C. 5741.01(I)(6)(b)] C. “Gross receipts” has the same meaning as in section 993 of the Internal Revenue Code. “Gross receipts” means the total receipts from the sale, lease, or rental of property held primarily for sale, lease, or rental in the ordinary course of trade or business, and gross income from all
en into account as gross receipts shall be the gross receipts on the sale, lease, or rental of the property on which such commissions arose.
the thing used. A thing is also "used" in Ohio if the consumer gives or otherwise distributes the thing, without charge, to recipients in this state.
ISSUE DISCUSSION I. What is the standard the Department of Taxation will use to determine whether an out-
Ohio law provides that the Department of Taxation can require an out-of-state seller to col- lect and remit Ohio use taxes under any set of circumstances allowed by Section 8 of Article I of the Constitution of the United States. Specifically, R.C. 5741.01(H) and (I) set forth the legal standard used by the Department of Taxation to determine whether an out-of-state seller is subject to Ohio use tax collection responsibilities. An out-of-state seller is subject to Ohio’s use tax collection responsibility when the out-of-state seller engages in any of the fol- lowing activities:
[R.C. 5741.01(I)(2)(a)];
installers, repair people, salespeople, or other individuals in Ohio for the purpose of conducting its business or either engages in a business with the same or a similar in- dustry classification as the seller selling a similar product or line of products as the seller, or to use trademarks, service marks, or trade names in Ohio that are the same
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the purpose of (1) receiving or processing orders of its goods or services; (2) using that person’s employees or facilities in this state to advertise, promote, or facilitate sales by the seller to customers; (3) delivering, installing, assembling, or performing maintenance services for the seller’s customers; (4) facilitating the seller’s delivery of tangible personal property to customers in Ohio by allowing the seller’s customers to pick up property sold by the seller at an office, distribution facility, warehouse, stor- age facility, or similar place of business [R.C. 5741.01(I)(2)(c)]; Example Company A sells pre-fabricated furniture that is required to be assembled. Com- pany A has no physical presence in Ohio, but hires a third party that is well versed in its product. Customers may purchase through Company A, the third party home or business location assembly of Company A’s product. Because the third party is in this state and performs a service for seller’s customer, Company A now has nexus with Ohio.
state by means other than common carrier (For example, the out-of-state seller has goods delivered to this state in vehicles which the out-of-state seller owns, rents, leases, uses, or maintains or has goods delivered by another member of a controlled group, of which the out-of-state seller is a part of, acting as a representative of the
lease, the out-of-state seller is an affiliated person of a person that has nexus with this state [R.C. 5741.01(I)(2)(e)];
consumer in this state, or offers tangible personal property, on approval, to consumers in this state [R.C. 5741.01(I)(2)(f)]; or
where the resident receives a commission or other consideration for directly or indi- rectly referring potential customers to the seller (including by a link on a website, in- person communication, telemarketing) provided that the cumulative gross receipts from sales to consumers referred to the seller by all such residents exceed $10,000 in the preceding twelve months. [R.C. 5741.01(I)(2)(g)] This provision will herein after be referred to as “click-through” nexus. Additionally, even if a seller does not have substantial nexus with this state, the seller and and any affiliate person of such seller must register with the tax commissioner before selling
requires such persons to obtain a registration through the Ohio Business Gateway as de- scribed below in Issue XI. Services means all services, not just taxable services enumerated
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in R.C. 5739.01(B)(3) to (12). Once registered, a seller is required to file tax returns, even if the seller has no sales for the reporting period. II. What activities by or on behalf of an out-of-state seller will create nexus in this state?
an out-of-state seller has nexus in this state when the seller directly or through
tivities to establish or maintain the market for the out-of-state seller. Such others can be organizations or individuals who are agents, representatives, independent contractors, brokers or any person acting on behalf of the out-of-state seller. It is irrelevant whether or not such others reside in Ohio. Activities which create nex- us, whether by the out-of-state seller or others acting on the seller’s behalf, in- clude, but are not limited to, the following:
harbor that may apply to this activity);
state including, but not limited to, engineering assistance, design service, quality control, product inspections, or similar services;
resolve customer complaints;
vides a special safe harbor that may apply to this activity);
agreements; or
tential customers to the seller if the cumulative gross receipts from sales (and not the commissions) are greater than $10,000.
are not employees of the out-of-state seller or an affiliated person of the out-of- state seller who in their professional capacity perform their customary services in this state for an out-of-state seller shall not be considered to be conducting activi- ties to establish or maintain the market on behalf of the out-of-state seller. This
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provision only applies if the activity done on behalf of the out-of-state seller or an affiliated person of the out-of-state seller and the seller is not part of an activity listed in II.A, above. III. How does a person overcome the presumptions set forth in Issue II? A seller is presumed to have substantial nexus with Ohio if they perform the activities de- scribed in Issue I, but a seller may rebut these presumptions. “Click-Through” Nexus (found in R.C. 5741.01(I)(2)(g)) A seller may rebut the presumption of substantial nexus by evidencing that each resident en- gaged by the seller did not engage in any activity in Ohio during the preceding twelve months that was significantly associated with the seller’s ability to establish or maintain the seller’s market in Ohio. This may include written statements from all of the Ohio residents with whom the seller has an agreement. The written statement should be provided and obtained in good faith and state that the resident did not engage in any solicitation in Ohio on behalf of the seller in the preceding twelve months. All Other Nexus Provisions A seller may rebut the presumption of substantial nexus by demonstrating that the activities conducted by the seller or on the seller’s behalf are not significantly associated with the sell- er’s ability to establish or maintain the seller’s market in Ohio. IV. Are there any safe harbor activities where nexus might exist but where the Depart- ment of Taxation will not require an out-of-state seller to collect and remit Ohio’s use tax from its customers in this state? If the out-of-state seller’s only contacts with this state are limited to one or more of the contacts listed below, the Department of Taxation will not require the out-of-state seller to collect and remit Ohio’s use tax from its customers in this state. Except for Issue IV.A. and B., below, these safe harbors are not mandated by statutory or case law; rather, these safe harbors are provided for purposes of administrative convenience.
