Saturday, February 19, 2005

More on the Ohio Use Tax

In the previous post, I explained how the Ohio Department of Taxation is going after people who bought tobacco products online without paying taxes. Technically, they should be paying an Ohio use tax on the purchase.

Knowing that all Ohio Voter readers are good, law-abiding citizens, I thought I would provide a list of sample items that are subject to the Ohio use tax if you didn't pay sales tax at the time of purchase.
  • All Internet purchases
  • All catalog orders
  • All direct sales purchases such as those Ginsu knife you called up and ordered at 2:00am in a moment of weakness
  • All out-of-state purchases made while traveling or vacationing in another state with a different state tax rate than Ohio
Luckily, being the law-abiding citizen that you are, you dutifully kept your receipts for all of the above purchases throughout the year. Unfortunately, there's still another situation you need to watch out for.
  • All purchases you made in another Ohio county with a lower sales tax rate than your resident county.
Yes, you read that correctly.

Ohio's 88 counties have 6 different sales tax rates, ranging from 6.5% to 8.0%. If you happen to live in Cuyahoga county - which has a sales tax rate of 8% - and you bought anything in another Ohio county, you need to pay the difference in the tax rate between the county you purchased the item in and your 8% rate.

I hope you kept your receipts Cleveland.

OK, so now you got to the point where you've gathered up all of your receipts from your out-of-county purchases, figured out the diffences in the tax rates and added the total to all of your other purchases listed above. You are ready to join the 1% of all Ohio taxpayers who declared any use tax last year.

You must be fine now.

Well, only if you were very careful in filling out your federal taxes too.

You see, federal law allows you to deduct state income taxes from your federal return. It does not allow you to deduct state use taxes. If you mistakenly deduct your use taxes (which are reported and paid as part of your income tax form) from your federal taxes, then the IRS can come after you with fines.

So there you have it. A quick guide to Ohio's use case tax. Have a nice day and have fun gathering your receipts.

Hat tip to Douglas L Oliver from The Buckeye Institute and his article "Ohio's Useless Tax", the source of much of this information.