March 16, 2000 - Columbus, Ohio
- Governor Endorses Taxpayer Services Bill
Reforms Would Benefit Small Businesses
Governor Bob Taft today helped launch a new effort to make
Ohio tax law more taxpayer friendly—especially for small
businesses—by announcing his support for the Taxpayer
Services Bill introduced this afternoon in the Ohio House by
Representative Greg Jolivette (R-Hamilton).
"Nobody likes paying taxes and the frustration is only
compounded by complex, hard-to-understand tax laws. Certain
provisions of tax law are especially hard on small
businesses. As the laboratories of free enterprise and
innovation, small businesses deserve our diligent support,"
Taft said. "Taxpayers deserve a simpler, more easy-to-use
process and this legislation helps create that with reforms
including expanded Internet filing opportunities and less
paperwork. I commend Representative Jolivette for his help on
The bill would remove outdated and obsolete provisions of tax
law and would reduce by 60,000 (15 percent) the number of
taxpayers required to file quarterly personal or school
district income tax payments. This change would also save the
Department of Taxation $100,000 annually in processing costs.
Other reforms include eliminating various mandatory penalties
and granting the tax commissioner discretionary authority to
impose penalties based on the details of the case. The bill
would also allow businesses to relocate within the same
county without having to obtain a new license. Currently,
businesses must cancel their existing licenses and obtain a
new license when they relocate to a new address.
Representative Jolivette says he welcomes Taft’s support and
believes the Taxpayer Services Bill will quickly sell itself,
"This is not a partisan issue; it’s about making life easier
for taxpayers and helping the Department of Taxation deliver
more efficient service. As a businessman, I welcome the
changes. As a legislator, I’m committed to accomplishing
Ohio Tax Commissioner Tom Zaino says the bill’s changes can
be made easily by the state and will benefit taxpayers.
"We are working to create a system that gives taxpayers more
convenience and the Department more flexibility in dealing
with all the variables that occur. Our focus is on enhancing
taxpayer services and this bill is a key part of that
effort," said Zaino.
Zaino says many of the proposed changes came from business
and individual taxpayers, along with a number of suggested
improvements contributed by Department of Taxation staff.
For more information, contact Scott Milburn, press
secretary, at (614) 644-0957, or Gary Gudmundson, Department
of Taxation, at (614) 644-6903.
TAXPAYER SERVICE/TAX ADMINISTRATION LEGISLATION
SUMMARY OF CONTENTS
March 21, 2000
Permissive Penalties (3734.904, 3734.907, 3769.088,
4301.422, 4303.33, 4305.13, 4305.131, 5727.89, 5728.09,
5728.10, 5733.28, 5735.12, 5735.121, 5739.12, 5739.13,
5739.133, 5739.15, 5743.03, 5743.081, 5743.082, 5743.52,
5743.56, 5747.15, 5749.15).
Many tax law penalty provisions are mandatory. H.B. 612 would
make application of these penalties permissive. Under H.B.
612, the Department could impose penalty at a lesser level
than currently specified by the law, or not at all. For
example, the current tire tax law (section 3734.907) imposes
a late filing penalty of fifteen percent of the tax due. The
bill authorizes imposition of a late filing penalty of up to
fifteen percent. These changes apply to employer withholding,
sales tax, personal income tax, corporate franchise tax and
Appeal period extensions (3734.907, 3769.088,
4305.13, 4305.131, 5711.25, 5711.28, 5711.31, 5717.02,
5727.26, 5727.47, 5727.89, 5728.10, 5733.11, 5735.12,
5735.121, 5739.13, 5739.15, 5743.081, 5743.082, 5743.56,
Language is included in this bill to extend appeal periods
from thirty to sixty days. This includes appeals to the
Commissioner and to the Board of Tax Appeals. Taxpayers have
indicated that thirty days is often insufficient time to
prepare and file an appeal.
Penalty only appeals (5733.11 and 5747.13).
Under current personal income and corporate income tax law,
taxpayers must pre-pay the penalty if this is the only item
of the assessment being appealed. H.B. 612 would remove this
pre-payment requirement in cases where the only item appealed
is the penalty itself, neither the tax nor interest.