business of telemarketing in this state that is engaged by the seller exclusively for the purpose of solicitation of customers in other states;
printer with which the seller has contracted for printing and that consists of the final printed product, property that becomes a part of the final printed product, or copy from which the final printed product is produced;
no more than seven days, which need not be consecutive, in a calendar year, and the seller has no more than $25,000 in gross sales in this state in that same calen-
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dar year. Or, for purposes of click-through nexus, the out-of-state seller has tan- gible personal property temporarily in this state for no more than seven days, which need not be consecutive, in a calendar year, and the seller has no more than $10,000 in gross receipts from sales in this state in that same calendar year;
provide, from or at a location in this state, any technical assistance or other sup- port;
equipment in this state, unless the equipment itself is owned, leased or rented by the out-of-state seller or any member of a controlled group of which the seller is a part;
services;
atives in their official capacity;
lawsuit in a court of law in this state;
this state for its employees (but not board of director’s meetings);
media;
state;
ties in this state in a calendar year, and the seller has no more than $25,000 in gross sales in this state in that same calendar year. Or, for purposes of click- through nexus, the out-of-state seller has no more than seven instances of nexus creating activities in this state in a calendar year, and the seller has no more than $10,000 in gross receipts from sales in this state in the previous twelve months;
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exhibitor provided that the out-of-state seller has no more than seven instances of nexus creating activities in this state in a calendar year and does not have gross sales in this state in excess of $25,000 in that same calendar year. Or, for purpos- es of click-through nexus, the out-of-state seller participates in one or more trade shows in this state as an exhibitor provided that the out-of-state seller has no more than seven instances of nexus creating activities in this state in a calendar year and does not have gross receipts from sales in this state in excess of $10,000 in that same calendar year. V. Are these standards prospective or retroactive? This information release applies nexus standards established by the U.S. Supreme Court from 1939 to the present. Decisions of the U.S. Supreme Court are the controlling interpretation of federal law and generally will be given full retroactive effect to all cases and years still open. Accordingly, the Department of Taxation will enforce the standards described within this in- formation release, with the exception of the safe harbor activities enumerated in Issue IV of this information release, for all open cases and years. The changes regarding affiliate nexus as well as the bright-line standard of $10,000 in gross receipts described for “click-through” nexus under Issue I were effective beginning on July 1, 2015. VI. When is this information release effective? Some of the limitations enumerated in Issue IV of this information release may not be man- dated by Ohio law or U.S. Supreme Court cases. Thus, while Ohio may have a basis for as- serting nexus in these instances, the Department of Taxation will not assert nexus if a taxpay- er's contacts are limited to those safe harbor activities described in Issue IV of this infor- mation release at any time after the first issuance of this release or the revision of this release. The Department of Taxation reserves the right to modify and reissue this information release in order to reflect judicial decisions or to clarify the Department’s position. VII. What are the use tax registration and filing requirements for an out-of-state seller sub- ject to Ohio's taxing jurisdiction? An out-of-state seller which falls within this state’s taxing jurisdiction, and makes taxable sales, will be required to obtain a seller’s use tax permit, collect tax on taxable sales made to consumers in this state, and file returns and remit the appropriate tax. Information about reg- istration and permits can be obtained by calling 1-888-405-4039, or from the Department’s website by visiting tax.ohio.gov. The duty to obtain a seller’s use tax permit, collect tax on taxable sales made to consumers in this state, and file returns and remit the appropriate tax commences with the month that in- cludes the day of the contact that establishes a regular presence and applies prospectively from that date.
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Example On May 4th, 2013, an out-of-state seller first enters Ohio to engage in nexus-creating activities that are protected by the safe harbor provisions in Issue IV. On September 8th, 2013, the out-of-state seller’s activities exceed the safe harbor provisions in Issue
lect tax on taxable sales made to consumers in this state, and file returns and remit the appropriate tax beginning on September 8th, 2013, and would include all sales made for the entire month of September 2013. Example On October 1, 2015, an out-of-state seller enters into an agreement with a resident
from sales for referring potential customers to the seller by providing a link on the Ohio resident’s blog. The amount of Ohio gross receipts of the out-of-state seller equals $75,000 ($10,000 of which is related to the resident receiving a commission) on December 15, 2015. The out-of-state seller would be required to
this state, and file returns and remit the appropriate tax beginning on December 15, 2015, and would include all sales made for the entire month of December 2015.
When an out-of-state seller no longer has nexus creating contacts, the out-of-state seller may cancel its registration and stop collecting and remitting use tax on its sales in this state. However, if the out-of-state seller reestablishes nexus by engaging in any nexus creating con- tacts within twelve months of its registration cancellation, the Department of Taxation will presume that the new contact remains part of a regular presence in this state. Thus, the out-
be required to reinstate its registration and pay tax on all its sales in this state during the inter- im period, and continue collecting tax on a prospective basis. Example An out-of-state seller has had nexus with this state because it maintains a sales office, and has sales representatives in this state. On June 15th, 2013, the out-of-state seller closes its office in this state and ceases sending salespersons into this state. Conse- quently, the out-of-state seller cancels its registration effective June 15th, 2013. Find- ing that its Ohio sales have been seriously harmed by the out-of-state seller’s lack of presence, the out-of-state seller begins sending representatives back into this state on December 1st, 2013. The Department of Taxation will presume that the December 1st, 2013, contacts remain part of a regular presence within this state. The out-of-state seller’s registration will be reinstated and the out-of-state seller will be required to
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pay tax on all its sales into this state for the period June 15th to December 1st, 2013, as well as collect Ohio use tax on its sales in this state on a going-forward basis. IX. Can an unregistered out-of-state seller subject to these nexus guidelines request a Vol- untary Disclosure Agreement? An out-of-state seller with a filing responsibility under these nexus guidelines but not yet reg- istered with or contacted by the Department of Taxation with respect to audit or criminal in- vestigation is eligible to request a Voluntary Disclosure Agreement (VDA). The VDA guide- lines are available on the Department’s website by visiting www.tax.ohio.gov or by calling the Department at 1-888-405-4039. X. Can an out-of-state seller lacking nexus voluntarily register to collect and remit Ohio’s use tax from its customers in this state? An out-of-state seller lacking nexus may enter into an agreement to collect use tax on its sales made to customers in this state. This agreement may provide that the out-of-state seller is not
even though the out-of-state seller may cancel its registration at any time, the out-of-state seller remains subject to audit for the periods during which the seller was registered or was collecting tax. XI. I (or my affiliate) is selling or leasing tangible personal property or services to a state agency. Even though a seller or its affiliates may not have substantial nexus with Ohio, sellers or their affiliates making retail sales of tangible personal property or services to a state agencyi are required by the Ohio Revised Code to register with the tax commissioner by obtaining a sell- er’s license. The seller may obtain a license through the Ohio Business Gateway (OBG). Note: Businesses must first establish an account with OBG before using it to request a seller's license. If you have any questions regarding this matter, please contact the Department at 1-888-405-4039 (Ohio Relay Services for the Hearing or Speech Impaired: 1-800-750-0750).
