April 09, 2001 - Columbus, Ohio
- The Line on Use Tax
COLUMBUS – Ohio Tax Commissioner Tom Zaino
said today the new use tax line on the year 2000 Ohio Income
Tax return is an effort to stem a growing loss of millions of
dollars in sales tax revenues for state and local
governments—and millions more in sales by Ohio businesses.
Zaino said he felt he needed to explain the purpose of the
use tax because of confusion about it by many taxpayers. The
year 2000 tax return is the first to include a line for use
tax, though the tax is 65 years old. Sixteen states,
including Michigan, Kentucky and Indiana, have a use tax line
on their income tax returns or include a use tax return with
the tax booklet.
Ohio citizens most commonly owe use tax when they make
purchases from a catalog or Internet retailer who collects no
Ohio sales tax. The use tax rate is the same as the sales tax
rate in the county where the taxpayer resides.
The Ohio Department of Taxation (ODT) estimates in fiscal
year 2003, Ohio and its local governments will lose more than
$597 million in tax revenues to out-of-state internet and
catalog sales. The state share of that total is $497 million.
The sales and use tax accounts for about one-third of Ohio’s
total tax collections and more than 40 percent of local
"Loss of tax revenue is not the only issue here, either,"
Zaino said. "When someone makes an untaxed, out-of-state
internet or catalog purchase, Ohio merchants are at a
disadvantage. Their products cost more because they must
charge sales tax." Continuing, he said, "The use tax gives
Ohio retailers a level playing field with out-of-state
retailers who collect no tax. That’s why the use tax law was
originally passed 65 years ago, and why it’s still a critical
safeguard today." Zaino says he’s talked to Ohio retailers
and they are very supportive of this new effort to collect
the use tax. He said it also protects out-of-state retailers
who voluntarily collect Ohio tax.
In a statewide survey done for ODT, nearly 86 percent of
respondents had never heard of the use tax. More than 77
percent were not aware that Ohio charges tax on purchases
from out-of-state catalog and internet retailers.
Commissioner Zaino said overcoming that lack of awareness is
critical for both the retail industry and state and local
government, "We have a lot at stake here -- thousands of
retail jobs and a vital source of revenue for both local and
state government services. I believe taxpayers will
understand the importance of this issue and be responsive. If
we can’t slow the losses, it’s not hard to imagine a scenario
where you’d have to raise other taxes to compensate."
Zaino said Ohio and many other states are working to develop
a streamlined sales tax system to help out-of-state retailers
to collect the sales tax but says it will take time to
develop such a system.
This tax season, Zaino says ODT is asking only that taxpayers
make a good faith effort to report and pay the use tax they
owe on purchases where no tax was paid. Through March
8th, more than 11,000 taxpayers had made use tax
payments totaling nearly $300,000. ODT is estimating
collections will reach about $1.8 million after all tax
returns are filed.
For more information contact:
Gary Gudmundson, Communications Director
Ohio Department of Taxation