Permits appointment of a Deputy to serve as
The bill permits the Tax Commissioner to appoint a deputy to
serve as Commissioner in the case of the Commissioner’s
disability, absence, or recusal. Recusal could occur where
there would appear to be a conflict of interest if the
Commissioner were to render the decision.
Electronic signature (5703.054).
Under current law, the Commissioner has the authority to
prescribe what constitutes a legal signature for personal
income tax. This provision enables tele filing and electronic
filing of income tax returns. The bill expands that authority
to all taxes administered by the Commissioner, facilitating
the expansion of electronic filing.
Allow the Commissioner to require rounding (5703.055
The proposed changes allow the Commissioner to require that
taxpayers round cents to the nearest whole dollars on their
returns. This change will have no measurable impact on tax
liabilities and will eliminate data entry "keystrokes" and
therefore promote greater efficiency in the Department of
Taxation. The department estimates saving data processing
costs totaling $325,000 annually in the income tax area
Delivery services/Record of delivery (5703.056,
5705.37, 5717.01, 5717.02).
Current law imposes various deadlines for the filing of tax
documents. H.B. 612 provides that the date the taxpayer
submits a document to a designated delivery service will be
treated the same as the date of the United States Postal
Service postmark or the date a document is submitted to a
U.S. Postal Service employee for certified mail delivery
constitutes the filing date. The bill allows the Commissioner
to designate alternative delivery services to be used when
filing documents with the Commissioner or the Board of Tax
Appeals, or paying the Commissioner or the Treasurer. As with
a U.S. Postal Service delivery, the date the qualified
delivery service receives the petition or appeal to
the board will be the date deemed received by the department
or the Board of Tax Appeals. Qualified carriers will be
determined by rule and may include United Parcel Service,
Federal Express and/or like carriers. This provision allows
taxpayers greater flexibility.
Session modifications (5703.11).
An outdated section of the code, dating back to the Tax
Commission, which requires the department to be open for
business on Saturday. This section is amended to ensure that
the department is open during business hours Monday through
Friday, but to eliminate the Saturday hours requirement.
"Murdoch" Journal (5703.141).
The bill eliminates section 5703.141 of the O.R.C., which
requires the department to maintain a journal containing
copies of any directive, bulletin, or informational document
issued by the Commissioner which affects taxpayers. The
journal, which is rarely used, includes items such as
information releases, notices to vendors and rate increases.
The department is making all such documents available on its
Modifications to procedures for notice (3734.907,
3769.088, 4305.13, 4305.131, 5703.37, 5717.02, 5727.26,
5727.89, 5733.11, 5739.13, 5743.081, 5743.082, 5743.56,
The tax law includes numerous statutes requiring legal notice
be given to taxpayers. The law includes a general service
provision (5703.37) and numerous specific provisions within
the law governing a particular tax (e.g., sales tax, income
tax). These provisions vary, creating confusion as to what
standards apply. The Ohio Supreme Court decision addressed
the discrepancies in Schindler Elevator Corp. v. Tracy
(1999). In the decision, the court rejected the
taxpayer’s arguments that the general service provision
prevailed over the later enacted specific service of sales
tax assessment provision found in section 5739.13 of the ORC.
The bill revises the general service provision and
cross-references other service provisions to the general
statute. The bill provides that the Commissioner is not
required to address notices or orders to the statutory agent
of a corporation, but to the person affected by the notice.
Severance tax (5749.08).
Currently, most taxes allow interest to be paid to taxpayers
on erroneous assessments. This type of provision is not
included in Chapter 5749, the severance tax. The Department
proposes to amend severance tax law to allow the payment of
interest to taxpayers on erroneous assessments.
Extend the personal property tax filing period
Personal property tax returns are due between the fifteenth
day of February and the thirtieth day of April. Under current
law, county auditors can extend the filing for a period not
exceeding forty-five days (the extension expires on June 14).
Most, but not all auditors grant the file extension.
The bill gives auditors the discretion to extend the filing
to a date certain: June 15.
Prospective application of depreciation rate changes
(5711.18 and 5727.11).
Long established depreciation schedules are used to determine
taxable property of general business and public utility
personal property. The proposal provides that any changes to
these schedules in true value would be prospective in nature,
and prohibit using changes in the schedules as evidence of
value with regard to prior year taxes. Information obtained
by the Commissioner regarding the business, property and
transactions of any individual taxpayer for the purpose of
modifying these schedules shall not be disclosed.