i “[S]tate agency,” means every organized body, office, or agency established by the laws of the state for the exercise of any func-tion of state government. "State agency" does not include the nonprofit corporation formed under section 187.01 of the Revised
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ST 1999-04 - On-line Services and Internet Access - January, 1999; Updated December, 2015; Updated September, 2016
This Information Release is intended to enunciate the application of Ohio sales and use tax to the provision of Internet Access and On-line Services. The update is a result of the recent addition (contained in House Bill (H.B.) 466 of the 131st General Assembly) of “ digital advertising services” to the definition of “ personal and professional services” for purposes of “ automatic data processing” , “ computer services” and “ electronic information services” . The effective date of this change is December 1, 2016. Section 5739.01(B)(3)(e) of the Ohio Revised Code provides: "(B) 'Sale' and 'selling' include all of the following transactions for a consideration in any manner, whether absolutely or conditionally, whether for a price or rental, in money or by exchange, and by any means whatsoever: * * * (3) All transactions by which: * * * (e) Automatic data processing, computer services, or electronic information services are or are to be provided for use in business when the true object of the transaction is the receipt by the consumer of automatic data processing, computer services, or electronic information services rather than the receipt of personal or professional services to which automatic data processing, computer services, or electronic information services are incidental orInformation Release
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ST 2010-02 - Sales and Use Tax: Bundled Transactions – Issued September 2010
The purpose of this Information Release is to explain the application of Ohio sales and use tax to “ bundled transactions” as those are defined in Ohio Revised Code (“ R.C.” ) section 5739.012. That section provides: (A) As used in this section: (1) "Bundled transaction" means the retail sale of two or more products, except real property and services to real property, where the products are otherwise distinct and identifiable products and are sold for one non-itemized price. "Bundled transaction" does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the consumer of the products included in the transaction. As used in division (A)(1) of this section: (a) "Distinct and identifiable products" does not include any of the following: (i) Packaging, including containers, boxes, sacks, bags, and bottles, and packaging materials, including wrapping, labels, tags, and instruction guides that accompany the retail sale of the products and are incidental or immaterial to the retail sale thereof; (ii) A product provided free of charge with the required purchase of another product. A product is provided free of charge if the sales price of the product purchased does not vary depending on the inclusion of the product provided free of charge. (iii) Items included in the definition of "price" under division (H) of section 5739.01 of the Revised Code. (b) "One non-itemized price" does not include a price that is separately identified by product on binding sales or other supporting sales-related documents made available to the consumer in paper or electronic form, including, but not limited to, an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list. (2) "De minimis" means the vendor's or seller's purchase price or sales price of taxable products is ten per cent or less of the total purchase price or sales price of bundled products. Vendors and sellers shall use either the purchase price or the sales price of the products to determine if the taxable products are de minimis, and shall use the full term of a service contract to determine if the taxable products are deInformation Release
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ST 1993-01 - Employment Placement Service - April 1993, Revised November 2012
On January 1, 1993, employment placement service became a transaction subject to Ohio sales
“employment placement service.”) That service is defined in Section 5739.01 (KK)) as “locating
position.” This information release provides guidance regarding the application of sales tax to the provision of employment placement services. The November, 2012 revision does not reflect any change in the Department’s policy regarding this service. It merely addresses H.B. 508’s elimination of the service vendor license. The following services are taxable employment placement services: Securing employment for a person; Finding an employee for an employer; or Locating a position for a person. Here are some frequently asked questions and answers regarding licensing and tax collection. 1) If I provide an employment placement service, must I have a license and if so what type
license from the county auditor’s office in the county where its business is located. Vendor’s licenses can also be obtained via the Ohio Business Gateway at business.ohio.gov. 2) If my business is headquartered in another state but I provide employment placement service at locations in Ohio, must I collect Ohio tax?
the service is provided in Ohio. To register, go to the Ohio Business Gateway at business.ohio.gov. 3) Is my need to register based upon the total amount of sales which I make?
4) When is the tax on employment placement service to be reported? The tax on the service must be reported on the return covering the period when the sale is made. A sale is made when performance of the service is provided or when the price is paid, whichever is first. If acceptance of an individual and payment of the fee is contingent upon the results of a trial period evaluation, the tax on the service is not due until the individual is accepted. If the fee
is due upon acceptance without such contingency, but may be fully refunded within a specified time after placement, the tax is due when the individual is placed or the fee is paid, whichever is first. 6) What price should I use in calculating the amount of tax to be charged? The total amount billed to the client for the employment service is the “price,” even though you may choose to separate certain reimbursable costs, such as travel expenses. 7) What rate of tax should be charged? The rate of taxation for a service depends upon the county where the client receives the benefit
employee resides for an employee-client. The proper sales tax rate can be found on the Department’s website at http://tax.ohio.gov/online_services/thefinder.stm. If you provide a placement to an employer-client for locations in more than one county, you will need to separate the placement charges for each county and bill tax based on the appropriate rate for each county involved. 8) How will I report the tax collected on this service? Sales tax returns must be filed electronically via the Ohio Business Gateway at business.ohio.gov. A return must be filed, even if you made no sales during the period to be reported. You are entitled to a 3/4 of 1% (.0075) discount on the tax to be paid, if tax returns are timely filed with full payment of the amount due. Vendors who fail to file returns on time or who do not remit the amount due with filed returns are subject to a late filing charge of $50 or 10% of the tax due, whichever is greater. If assessed, there is a 50% penalty on any tax collected that was not paid. Failing to remit sales tax collected is a fourth degree felony. 9) Am I entitled to claim exemption on the purchase of any other taxable service? If you purchase an “employment placement service” for the purpose of reselling that service to a client, you may claim “resale” from that service supplier. However, you must properly charge tax on the total price of the employment placement service you provide. Example: Company A, an employment placement service provider, has a client looking for an
fee if B’s candidate is hired. Company A may claim exemption from tax on its transaction with Company B based on its resale of B’s service. However, Company A must collect tax on the entire charge for the placement.
10) If an employment placement service is provided to a client that claims to be nontaxable, what proof does the law require? If the client is never subject to tax, such as the U.S. government; the state of Ohio; or a city, county or other political subdivision of this state, a copy of the sales invoice is all that is needed, provided that the name and address of the client are clearly identified. If the employer-client is claiming that the use of the service is not subject to tax or that it is a nonprofit charitable organization, a qualifying state veterans’ organization headquarters, or an
exemption certificate from the client and keep it in your files. If the client claims to hold a direct payment authority with Ohio, the client must furnish evidence of the authority. (A direct payment authority number is always 98-six digits.) Note: An employee-client cannot claim exemption based on his or her placement with an exempt
11) What are my responsibilities if the consumer refuses to pay tax? As a provider of a taxable service, you are responsible for charging, collecting and remitting tax. If the purchaser of your service has no valid reason for not paying tax, you may pursue collection as you would any unpaid debt. R.C. 5739.26 and 5741.19 state, “ No consumer shall refuse to pay the full and exact tax as required by ...[statute], or refuse to comply with such sections and the rules and regulations of the tax commissioner, or present to the vendor a false certificate indicating that the sale is not subject to tax.” EXAMPLES OF EMPLOYMENT PLACEMENT TRANSACTIONS AND THEIR TAX TREATMENT: FEE PAID BY THE EMPLOYEE: EXAMPLE #1 Ohio or Out-of-State Employer Ohio Resident Ohio Job The fee paid by the employee is taxable at the rate in effect in the county where the employee lives when the job is found because the benefit of the service is received there. EXAMPLE #2 Ohio or Out-of-State Employer Out-of-State Resident Ohio Job The fee paid by the employee is not taxable because the out-of-state resident is considered to have received the benefit of the employment service in the other state.
