Two Pieces of Tax News from Ohio

tax lawOhio has had some interesting tax news in recent weeks. One piece that has received media attention involves recent reports about income tax revenue in the state, the other a proposal that could impact the state’s sales tax.

 

What about income tax revenue in Ohio? Ohio has faced some struggles meeting estimates for income tax revenue. Over the last 11 months the actual revenue has fallen $849 million short of the estimated projections. However, a recent report by WKSU notes that the state is proudly reporting a jump in collections. More specifically, the state was expected to gather 5 percent more than the projected estimates for July.

 

This translated to an additional 29 million in taxpayer dollars in the state’s coffers.

 

The public radio station for Northeast Ohio notes that although the state was below projections for most of the previous fiscal year, which runs July through June, it somehow ended the year with a surplus.

 

The station reports that Budget Director Tim Keen ended the fiscal year with a “cushion of just under $171 million.”

 

What will happen to Ohio’s sales tax? The recently enacted Ohio Budget Bill includes a provision that impacts internet sales. The provision establishes a nexus between the internet seller and the state. A nexus is essentially a legal term that means a connection is present. The law states that the nexus is determined based on the presence of cookies on “property in [the] state.”

 

Basically, this is intended to extend the state’s ability to tax businesses that operate online and have customers in Ohio. It is important to note that the use of cookies is only one factor taken into account when attempting to establish a nexus for sales tax obligations. Additional criteria, often involving sales revenue or actual interactions, are also taken into account.

 

What does this mean for taxpayers in Ohio? The push to increase income tax revenue brings attention to the fact that taxes are constantly under review. This can result in an audit at either the state or federal level.

 

The push to increase the state’s ability to hold businesses accountable for sales tax is fairly novel. Ohio is putting forward a rather innovative way to gather uncollected taxes. As noted in a recent piece in Bloomberg, the cookie provisions may face a legal challenge from businesses that are pushed to pay the sales tax.  

Download our Tutorial on IRS Audits