Tax / Fuel Use Tax
Change the minimum threshold for vehicles subject to
the fuel use tax (5728.01, 5728.02, 5728.03, 5728.04,
Ohio is the only state that levies an intrastate
fuel use tax on a two axle truck pulling a trailer that
weighs more than 3,000 pounds and the gross vehicle weight
(GVW) is less than 26,000 pounds. The International Fuel Tax
Agreement (IFTA) governs use taxes of trucks with
interstate operations and only taxes such
combinations if their GVW exceeds 26,000 pounds. Currently,
the difference between Ohio and the IFTA means that certain
intrastate combinations are taxed while Ohio cannot
tax the same interstate combinations.
Increasing the threshold to greater than 26,000 pounds will
provide similar treatment of intrastate and interstate motor
carriers. This change will also eliminate the tax return
filing requirement for many non-business users of pickup
trucks pulling trailers and farmers using pickup trucks
pulling trailers. There will be a loss of revenue to ODOT of
approximately $100,000 per year.
Eliminate the $2.00 Fuel Use and International Fuel
Tax Agreement (IFTA) permit and renewal fees (5728.02 and
The proposed changes will eliminate the $2 fuel use and IFTA
permit and renewal fees. The Department of Taxation will be
able to better serve Ohio's motor carriers by making it
easier and faster for them to obtain permits. Also, it will
be easier for Taxation to develop electronic filing of permit
applications and renewals. Until the electronic system is
developed, taxpayers will be able to file their permit
applications by fax and receive their temporary authority the
Currently, the motor carries can go to one of nine Taxation
offices statewide, send the information and payment by mail
(up to three weeks), or pay a third-party commercial permit
service to get the permits the same day. There will be a loss
of revenue to ODOT of approximately $325,000 per year
(162,500 permits per year at $2 each).
Codify policy on the reporting of bobtail miles
(5728.06 and 5728.04).
A bobtail is a semi-tractor operating without the trailer.
Currently, taxpayers are reporting these miles as taxable for
purposes of the fuel use tax. Thus, this provision codifies
existing practice and will not affect tax liability.
Expand fuel use tax annual filing option
Currently, farmers using fewer than 15,000 gallons of motor
fuel per year are allowed to file motor fuel use tax returns
on an annual rather than a quarterly basis. The bill would
permit the Tax Commissioner to authorize any fuel use
taxpayer to file on an annual basis. If the Commissioner
extends the annual filling option to all taxpayers using
fewer than 15,000 gallons of fuel per year (the standard for
farmers) the Department will experience an annual cost
savings of $50,000 due to reduced mailing and processing
costs. It would cause an estimated one-time loss to ODOT of
$650,000. This change would affect approximately 8500
Permit the sale of dyed kerosene at gasoline service
stations (5735.01, 5735.023, 5735.05).
Generally, federal law provides for the dying of motor fuel
as a means to enforce motor vehicle fuel tax laws. Dyed fuel,
on which no fuel tax has been paid, may be used only for tax
Kerosene can be used as an additive to or component of motor
fuel (taxable), or for non-transportation (tax-exempt)
purposes. One of the prime non-transportation or tax exempt
uses of kerosene is as a home heating fuel. Small purchases
of kerosene for tax exempt purposes typically occur at a
retail (gasoline) service station from a special pump. Ohio
law only permits the sale of clear kerosene
at retail service stations. Ohio law also provides that the
state motor fuel tax does not apply to these
service station sales.
The bill will permit the sale of clear and
dyed kerosene at retail service stations.
Change the point of taxation for ethanol to be the
same as gasoline (5735.01(E) (2)).
Gasoline and ethanol are blended to produce gasohol and must
be reported separately as a sale of gasoline and a sale of
ethanol under current motor vehicle fuel tax law. Ethanol was
not defined as gasoline to facilitate claims for the ethanol
credit that was repealed in 1997. H.B. 612 changes the
definition of gasoline to include ethanol. This will ease the
reporting requirements of terminal operators and wholesale
distributors. Tax revenue will not be affected.
Change the definition of transmix to reflect industry
practices (5735.01(E) (3)).