EXAMPLE #3 Ohio or Out-of-State Employer Ohio Resident Out-of-State Job As with the analysis of Example 1, the fee paid by the employee is taxable at the rate in effect in the county where the employee lives when the job is found because the benefit of the service is received there. FEE PAID BY EMPLOYER: EXAMPLE #4 Ohio or Out-of-State Employer Ohio Resident Ohio Job This transaction is taxable at the rate in effect in the county where the employee’s post of duty is
EXAMPLE #5 Ohio or Out-of-State Employer Out-of-State Resident Ohio Job The analysis is the same as Example #4 EXAMPLE #6 Ohio or Out-of-State Employer Ohio Resident Out-of-State Job The fee paid for this job placement is not taxable because the benefit of the service received by the employer is not in Ohio. If the employer pays the employment placement provider an annual retainer, that retainer is subject to tax since the payment of the retainer anticipates the rendering of a taxable service. If in-state and out-of-state placements occur, that portion of the retainer which applies to Ohio placements is taxable and can be calculated based upon the ratio of other fees generated by the service provider for Ohio placement to all placement fees generated by the service provider. If the other fees are not related to the salary/wage of the positions filled, the allocation can be based upon the number of Ohio placements to all placements. If you have any questions regarding this matter, you should call us at 1-888-405-4039. OHIO RELAY SERVICES FOR THE HEARING OR SPEECH IMPAIRED Phone: 1-800-750-0750
ST 1993-08 - Employment Service - Issued September, 1993; Revised October, 1993; Revised December, 2000; Revised May, 2006, Revised February, 2007
This release supersedes all previous versions of information release ST 1993-08 addressing the specifically enumerated taxable service of “ employment service.” The purpose of this release is to clarify the law with regard to employment service. Specifically, this revised release as of February, 2007 provides information on the changes to the definition of “ employment service” found in R.C. 5739.01(JJ) as amended by Sub. H.B. 293, effective January 1, 2007. Employment service became a transaction subject to sales and use tax on January 1, 1993. Later, on July 1, 1993, changes were made in the statute as to what is an employment service. Since that time, decisions made by the Ohio Board of Tax Appeals and the Ohio Supreme Court have interpreted the definition of this service. To help you understand these developments and how they may affect you as a potential provider or consumer of employment service, the Department of Taxation has prepared this information release. If after carefully reading it you have any questions or require more specific assistance on your responsibility as a vendor or consumer of this service, please contact any office of the Department of Taxation. Section 5739.01(B)(3)(k) of the Ohio Revised Code (“ R.C.” ) includes within the definition of a “ sale” and “ selling” the providing of employment service. As amended by Sub. H.B. 293 of the 126th Ohio General Assembly, effective January 1, 2007, employment service is defined in R.C. 5739.01(JJ) as: . . . providing or supplying personnel, on a temporary or long-term basis, to perform work or labor under the supervision or control of another, when the personnel so provided or supplied receive their wages, salary, or other compensation from the provider or supplier of the employment service or from a third party that provided or supplied the personnel to the provider or supplier.. “ Employment service” does not include: (1) Acting as a contractor or subcontractor, where the personnel performing the work are not under the direct control of the purchaser. (2) Medical and health care services. (3) Supplying personnel to a purchaser pursuant to a contract of at least one year between the service provider and the purchaser that specifies that each employee covered under the contract is assigned to the purchaser on a permanent basis. (4) Transactions between members of an affiliated group, as defined in division (B)(3)(e) of this section. (5) Transactions where the personnel so provided or supplied by a provider or supplier to a purchaser of an employment service are then provided or supplied by that purchaser to a third party as an employment service, except “ employment service” does include the transaction between that purchaser and the third party. Exclusions A: R.C. 5739.01(JJ)(1) “ Employment service” does not include “ [a]cting as a contractor or subcontractor, where the personnel performing the work are not under the direct control of the purchaser.” To determine whether a transaction would qualify for this exclusion it needs to be determined whether the consumer is purchasing qualified personnel to work at the consumer’ s direction or whether the consumer is purchasing the accomplishment of some specific task which the provider is obligated to perform. The key is the true object of a particular transaction. If the true object of the consumer is to receive personnel to work at the consumer’ s direction, the transaction is an employment service. On the other hand, if the true object of the consumer is to enter into a contact for a completed task or project, it is not an employment service. While it is true that both situations require work or labor, the difference between them depends on the express or implied responsibilities of the provider of the service as | State Agencies|Online ServicesInformation Release
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ST 2003-01 - Direct Payment Authority Program - March, 2016 This Information Release supersedes Information Release ST 2003-01 – December, 2004. Ohio Revised Code (R.C.) 5739.031 allows the Tax Commissioner to issue a direct payment permit that authorizes the permit holder to pay sales and use taxes directly to the state and waives the collection of such tax by the vendor or seller. “Direct payment authority” is a privilege, which can be granted to a business to promote the efficient administration of Ohio’s sales and use tax laws. Effective May 2015, the Department of Taxation (“Department") implemented an improved “direct payment authority” sales and use tax program. This program has several key features:
Each direct payment permit holder will enter into an agreement that sets forth compliance and record keeping requirements, revocation procedures and an expectation that the permit holder will make every reasonable effort to determine the taxability of purchases accurately to avoid underpayment or overpayment of tax.
Periodically (typically every four (4) years), the Department will review and validate the business’ continuing need for the direct payment permit and their compliance with the procedures as outlined within the direct payment agreement.
A complete listing of all direct payment permit holders is included within the "Active
Vendor Licenses" file on the Department’s website and is updated weekly.
Direct payment authority will be granted to each taxpayer that has entered into an
agreement with the tax credit authority under R.C. 122.175, pertaining to an eligible computer data center. The following question and answer format provides general information, describes the application process, sets forth compliance requirements, and explains how direct payment authority can be relinquished or revoked. General Information
R.C. 5739.031 authorizes the Tax Commissioner to allow direct payment permit holders to forego paying state and local sales and use tax at the time they make certain purchases. These direct payment permit holders must accrue and pay the state and local sales and use tax directly to the Department.
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A direct payment permit holder is a taxpayer whom the Tax Commissioner has authorized
to make direct payment of state and local sales and use tax to the Department on certain taxable purchases rather than paying the tax to the seller.
