The expanded Ohio Sales Tax Holiday (“Holiday”) was supposed to provide a substantial benefit to Ohio consumers by exempting most purchases of tangible personal property from sales and use tax. Unfortunately, the full benefit of the holiday wasn’t reached as some vendors did not comply with eliminating the sales tax, leaving businesses to deal with collected sales taxes in the aftermath.
Several ZHF professionals purchased items that should have been exempt from sales tax due to the Holiday but paid sales tax because the vendor erroneously charged the sales tax. Based on our understanding, there were numerous reasons why vendors continued to charge sales tax during the Holiday. Some vendors indicated that they did not know anything about the Holiday, so they did not change their systems to eliminate the sales tax. (Please note that the Ohio Department of Taxation (ODT) did take steps to educate Ohio taxpayers including Tax Alerts and frequently asked questions on ODT’s website). Other vendors indicated that they were not participating in the Holiday, thinking that they had a choice to participate or not. Other vendors continued to charge sales tax because it was too difficult to change their systems to accommodate the rules of the Holiday (only applied to purchases of tangible personal property $500 or less, on an item by item basis, and did not include alcoholic beverages, tobacco, vapor products, motor vehicles, items including marijuana, and any taxable services) for such a short period of time.
Impact on Vendors
Many vendors welcomed the Holiday as a way to increase sales activity during the 10-day period. However, complying with the sales tax holiday was difficult and expensive for vendors, especially small businesses. To comply, businesses had to re-program their Ohio-only point of sales systems — twice — as well as retrain their personnel on the temporary law and on how to handle sales tax questions from customers.
Vendors should consider contacting their statehouse representatives to provide their feedback on the Holiday. ZHF routinely works with several policy makers and is effective at assisting businesses with legislative matters.
Impact on Purchasers
If you have erroneously paid sales tax to your vendor, you have two options to recover the overpaid sales tax:
- Contact the vendor and request that the vendor refund the sales tax[1], or
- File a refund claim directly with ODT.
Keep in mind that if a business erroneously accrued use tax on purchases (consumers use tax account holders and direct payment permit holders) that qualified for the Holiday, the business can also file a refund claim with ODT to recover the erroneously paid use tax.
Businesses that think they have erroneously paid sales tax or use tax as a result of the Holiday should also consider reviewing their purchases for the last four years[2] to determine if they have erroneously paid sales or use tax, to maximize any refund opportunities. ZHF has extensive experience in identifying and obtaining sales and use tax refunds for our business clients and we would be happy to meet with you to discuss how we can assist you in recovering overpaid sales and use tax.
If you would like to discuss overpaid sales and use tax or any other state and local tax matter, please contact John Trippier or any ZHF professional.
[1] Requesting a refund from the vendor does not constitute the filing of a refund claim. If a refund claim is filed, the statute of limitations relating to the transactions in the refund claim is tolled.
[2] The statute of limitations for sales and use tax is four years from the date the tax was paid