A terminal is the main distribution center for motor fuel. At
this location, different types of fuels are continuously
pumped through a main pipeline. At times, these types of
fuels will blend in the pipeline, for example, when gasoline
follows diesel. The commingled fuel is called "transmix."
Current law defines transmix as gasoline. The bill would
define transmix as gasoline or diesel, in conformance with
industry practice. This change will simplify reporting for
taxpayers, because they will be able to report fuel types
through their own classification system without making
additional accounting or tax return adjustments. This change
does not alter tax liabilities.
Codify policy that gallons must be reported in
"gross" and not "net" gallons (5735.012).
Motor fuel gallonage can be reported in "gross" or "net"
gallons. "Gross" means the actual gallons at the time of
delivery and "net" means the gallons adjusted for temperature
and pressure. It is important that fuel be reported
consistently one way or the other. All taxpayers are now
using the gross reporting method in accordance with
Department policy. H.B. 612 will codify existing practice.
Motor fuel used by "vessels" (5735.05 (A)
Certain users of motor fuel are exempt from taxation, but
must pay for the tax when the fuel is purchased and then
apply for refund. H.B. 612 will permit purchase of fuel for
use in vessels for commercial fishing, or for ferries,
barges, and freighters without paying tax in the first
instance, eliminating the need for the refund.
Repeal of tax refund for "excess gallonage"
The sales of motor fuel between licensed motor fuel dealers
is exempt from the motor fuel tax. Due to the prior structure
of the tax, licensed motor fuel dealers were permitted to
file for a refund when then sold more motor fuel in a month
to other dealers than they had purchased. In 1996, the point
of taxation for motor fuel changed, eliminating the need for
this refund provision. H.B. 612 eliminates it.
Eliminates obsolete provisions for taxation of
interstate buses (5735.l2 and 5735.132).
With the advent of the International Registration Plan (IRP)
of which Ohio is member, the registration and taxation of
interstate bus operators changed. The bill eliminates
provisions of law that are remnants of the prior tax
structure for these companies.
Extend the time to file motor fuel refunds (5735.14,
5735.141, 5735.142, 5735.18).
The bill will extend from 180 days to 1 year, the time within
which a taxpayer must file a refund claim for the following
exempt uses of motor fuel: off highway usage (farmers,
industrial users), transit bus usage, and non-dealer sales.
The bill will extend from 60 to 120 days the time within
which a taxpayer must file a refund claim for the retail
dealer shrinkage allowance.
Redefine casual sales (5739.01(L)).
Under current law, "casual sales" are exempt from sales tax
when the item sold has previously been subject to a tax
within Ohio. Generally, a "casual sale" is the resale of an
item by a person who is not a retailer. There are some
exceptions to this including motor vehicles, certain
watercraft, snowmobiles and all purpose vehicles. The
proposed change would allow exemption when the item had been
subjected to the taxing jurisdiction of any state. Current
law favors items transferred within the state over items
purchased and brought into the state and therefore raises
Clarify sales tax treatment related to 501(c)(3)
The sales tax law provides special tax treatment to
charitable organizations in three areas. 1) They are exempt
from sales tax on their purchases. 2) Charitable
organizations may make retail sales for up to six days a year
without incurring the responsibility of collecting sales tax;
and 3) Building contractors are exempt from the tax when they
purchase materials for construction of buildings for those
Current law treats 501 (c)(3) organizations as charitable
organizations for purposes of making exempt purchases, as
described in item 1), above. It does not clearly address
items 2) or 3), although it has been the Department’s
practice to allow these exemptions.
The bill amends the law to reflect the Department’s practice.
Elimination of the exemption for certain types of
energy systems (5739.02(B)(27)).
This section provided an exemption for certain types of
energy systems purchased between August 14, 1979 and December
31, 1985. The exemption no longer applies.
120 days to substantiate tax exempt sales (5739.03
Vendors making sales are required to either collect the tax
or obtain an exemption certificate that specifies a legal
reason why the purchaser is not paying the tax. In some
cases, the exemption certificate is incomplete or not
submitted. In case of audit, the bill extends the time from
60 to 120 days for an in-state vendor to collect sufficient
information to establish an exemption. The bill also extends
the same treatment to out-of-state sellers who presently face
no specific time limitation.