Chapter 5741 imposes on all Ohio businesses the requirement to pay Ohio “use tax” when the business purchases taxable goods and/or services from a seller/service provider that does not collect the Ohio and local sales tax. Use tax is also due when the proper amount of sales tax has not been paid to an in-state vendor, seller or service provider. The use tax applies to purchases of the same goods and services that are subject to the sales tax.
A manufacturer, contractor or other consumer that purchases goods or services under circumstances normally making it impossible at the time of the purchase to determine if the goods or services are exempt from taxation, Or
A consumer (i) whose number of purchase transactions of goods and services exceed five thousand annually or (ii) whose Ohio state sales and use tax paid on these purchases exceeds $250,000 annually.
The Department frequently receives requests from vendors to confirm that a taxpayer has direct payment authority. Placing the list on the website allows vendors to self-serve and
R.C. 5703.21 permits the Department to disclose the following information:
The name and address of the business,
The business’s direct payment permit number, and
The effective date of the direct payment authority. Application Process
A business desiring direct payment authority must complete an application form http://www.tax.ohio.gov/portals/0/forms/sales_and_use/Generic/ST_ST900_FI.pdf.
written direct payment agreement required?
The business must execute a written direct payment agreement with the Department, in which the business must state it understands and agrees to fulfill the duties and responsibilities commensurate with direct payment authority.
The business must also provide a written description of the business’s accounting system and demonstrate how the accounting system will record and reflect the proper amount of sales and use tax due.
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A detailed diagram/schematic of the operations must be provided.
Information necessary to complete the Taxpayer Information Report and Responsible Party Questionnaire, in particular the names and home addresses of the corporate
information may be used to generate a responsible party assessment against the responsible party or parties.
application form?
This Department’s Audit Division will review all applications and will assist qualified applicants in completing a direct payment agreement. Within 120 days of receiving the application, the Department will notify the applicant of the approval or the denial of direct payment authority, or may schedule a conference with the applicant to obtain more
approval or denial within sixty days after the conference.
You will be notified by the Department in writing.
appeal?
Compliance Requirements
A direct payment permit holder must furnish either (i) a copy of the direct payment authorization or (ii) the name and address of the direct payment permit holder, the direct payment permit number (8 digit number beginning with 98), and the date the Tax Commissioner issued the direct payment authority, to each supplier or seller from whom the direct payment permit holder purchases tangible personal property or services, subject to exclusions within the direct payment agreement.
A direct payment permit holder does not have to provide any exemption certificates to its suppliers and does not have to pay any Ohio sales and use tax to its suppliers who receive either (i) a copy of the direct payment authority or (ii) the name and address of the direct payment permit holder, the direct payment permit number, and the date the Tax Commissioner issued the direct payment authority.
R.C. 5739.01(B)(5) explains that the Ohio sales and use tax does not apply to construction
repair, modernization, or new construction of real property under a construction contract. Because such contracts are not subject to Ohio sales and use tax, a direct payment permit holder must not claim, nor should a construction contractor accept, direct payment authority for any construction contract work performed in connection with real property,
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unless certified by the contractee that the property will retain its tangible status as a business fixture after installation.
If a direct payment permit holder has a contract with a construction contractor and certifies that a portion of a construction contract relates to personal property which remains as personal property after installation, then R.C. 5739.03(C) allows the direct payment permit holder to claim, and the construction contractor to accept, the direct payment authority with respect to the certified tangible personal property portion of the contract.
that the business has direct payment authority?
If the direct payment permit holder provides to the supplier/seller either (i) a copy of the direct payment authority or (ii) the name and address of the direct payment permit holder, the direct payment permit number, and the date the Tax Commissioner issued the direct payment authority, then the supplier/seller should not collect any Ohio or local sales and use tax from the customer. However, the supplier/seller must maintain adequate records which detail the amount involved and the identity of the holder of the direct payment authority (see (i) and (ii) above). The supplier/seller is not required to confirm with the Department that the customer possesses direct payment authority.
A direct payment permit holder must maintain all records that are necessary for a determination of the correct tax liability. The direct payment permit holder must make the required records available to the Department upon request as required under R.C. 5739.031(D).
Required records include, but are not limited to, purchase invoices, bills of lading, asset ledgers, project folders and authorizations, depreciation schedules, transfer journals, accounts payable ledgers, and any other such primary and secondary records and documents created in the course of business. The permit holder must maintain records in an electronic format and, when under audit, provide the electronic records to the
sampling for expenses.
A taxpayer granted a direct payment authority must maintain a record keeping system in a manner that allows the Department to efficiently and effectively identify the values upon which tax is reported and the amount of tax reported thereon. In addition, whenever a taxpayer has a direct payment authority covering more than one facility, the taxpayer must keep its records in a manner that allows the Department to identify the purchases and tax reported for each facility.
Depending upon the extent of the direct payment permit holder’s purchases, some direct payment permit holders file monthly returns while others file quarterly returns. When a business receives its direct payment authority, the Department will inform the business if it is a monthly or quarterly filer.
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All returns are to be received by the twenty-third of the month following the close of the filing period (either monthly or quarterly).
A direct payment permit holder remits the tax due with the return. Some direct payment permit holders are required to make payment by electronic funds transfer (see R.C. 5739.032). The Department will notify those direct payment permit holders who must pay by electronic funds transfer.
Whenever the direct payment permit holder files its return, the direct payment permit holder must calculate and remit the local sales and use tax based upon the rate imposed by the local tax jurisdiction where the direct payment permit holder receives the tangible personal property or service. If the direct payment permit holder subsequently moves tangible personal property to another part of the state having a higher combined state and local sales and use tax rate, then the direct payment permit holder must pay the additional local sales and use tax.
return?
A direct payment permit holder may elect not to claim its direct payment authority status in connection with the purchase of certain types of transactions. Examples of such transactions include purchases of taxable lodging, meals, and beverages, the washing and waxing of motor vehicles, purchases of telecommunications services, and purchases made with a purchasing card. The transactions for which the permit holder elects not to use the direct payment authority must be indicated in the direct payment agreement.
If only the business name changes, the direct payment permit holder must notify the Department’s Audit Division (by certified mail) of the name change within thirty days after the effective date of the change.
If there is a change in the legal entity (e.g., a business converts from a partnership to a corporation) but the taxpayer’s business and operations remain the same, the new entity must submit a written request to the Department’s Audit Division for a continuation of direct payment authority status. This request must be sent to the Department (by certified mail) thirty days in advance of the status change and must set forth the name of the old entity and the name of the new entity, the effective date of the change and the permit number issued to the non-surviving entity. Generally, the Department will issue new direct payment authority and a new permit number to the surviving entity. The new entity will also need to sign a new agreement.
If the new entity receives new direct payment authority with a new permit number, the new entity must provide its supplier/sellers with notification of the new permit number. Of course, the new entity must report its taxable purchases under its new direct payment permit number.
If the operations change (including, but not limited to, new line of operations, change in accounting systems, change in responsible party, or any other change causing the method
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agreement to reflect the new information and forwarding it to the Department thirty (30) days in advance of said change.
tax?
