ST 2007-06 - Sales and Use Tax: Accelerated and Electronic Sales and Use Tax Payments – Issued December 2007
The purpose of this information release is to explain recent changes to state law and new procedures for taxpayers who are required to pay sales and use tax by electronic funds transfer (EFT) and therefore make accelerated payments of the sales and use tax.
Taxpayers whose liability exceeds $75,000 in any calendar year are required to pay sales and use tax by electronic funds transfer (EFT) and to make accelerated payments for the second ensuing and each succeeding year.
These basic requirements haven’t changed. But in an effort to simplify compliance for taxpayers required to make accelerated payments, language enacted last June by the Ohio General Assembly has changed the accelerated payment schedule so that only one accelerated payment is due each month.
Understanding the new accelerated payment schedule
For taxpayers required to make accelerated payments, the payment must be made by the 23rd day of the month for which the tax is due. This is the same day on which the previous month’s tax return is also due. The remaining tax due for the month must be paid when the tax return for that month is filed by the 23rd day of the following month.
For example, during the month of March, an accelerated payment is due on or before March 23, when the February tax return is due. The balance of the tax due for March is to be filed and paid on or before April 23, when the March tax return is due. To calculate the remaining balance due, subtract the amount of the accelerated payment made on or before March 23 from the tax due. The resulting “Balance Due” is paid on or before April 23.
Note: If the due date of any payment and/or return falls on a weekend or a holiday, then the due date is the next banking day.
Accelerated payment requirements
An accelerated payment must be equal to at least 75 percent of the anticipated tax liability for that month. If a taxpayer makes a payment that is less than 75 percent of the actual liability for that month, the commissioner may impose an additional charge not to exceed 5 percent of the unpaid amount. This charge, which is intended to encourage taxpayer compliance, is unlikely to be applied to taxpayers that are attempting to comply with accelerated payment requirements. This subject is discussed in greater detail below.
Taxpayers have the option to make just one payment per month that includes both the accelerated payment, and the balance due for the previous month’s return. An additional line will be added to tax returns beginning with the return for January 2008 to show such accelerated payments. For example, a March 2008 return, filed and paid on or before April 23, can include the amount of the April accelerated payment (which would be shown on the new line on the return) and paid together with the balance of the tax due for March in one payment. The Department of Taxation will credit the amount designated by the taxpayer on the accelerated payment line to the next return period.
Taxpayers may also continue to make accelerated payments separate from the return payment. A taxpayer who chooses to do this should leave blank the new line on the tax return designated for “Accelerated payment for next reporting period.”
Accelerated payments, if not paid with the tax return, can be made separately through the Treasurer of State, the Ohio Business Gateway, and Ohio Telefile.
Electronic payment options
Taxpayers have the following EFT payment options:
- Treasurer of State – Taxpayers have the option to make Automated Clearing House (ACH) Debit or ACH Credit payments. To make ACH Debit or ACH Credit payments, the taxpayer must register with the Treasurer of State of Ohio. An application to register for ACH payments may be obtained from the Web site of the Treasurer of State: www.eft.tos.ohio.gov. It should be faxed or mailed to the Treasurer of State. The sales or use tax returns, UST-1 and UUT-1, must be filed separately if payments are made through this option.
- Ohio Business Gateway – Electronic payments can be made online through the Ohio Business Gateway, located at business.ohio.gov. The electronic payment options through the OBG are ACH Debit or credit card. A convenience fee is charged for credit card payments. The sales tax return, UST-1, can be filed and paid at the same time through the Gateway..
- Ohio Telefile – This is a push-button, telephone response system that may be used to make a ACH Debit or credit card payments, and for limited use in filing the UST-1. To use, call (800) 697-0440. Telefile users should have their account number, reporting period, bank routing number and bank account number ready before making the call. Note: A convenience fee is charged for credit card payments.
Note: Dates need to be entered carefully when making electronic payments. When an electronic payment only includes the accelerated payment, the taxpayer should enter the 23rd day of the month for which the accelerated payment is intended in the date field requested by the system. When making the tax return payment – which may or may not include an accelerated payment – the taxpayer should use the last day of the month of the tax return period as the period end date.