Lower Electronic Funds Transfer (EFT) payment
thresholds (5739.032, 5739.122, and 5741.121)
Under current law, a vendor whose sales tax liability meets
or exceeds $600,000 for a year is required to pay taxes by
EFT beginning in the second ensuing year after this threshold
is met. From then on, the vendor pays electronically until
the vendor owe less then $600,000 for two consecutive years.
Current law also requires vendors that file for more than one
license to pay electronically if the combined tax meets or
exceeds the $600,000 threshold.
The bill lowers the threshold from $600,000 to $60,000
effective with the 2000-filing year. This change will affect
the December 2001 return with the payment due January 23,
2002. Also, vendors filing for multiple licenses will no
longer be required to combine the tax liabilities. (See also
Employer Withholding Tax.)
Eliminate the limited vendor’s license; Expand
transient vendor’s license (5739.033 and 5739.17).
Currently, limited vendors are retailers who make sales at a
temporary exhibition, show, flea market, or other similar
events. The license is valid only for the duration of the
event, up to 20 days. For each event, the vendor must obtain
a separate license at a cost of $5 for each limited license.
Transient vendors are retailers who make sales in any county
in which they have no fixed place of business. The license is
valid throughout the state. The transient license allows the
person to sell at many events during a year with no
limitation on the number of sale days. The cost of the
transient license is currently $100 and transient vendors are
subject to annual license renewals for a $40 fee.
The bill eliminates the limited vendor’s license and requires
those vendors to obtain the transient vendor’s license. The
transient vendor’s fee will be reduced from $100 to $25. The
estimated loss, including state and local funds, totals
Under current law, either the county auditor or the
department may issue the limited vendor’s licenses. The
department issues the transient vendor’s licenses and
renewals. If the auditor issues the limited license, the
revenue is placed into the county’s general fund. If the
department issues the license or renewal, the revenue is
deposited in the state General Revenue Fund. Under the bill,
the department will continue to handle the issuance of the
transient vendor’s licenses.
Eliminate vendor’s license renewal and renewal fees
(5739.13, 5739.17, 5739.19, and 5739.30).
License renewal fees currently apply to vendor, service
vendor, transient vendor, and delivery vendor licenses. The
amount of the fee is $40 for the transient vendor and $10 for
all other vendors. The bill eliminates these renewal fees and
the associated paperwork for the department and vendors. The
bill also permits the Commissioner to revoke inactive
licenses. The estimated loss to the state General Revenue
Fund totals $2.3 million.
Allow vendors to transfer licenses between locations
Allow vendors to transfer licenses between locations
Allow vendors to transfer licenses between locations
Generally, each county auditor issues vendor’s licenses for a
specific location. Currently if a vendor relocates, even if
only across the street from his original location, the vendor
must apply and pay for a new license and cancel the existing
license. This change allows the vendor to retain the license
if the business remains in the county, reducing paperwork and
costs for the vendor.
Require a liquor permit holder to have the liquor
license in the same name (5739.17).
H.B. 612 codifies existing policy that requires a liquor
permit holder to have a liquor license in the same name as
shown on the vendor’s license. This change will complement
existing statute that specifies that only the liquor permit
holder is allowed to sell liquor.
Repeal temporary immunity provision
For 16 days during 1981, the state sales tax rate was
increased from 4.0 percent to 5.1 percent. Because this tax
rate created many problems for vendors, the General Assembly
quickly amended the tax and gave vendors immunity from
assessments related to that period. This section is no longer
Lower the Electronic Fund Transfer (EFT) payment
threshold from $180,000 to $84,000 (5747.07).
Under current law, employers with annual personal income tax
withholding tax payments exceeding $180,000 per year, are
required to remit their payments to the Treasurer of State
via EFT. The bill would lower that threshold to $84,000
beginning in 2001 and increase the number of filers by
Income Tax and School District Income Tax
Increase the estimated payment threshold
Under current law, taxpayers with annual tax liabilities of
$300 or more (after withholding) are required to make
quarterly estimated payments of personal and school district
income taxes. The proposed changes raise that threshold to
$500, which will reduce the number of taxpayers required to
file estimated payments by approximately 15 percent. There
will be a one-time revenue loss of approximately $6.5 million
in the fiscal year this change is enacted. The $300 threshold
was established in 1984. Raising it to $500 is consistent
with inflation since then.