If too much tax was paid through the direct payment account, the Department shall refund the overpayment plus any applicable interest.
If too little tax was paid, the balance of any tax due plus applicable penalty and interest must be paid in full.
If tax was paid erroneously to the vendor/seller, a comprehensive refund claim must be filed with the Department within the statute of limitations. The refund claim is subject to review and verification by the Department. Applicable interest will be included with a final approved claim.
During the term of an agreement under R.C. 122.175, each taxpayer subject to the agreement shall submit to the Tax Commissioner a return that shows the amount of computer data center equipment purchased for use at the eligible computer data center, the amount of tangible personal property and taxable services other than computer data center equipment purchased for use at the eligible computer data center, the amount of tax under R.C. 5739 or 5741 that would be due in the absence of the agreement under this under R.C. 122.175, the exemption percentage for computer data center equipment specified in the agreement, and the amount of tax due under R.C. 5739 or 5741 as a result of the agreement under R.C. 122.175. Each such taxpayer shall pay the tax shown on the return to be due in the manner and at the times as may be further prescribed by the Tax Commissioner. Each such taxpayer shall include a copy of the director of development services' certificate of verification issued under division (E)(6) of R.C. 122.175. Failure to submit a copy of the certificate with the return will not invalidate the claim for exemption if the taxpayer submits a copy of the certificate to the Tax Commissioner within sixty days after the Tax Commissioner requests it. Relinquishing or Revoking Direct Payment Permit Authority
A direct payment permit holder can relinquish (give back) a direct payment permit by informing the Department’s Audit Division (by certified mail) of the effective date of
which the cancellation is requested.
The Tax Commissioner may revoke (cancel) the direct payment permit if, upon audit, it is determined that, for the audit period, less than ninety (90%) percent of the tax owed was paid unless the Tax Commissioner determines there is a legitimate legal dispute over the imposition of the tax. The Tax Commissioner may also revoke direct payment authority for
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responsible party information, not filing returns accurately and on a timely basis, not remitting the tax due, not updating the procedures as required, and not completing audits using statistical sampling for expenses when determined reasonable. Generally, the business will then have to wait at least three (3) years before applying for another direct payment permit.
Send a notification by certified mail to the Ohio Department of Taxation, Audit Division, P.O. Box 183014, Columbus, Ohio, 43218-3014. Cancellation is effective as of the last day
Written notification shall be sent by the business to all vendors and sellers from whom purchases of tangible personal property or services are made, prior to or at the time of the first purchase after such cancellation. Such notice must be sent by first class mail and the permit holder must maintain evidence of such notification for subsequent examination by the Tax Commissioner. Failure to notify vendors or sellers from whom purchases of tangible personal property or services shall be considered as a refusal to pay the tax by the person required to issue such notice.
In the event the direct payment authority is revoked and the permit holder continues to do business, provisions of R.C. 5739.03, 5741.04, and 5741.12 shall immediately apply to all purchases made subsequent to such revocation.
Written notification shall be sent by the business to all vendors and sellers from whom purchases of tangible personal property or services are made prior to or at the time of the first purchase after such cancellation. Such notice must be sent by first class mail and the permit holder must maintain evidence of such notification for subsequent examination by the Tax Commissioner. Failure to notify vendors or sellers from whom purchases of tangible personal property or services shall be considered as a refusal to pay the tax by the person required to issue such notice. If you have additional questions, contact the Audit Division at 1-614-466-8099. OHIO RELAY SERVICES FOR THE HEARING OR SPEECH IMPAIRED Telephone: 1-800-750-0750
TAXPAYER NAME AUDIT PROJECT PLAN AUDIT PERIOD TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Preliminary Preliminary meeting with tax representative √ Meet with taxpayer √ √ Choose audit period and stat sample period √ √ Tour facility √ Follow-up meeting √ Pre-Audit Department reviews chart of accounts and determines accounts to be stratified √ Taxpayer reviews target accounts as presented √ Department and taxpayer meet to agree on accounts to be stratified √ √ Draft participatory audit agreement √ Administration agrees with participatory agreement √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Taxpayer agrees with and signs participatory agreement √ Draft timeline √ Administration agrees with timeline √ Taxpayer agrees on timeline √ Audit Capital
available for review √ Capital records verified to the depreciation schedule √ Department and taxpayer agrees
review √ √ Department determines taxability
√ Taxpayer determines taxability of capital records as assigned √ Department reviews taxpayers findings of capital recommendations √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Taxpayer reviews departments findings of capital recommendations √ First meeting to review findings and address issues on capital √ √ Taxpayer to research additional evidence to support their standings √ Department to review court cases and confer with administration √ Second meeting to review findings and address issues on capital √ √ Taxpayer to research additional evidence to support their standings √ Department to review court cases and confer with administration √ Final meeting to review findings and address issues on capital √ √ Expense samples
for the sample period √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS
expense account total verification √ AP download verified to GL totals √ √ Tax Department to perform data screening, remove credits and establish the target population √ Create Statistical Methodology Letter √ Sign Statistical Methodology Letter of Agreement √ √ Computer Audit Group to create stratum ranges, calculate sample size per stratum range, and generate any required pull lists (i.e.: stat sample, block sample, comprehensively reviewed items) √ Produce stat sample pull list invoices for review √ Both parties agree upon distribution of stat sample pull list invoices √ √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Department reviews and determines taxability of assigned stat sample pull list invoices √ Taxpayer reviews and determines taxability of assigned stat sample pull list invoices √ Department reviews taxpayer's determination of stat sampled expense tax liability √ Taxpayer reviews department's determinations of stat sampled expense tax liability √ First meeting to review findings and address issues on stat sampled expense tax liability √ √ Taxpayer to research additional evidence to support their standings √ Department to review court cases and confer with administration √ Second meeting to review findings and address issues on stat sampled expense tax liability √ √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Taxpayer to research additional evidence to support their standings √ Department to review court cases and confer with administration √ Final meeting to review findings and address issues on stat sampled expense tax liability √ √ Comprehensive expenses Both parties agree upon distribution of block sample and/or comprehensively reviewed invoices √ √ Department reviews and determines taxability of assigned block sample and/or comprehensively reviewed invoices √ Taxpayer reviews and determines taxability of assigned block sample and/or comprehensively reviewed invoices √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Department reviews taxpayer's determination of block sample and/or comprehensively reviewed invoices √ Taxpayer reviews department's determinations of block sample and/or comprehensively reviewed invoices √ First meeting to review findings and address issues on block sample and/or comprehensively reviewed invoices √ √ Taxpayer to research additional evidence to support their standings √ Department to review court cases and confer with administration √ Second meeting to review findings and address issues on block sample and/or comprehensively reviewed invoices √ √ Taxpayer to research additional evidence to support their standings √
TASK DEPARTMENT'S RESPONSIBILITY TAXPAYER'S RESPONSIBILITY ANTICIPATED COMPLETION ACTUAL COMPLETION STATUS Department to review court cases and confer with administration √ Final meeting to review findings and address issues on block sample and/or comprehensively reviewed invoices √ √ Calculate tax liability and interest
received √ Schedule final audit check out √ √ Sign all required forms apply payment if received √ √ Post-Audit Agent finalizes remarks, audit assembly √ Submit audit to Audit Manager √ Audit submitted to Audit Review √
Revised 10/15 1
SALES AND USE TAX PARTICIPATORY AUDIT AGREEMENT
The Parties to this agreement are the Ohio Department of Taxation (herein after referred to as the Department) and Company Name (herein after referred to as the Taxpayer). The Parties acknowledge that the purpose of this agreement is to establish the basis for conducting a sales and use tax participatory audit covering the period Audit Period Begin through Audit Period End and to provide guidance for improved compliance for periods subsequent to this audit period. The Parties agree to the following:
hereby incorporated into this agreement and any subsequent amendments to such audit project plan) and determine unreported sales and/or use tax liability due for the audit period by the dates prescribed in the written audit project plan and make available all computations and records for verification by the Department.
