Legal Resources - Tax Rules

Tax Rules: Final: 5703-29

5703-29-09 Option for quarterly taxpayers to make estimated payments.

(A) Division (C) of section 5751.05 of the Revised Code allows the tax commissioner to grant written approval for a calendar quarter taxpayer to use an alternative reporting schedule or estimate the amount of tax due for the calendar quarter if the taxpayer demonstrates the need for such deviation. In addition, this section also grants the commissioner the authority to adopt a rule to allow a group of taxpayers such deviation without prior written approval. Pursuant to this authority, the commissioner hereby grants authority for all calendar quarter taxpayers, and all taxpayers for the semiannual period for 2005, to make estimated payments of their tax if done pursuant to the procedures prescribed in the following paragraphs.

(B) A calendar quarter taxpayer is allowed to file its commercial activity tax return and make an estimated payment of tax due thereon within forty days after the end of the calendar quarter if all the procedures set forth in this rule are followed.

(1) A calendar quarter taxpayer electing to make an estimated payment shall do all of the following for this rule to apply:

(a) Check the "rule estimation" box on the return, report the appropriate estimate of taxable gross receipts, and pay the appropriate amount of estimated tax. Taxpayers seeking to use the "statutory estimation" provided for under division (A)(2) of section 5751.051 of the Revised Code shall check that box and shall not use this rule for any calendar quarter in that entire calendar year.

(b) Make an estimated payment of the tax using the tax rate in effect for the calendar quarter for which the estimated payment is being made. Any minimum annual tax amount that is owed is in addition to the estimated tax determined pursuant to this rule.

(c) On or before the due date of the return for the following calendar quarter, the taxpayer must reconcile its actual tax for the calendar quarter for which the estimate was made, using either a form prescribed by the commissioner for such purpose or the actual return. The taxpayer must calculate its actual tax using the tax rate in effect for that quarter for which the estimated payment is made, file its reconciliation report reconciling its actual tax with its estimated tax for that quarter, and, if applicable, pay any underpayment of the actual tax owed for that quarter. If the taxpayer's estimate results in an overpayment of tax, such overpayment will be applied to the next tax return/report. If, after applying the overpayment to such next tax return/report an overpayment remains, such remaining overpayment may be refunded or carried forward to the subsequent return/report filed by the taxpayer. A taxpayer making an election under this rule must file the return for the following calendar quarter. The return for that calendar quarter may again be estimated in accordance with this rule.

(d) In order for this rule to apply, both the estimated payment return/report and the reconciliation report/return, along with all applicable payments for those tax periods, must be made timely, and the taxpayer must not have any outstanding commercial activity tax liability.

(2) A taxpayer electing to make an estimated payment, as prescribed by paragraph (B)(1) of this rule, and subject to paragraph (B)(3)(a) and (b) of this rule, must estimate its taxable gross receipts as at least ninety-five percent of the taxable gross receipts from the previous quarter, after deducting the applicable exclusionary amount of two hundred fifty thousand dollars. However, in no event shall a taxpayer's estimated payment for a given calendar quarter be less than seventy percent of its actual tax liability for that calendar quarter. In the event a taxpayer's previous calendar quarter's taxable gross receipts exceed its current quarter's taxable gross receipts, such taxpayer's estimated tax liability for the quarter is only required to equal or exceed one-hundred percent of its tax liability for that period.

(3)(a) For the first quarter of 2006, a taxpayer who elects to make an estimated return and payment must estimate its taxable gross receipts as at least forty-eight percent of the actual taxable gross receipts for the semiannual period of July 1, 2005 through December 31, 2005.

(b) For the first quarter returns due for 2007, 2009 and 2011, taxpayers who elect to make an estimated return and payment for these calendar quarters must make their estimate using at least one hundred percent of the actual taxable gross receipts from the previous calendar quarter.

(C) Notwithstanding paragraph (B) of this rule, for the semiannual period of July 1, 2005 through December 31, 2005, any taxpayer may elect to make an estimated payment by checking the "rule estimation" box on the semiannual report. Such taxpayer must estimate its tax due and pay this estimated amount at the time the taxpayer files the report. Any taxpayer who elects to estimate its tax due is then required to file a reconciliation report along with its first quarterly return for 2006 for calendar quarter taxpayers or with the annual fee for calendar year taxpayers, both of which are due by May 10, 2006. Such reconciliation must reflect the actual tax due for the semi-annual period and any additional tax due must be paid at this time. The taxpayer's estimated payment of the tax for this semi-annual period must be the greater of seventy-five dollars or six-tenths of one per cent times the difference between (1) at least eighty-five percent of the actual taxable gross receipts for the semiannual period and (2) the five hundred thousand dollars exclusionary amount.

(D) Any taxpayer who elects to estimate its tax using this rule shall not estimate its tax using the statutory estimation procedure contained in division (A)(2)(b) of section 5751.051 of the Revised Code for any calendar quarter in that entire calendar year.

(E) Interest and penalties will not be imposed on payments made pursuant to this rule provided the taxpayer fully complies with this rule. In other words, such payments will be considered to be made timely. A taxpayer who elects to estimate its tax under this rule agrees to have any overpayment automatically be applied to the taxpayer’s next commercial activity tax report filed.

(F) Except as provided for in paragraph (C) of this rule, a calendar year taxpayer may not use this rule.

(G) For example, assume a taxpayer for the second calendar quarter of 2006 elects to make an estimated payment pursuant to this rule. For this example, the taxpayer's actual taxable gross receipts for the first calendar quarter after its applicable exclusion were $8,000,000. On August 9, 2006, the taxpayer files its second calendar quarter return and checks the "rule estimation" box. In making the estimated payment, the taxpayer calculates an estimated liability after its $250,000 exclusion of $7,644 [.00104 * ($7,600,000 - $250,000)]. In order to be covered by the safe harbor, the taxpayer makes an electronic payment of $7,644. Such taxpayer meets the 95% threshold required to avoid the imposition of interest and penalties when it reconciles its report at the beginning of the third calendar quarter.

When reconciling the second calendar quarter return by filing its third quarter return, the taxpayer determines its actual taxable gross receipts for the second quarter were $8,500,000. The taxpayer applies the effective tax rate for the second quarter to its actual taxable gross receipts, net of its $250,000 exclusion, resulting in a tax liability of $8,580 [.00104 * ($8,500,000 - $250,000)].

On November 9, 2006, the taxpayer will be required to electronically file its reconciliation report, reflecting an additional $936 tax due ($8,580 actual tax liability for the second calendar quarter, less the $7,644 estimated payment). At the same time, the taxpayer must timely file its third calendar quarter return/report and may elect to make an estimated payment for the third quarter (based on the taxpayer's second calendar quarter actual taxable gross receipts).

Effective: 3-13-06

Promulgated under: 5703.14

Authorized by: 5703.05, 5751.05(C)

Amplifies: 5751.05, 5751.051