News Releases

News Release

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 government revenues.

"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
(614) 644-6903