determine unreported sales and/or use tax liability due for the audit period by the dates prescribed in the written audit project plan and make available all computations and records reviewed for review by the Taxpayer.
audit findings for the audit period plus any applicable pre-assessment interest. Pre- assessment interest will be calculated taking into account the dates when payments of tax have been made by the Taxpayer for such audit period. If the Taxpayer is in agreement with the proposed audit findings and pays the full amount due within the prescribed time period, an assessment will not be issued. If the Taxpayer is not in agreement with the proposed audit findings and the full amount due is not paid within the prescribed time period, the Department shall issue an assessment for such tax liability and pre-assessment interest. The execution of this agreement does not waive the Taxpayer’s right to appeal the assessment. No penalty will be applied to the Department’s proposed audit findings as long as the Taxpayer in good faith makes a reasonable effort to follow the attached signed written audit project plan incorporated herein or as subsequently amended. If the Taxpayer does not, in good faith, make a reasonable effort to follow the written audit project plan, penalties may be applied. If penalties are applied an assessment will be issued and any payments made by the Taxpayer will be credited. If the Department’s proposed audit findings reflect a net refund for this audit period, a refund claim in the amount of the total credited tax payments must be filed by the Taxpayer in order to receive the net amount of the refund due.
and will provide procedural guidance as the Taxpayer requires or requests to properly conduct this audit. These contacts will be documented in writing and the progress reviews will become part of the audit file.
compliance for periods subsequent to this audit period, the Taxpayer will review internal procedures and establish tax reporting procedures sufficient to attempt to timely resolve future sales and use tax reporting and filing requirements and will rectify any tax liability
Revised 10/15 2
issues determined to be unreported for all periods subsequent to this audit period in a manner consistent with the audit findings for this audit period. If the Taxpayer is unregistered for reporting sales and/or use tax liability, the Taxpayer will register for the appropriate Ohio tax account(s) prior to the conclusion of this audit. The Department will also be available for on-going consultation in the future as questions or concerns develop. 6. It is agreed that, in the event that Taxpayer fails to fulfill the above terms of this agreement, the Department will proceed with an assessment based on the best information available. It is further agreed that any completed audit work of Taxpayer and/or the Department may be used as basis for such assessment including any additional agreements to conduct sample analyses, projections, test checks, and effective tax rate computation procedures. The persons signing below represent that they are fully authorized to bind their respective party to the terms of this agreement and that the Parties may rely on such representation.
Company Name The Ohio Department of Taxation Name Name Signature Signature Auditor Title Title Date Date Taxpayer's TBOR-1 Representative The Ohio Department of Taxation Name Name Signature Signature Audit Manager Title Title Date Date
Please send this application and supporting documentation to: Ohio Department of Taxation, Business Tax Division – SUT REF, P.O. Box 530 Columbus, OH 43216-0530.
ST AR
Sales/Use Tax Application for Refund
Mailing address Name of applicant (if business, print name as registered with the Internal Revenue Service) ZIP code State City Sales or use tax vendor's license number (if applicable) The following information refers to the person/entity submitting the application for refund of tax claimed to have been erroneously paid to the state of Ohio/Clerk of Courts.
For State Use Only
Overrides: Name Y N Address Y N
, , . $
Requested refund amount
State full and complete reasons for the above claim. You must include supporting documentation.
Time period covered by the refund request (MM/DD/YY) to
M M D D Y Y M M D D Y Y
Sales Tax / Consumer Sales Tax / Vendor Use Tax FEIN/SSN (do not use dashes) E-mail
SIGN HERE (REQUIRED)
Telephone Fax
I declare under penalty of perjury that I am the taxpayer or the taxpayer’s authorized agent having knowledge of the relevant facts in this matter to fi le this refund application. Signature Date (MM/DD/YY) Name Title
First name Last name M.I. E-mail
Taxpayer representative: The taxpayer will be represented in the matter by the following individual. Include a Declaration of Tax Representative (Ohio form TBOR 1), which can be found on the department’s Web site at tax.ohio.gov.
Telephone Title FOR OFFICE USE ONLY Examiner Date Amount recommended Reviewer Date Manager Date Claimed Inc/red Deallocation Xfer tax Xfer int Total approved Int to txpr Net to TP Txpr ck
Please fully complete this application and submit documentation supporting the refund with this application. For information on what documents must be supplied, see the Refund Checklists (STAR C) in the tax forms section at tax.ohio.gov. To the extent that a refund is granted on this application, either in whole or in part, the Ohio Department of Taxation will calculate and include the appropriate amount of interest in the refund pay- ment made to the applicant. The applicant should not include such interest in the “total amount of the refund claimed.” Sales tax refunds are governed by Ohio Revised Code (R.C.) sec- tion 5739.07, which provides in pertinent part as follows: (A) When, pursuant to this chapter, a vendor has paid taxes to the treasurer of state or the treasurer of state's agent, or to the tax commissioner or the commissioner's agent, the commissioner shall refund to the vendor the amount of taxes paid if the vendor has refunded to the consumer the full amount of taxes the con- sumer paid illegally or erroneously or if the vendor has illegally or erroneously billed the consumer but has not collected the taxes from the consumer. (B) When, pursuant to this chapter, a consumer has paid taxes directly to the treasurer of state or the treasurer of state's agent, or to the tax commissioner or the commissioner's agent, and the pay- ment or assessment was illegal or erroneous, the commissioner shall refund to the consumer the full amount of illegal or erroneous taxes paid. (C) The commissioner shall refund to the consumer taxes paid il- legally or erroneously to a vendor only if: (1) The commissioner has not refunded the tax to the vendor and the vendor has not refunded the tax to the consumer; or (2) The consumer has received a refund from a manufacturer or
not the tax, paid to the vendor in settlement of a complaint by the consumer about the property or service purchased. The commissioner may require the consumer to obtain or the ven- dor to provide a written statement confi rming that the vendor has not refunded the tax to the consumer and has not fi led an applica- tion for refund of the tax with the commissioner.