Accelerated Payments: Additional Charges
As stated above, the commissioner may impose an additional charge not to exceed 5 percent of the unpaid amount of an accelerated payment. However, state law provides that no additional charge will be imposed on the underpaid amount as long as the accelerated payment is equal to or greater than 75 percent of the reported liability for the same month in the immediately preceding calendar year.
The purpose of the additional charge is to encourage taxpayer compliance with the accelerated payment provisions in the Ohio Revised Code. The additional charge is discretionary and will likely not be applied to taxpayers that are attempting to comply with the statute. The additional charge will be imposed when:
- the accelerated payment is substantially less than 75 percent of the actual liability for the month,
- the accelerated payment does not meet the safe harbor amount of at least 75 percent of the reported liability for the same month in the immediately preceding calendar year, and
- there have been repeated instances of understatement of the anticipated tax liability by a taxpayer.
In a case where the additional charge is imposed, the additional charge will be waived if the underpayment can be shown to have resulted from a substantial unanticipated fluctuation in the taxpayer’s sales.
The additional charge will be imposed on taxpayers that are required to make payments by electronic funds transfer and who regularly and/or intentionally do not comply with the accelerated payment requirements outlined above.
If you have any questions regarding this information release, please contact Taxpayer Services at (888) 405-4039, or e-mail us through our Web site: tax.ohio.gov.
OHIO RELAY SERVICES FOR THE
HEARING AND SPEECH IMPAIRED
Telephone: (800) 750-0750
Addendum: Accelerated payments, electronic payments and the Ohio Revised Code
Three sections of the Ohio Revised Code provide for the requirement to pay sales and use tax by EFT and make accelerated payments. The provisions are essentially the same; the only difference is the type of taxpayer involved. They are:
- R.C. 5739.032 for Direct Payment Permit Holders
- R.C. 5739.122 for Vendors
- R.C. 5741.121 for Out of State Sellers and In-State Consumers
R.C. 5739.122, as amended by Am. Sub. H.B. 119 of the 127th Ohio General Assembly provides, in pertinent part:
(A) If the total amount of tax required to be paid by a vendor under section 5739.12 of the Revised Code for any calendar year equals or exceeds seventy-five thousand dollars, the vendor shall remit each monthly tax payment in the second ensuing and each succeeding tax year by electronic funds transfer as prescribed by divisions (B) and (C) of this section.
(B) Vendors required by division (A) of this section to remit payments by electronic funds transfer shall remit such payments to the treasurer of state in the manner prescribed by this section and rules adopted by the treasurer of state under section 113.061 of the Revised Code, and as follows:
(1) On or before the twenty-third day of each month, a vendor shall remit an amount equal to seventy-five per cent of the anticipated tax liability for that month.
(2) On or before the twenty-third day of each month, a vendor shall report the taxes collected for the previous month and shall remit that amount, less any amounts paid for that month as required by division (B)(1) of this section.
The payment of taxes by electronic funds transfer does not affect a vendor's obligation to file the monthly return as required under section 5739.12 of the Revised Code.
(C) A vendor required by this section to remit taxes by electronic funds transfer may apply to the treasurer of state in the manner prescribed by the treasurer of state to be excused from that requirement. The treasurer of state may excuse the vendor from remittance by electronic funds transfer for good cause shown for the period of time requested by the vendor or for a portion of that period. The treasurer of state shall notify the tax commissioner and the vendor of the treasurer of state's decision as soon as is practicable.
(D)(1)(a) If a vendor that is required to remit payments under division (B) of this section fails to make a payment, or makes a payment under division (B)(1) of this section that is less than seventy-five per cent of the actual liability for that month, the commissioner may impose an additional charge not to exceed five per cent of that unpaid amount.
(b) Division (D)(1)(a) of this section does not apply if the vendor's payment under division (B)(1) of this section is equal to or greater than seventy-five per cent of the vendor's reported liability for the same month in the immediately preceding calendar year.