Instructions and Pertinent Law Sections
(D) Subject to division (E) of this section, an application for refund shall be fi led with the tax commissioner on the form prescribed by the commissioner within four years from the date of the illegal
waives the time limitation under division (A)(3) of R.C. section 5739.16. If the time limitation is waived, the refund application pe- riod shall be extended for the same period as the waiver. (E) An application for refund shall be fi led in accordance with divi- sion (D) of this section unless a person is subject to an assess- ment that is subject to the time limit of division (B) of R.C. section 5703.58 for a tax not reported and paid between the four-year time limit described in division (D) of this section and the seven-year limit described in division (B) of R.C. section 5703.58, in which case the person may fi le an application within six months after the date the assessment is issued. Any refund allowed under this division shall not exceed the amount of the assessment due for the same period. (F) On the fi ling of an application for a refund, the commissioner shall determine the amount of refund to which the applicant is en-
shall certify that amount to the director of budget and management and the treasurer of state for payment from the tax refund fund created by R.C. section 5703.052. If the amount is less than that claimed, the commissioner shall proceed in accordance with R.C. section 5703.70. (G) When a refund is granted under this section, it shall include interest thereon as provided by R.C. section 5739.132. Amended by 129th General Assembly File No. 28, HB 153, §101.01, eff. 9/29/2011. Use tax refunds are governed by R.C. 5741.10, which provides in pertinent part as follows: Refunds of taxes paid pursuant to this chapter by a seller or con- sumer illegally or erroneously shall be made in the same manner as refunds are made to a vendor or consumer under R.C. section 5739.07.
Refund Checklist Consumer-Filed Claims
The following documents must be supplied when a consumer fi les for a refund for sales tax paid to a vendor:
Note: In the event the check is payment for multiple invoices, copies of invoices paid by said check or a copy of the check remittance is required to prove the invoices claimed for refund were paid in full, including the tax. 4. A computer disc containing a Microsoft Excel or Microsoft-compatible spreadsheet set up like the example included with the ST AR C form for all claims containing 25 or more invoices. The spreadsheet must list every invoice sepa- rately and the total should equal the amount requested on the refund application. Note: To expedite the refund process you may also supply a disc for claims containing less than 25 invoices, but it is not required.
subject item you purchased was used. References to the Ohio Revised Code or legal opinions alone are insuffi cient to substantiate the refund request.
ST AR CVendor-Filed Claims
The following documents must be supplied when a vendor fi les for a refund for sales or use tax: 1. A completed Sales/Use Tax Application for Refund (Ohio ST AR).
until fi nal determination of the refund claim, or some other proof that the accounts receivable was adjusted for the tax or account activity.
4 for all claims containing 25 or more invoices. The spreadsheet must list every invoice separately and the total should equal the amount requested on the refund application. Note: To expedite the refund process, you may also supply a disc for claims containing fewer than 25 invoices, but it is not required.
cates or letters of usage. Note: An exemption certifi cate is valid from the signature date forward. In order to establish exemption after the fact, a taxpayer must provide a letter of usage in which the item is fully described and the taxpayer’s use of the item is fully described. A quote from statute or administrative rule will not meet the requirement.
gures for the period(s) referenced on the refund application. The proof may consist of sales journals, cash register receipts, summary reports
prove that the equipment purchased is capitalized research and development equipment. Proof may consist of as- set ledgers, depreciation schedules, etc.
in error.
Vendor-Filed Claims
The following documents must be supplied when applying for a sales or use tax refund:
MCO/MSO or a copy of form BMV-3711. The BMV-3711 is a title cancellation letter and can be obtained from the Bureau of Motor Vehicles in Columbus.
(front and back) or other documents that show the refund to your customer.
as a copy of the cancelled check (front and back) or other documents that show the refund to your customer.
as a copy of the cancelled check (front and back) or other documents that show the refund to your customer.
back) or a statement signed by your customer stating that they agree to wait for the sales tax refund until you receive it from the state.
(front and back) or other documents that show the refund to your customer.
cate and/or a copy of their contract to haul, if they are under contract with someone who has PUCO authority.
cation.
indicating the selling price of the vehicle. (A copy of the tax receipt will not suffi ce.)
tax was paid.
3711 showing the incorrect title was cancelled. The BMV-3711 is a title cancellation letter and can be obtained from the Bureau of Motor Vehicles in Columbus.
cate and/or a copy of your contract to haul if you are under contract with someone who has PUCO authority.
cation issued by the federal government if claiming nonprofi t organization.
Motor Vehicle Refund Checklist Consumer-Filed Claims
The following documents must be supplied when applying for a sales or use tax refund on a titled motor vehicle:
Declaration of Tax Representative
Representative Information Representative’s name and fi rm Address City State ZIP code Telephone number Fax number E-mail address The taxpayer identifi ed above authorizes the representative identifi ed above to represent the taxpayer before the Department of Taxation. This authorization includes the authority to view and receive copies of returns, reports or other documents fi led by the taxpayer or prepared by the Department of Taxation concerning the business, property or transactions of the taxpayer, request alternative methods of taxation, present evidence or legal arguments to any employee of the Department of Taxation, raise objections to audit fi ndings or assessments, fi le petitions or applications and waive statutes of limitation. This authorization does not authorize the tax representative to sign any form or declaration where the Ohio Revised Code specifi cally requires that the form or declaration be signed by the taxpayer. The taxpayer understands that the acts of the authorized representative may increase or decrease the taxpayer’s tax liabilities and legal rights. The taxpayer must indicate all restrictions, if any, to this authorization in the space below. I certify, under penalties of perjury, that I am the taxpayer or that I am a corporate offi cer, LLC member, general partner, guardian, tax manager or similar employee authorized to act on tax matters, executor, receiver, administrator or trustee
properly completed, this Declaration of Tax Representative will not be processed. Signature Date Name (print) Title Telephone number Fax number Authorized Signature Restrictions to this Declaration The following restrictions are placed on this Declaration of Tax Representative: *Mail: P.O. Box 1090, Columbus, OH 43216-1090 This declaration is valid until . If no expiration date is given, this declaration will expire one year after the date that it is signed. Expiration Date Taxpayer’s name Business name Address City State ZIP code FEIN or Social Security number
(Only use Social Security number if requesting individual income tax representative or if business does not have a FEIN.)E-mail: TBOR1@tax.state.oh.us Fax: (206) 888-4377 (Use the same method to revoke declaration.)
*Most secure method