Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

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Multistate Taxation: New York's Highest Court Upholds Click-Through Nexus Law Amid Facial Constitutional Challenge PDF Print E-mail
Tuesday, 30 April 2013 13:12

“Click-through nexus” laws generally attribute the presence of in-state representatives who refer sales to an out-of-state retailer, including via web links, in exchange for a commission for determining sales tax nexus. See e.g., New York Tax Law § 1101(b)(8)(vi). New York was the first state to enact such a “click-through nexus” or Amazon law. Predictably, Amazon.com and Overstock.com challenged the constitutionality of New York’s click-through nexus law. After making its way through the trial court and initial appellate court, the New York Court of Appeals (the state’s highest court) recently held that the statute did not violate the U.S. Constitution on its face.

The Court found that it was reasonable to impose sales tax collection burdens on out-of-state retailer, such as Amazon.com and Overstock.com, that have effectively established an in-state sales force through affiliate programs. Despite the affiliates’ primary activity being simply posting links to the retailers’ online marketplaces, evidence in the record supported active solicitation of New York residents by the affiliates to justify the presumption that such arrangements created nexus. “The bottom line is that if a vendor is paying New York residents to actively solicit business in this State, there is no reason why that vendor should not shoulder the appropriate tax burden.” Overstock.com, Inc. v. N.Y. State Dept. of Tax. and Fin., 2013 WL 1234823 (N.Y. Ct. of Apps., Mar. 28, 2013).

Additionally, the opinion specified that substantial nexus would not result if the New York resident was paid merely to post passive advertisements on their website, relying upon the Department of Taxation and Finance’s published guidance that the statute is only triggered if the compensation paid to the New York resident is tied to a completed sale. N.Y. St. Dept. of Tax. & Fin. Memorandum No. TSB-M-08(3)S (May 8, 2008).

Justice Robert Smith wrote an interesting dissent whereby he concludes that the statute is unconstitutional since, based upon its literal wording, it covers online (passive) advertisements linking to the advertiser’s website. This fight may not be over as Overstock.com has indicated that it will likely file an appeal to the U.S. Supreme Court.

Last Updated on Tuesday, 30 April 2013 13:18
 
Northeast Ohio State and Local Tax Conference PDF Print E-mail
Monday, 17 June 2013 17:20

Steve and Rich will be participating in the inaugural Northeast Ohio State & Local Tax Conference on July 25, 2013 in Independence, Ohio. The Conference, presented by The University of Akron's George W. Daverio School of Accountancy and The Ohio Society of CPAs, will be beneficial for a wide variety of professionals, including CPAs, tax attorneys and business owners / executives. The Conference will address Ohio and multistate tax issues, trends and planning techniques, including updates from Ohio’s most recent budget bill to be effective July 1, 2013. 

Steve will present on Ohio sales tax trends, developments and planning opportunities. Rich and Team NEO’s Stephanie Mercado will discuss the benefits of Ohio’s tax incentives and economic development tools. 

Additionally, keynote speaker Joseph Testa, Ohio Tax Commissioner, will give an overview of Ohio’s tax landscape and Margaret Brewer, executive director, Ohio Department of Taxation, will present a thorough review of Ohio tax procedure. Other speakers include: Ray Turk (Price Waterhouse Coopers); Amy Arrighi (Regional Income Tax Authority); William Nolan (Ernst & Young); David Perry (KPMG, LLP) and John Slagter (Buckingham, Doolittle & Burroughs, LLP). 

Click here for more information regarding the conference, including how to register.

Last Updated on Wednesday, 26 June 2013 15:18
 
Snowbirds: Watch Out For Ohio's "Contact Period" Test! PDF Print E-mail
Thursday, 17 December 2009 20:24

Ohio has adopted a unique test for determining who is considered an Ohio resident for individual income taxes.  Based upon the number of  “contact periods” an individual has in Ohio during a given year, a presumption is created as to the individual’s residency.  A “contact period” occurs when an individual is in Ohio for any period of time on two consecutive days, while being away overnight from the individual’s non-Ohio residence.  Under this test, an individual is irrebuttably presumed not to be an Ohio resident if he/she: 1) had a non-Ohio abode for the entire year; 2) had less than 183 Ohio contact periods during the year; and 3) timely filed an Affidavit of Non-Ohio Residency/Domicile with the Ohio Tax Commissioner in  the following year.  Failure to file the Affidavit will cause the individual to be presumed to be an Ohio resident. 

The “contact period” test often arises with respect to retirees that purchase a residence “down south”, while retaining their Ohio residence and continuing to spend significant time in the state – so-called “dual residents.”  Since the taxpayer has the burden of proving the number of non-Ohio “contact periods” he/she has during the year, it is crucial to keep complete records, perhaps even a daily journal, of those days spent outside of Ohio.  If you are contemplating moving out of the state, but retaining your Ohio residence, you should contact an Ohio state tax attorney  to confirm the necessary proof and records to be maintained to support the presumption that you are no longer an Ohio resident. 

However, it should be noted that the “contact period” test normally will not apply to transition years (the first year in which the non-Ohio residence is acquired), as this test does not apply to part-year Ohio residents.
Last Updated on Thursday, 17 December 2009 20:38
 
Restaurants Under Audit: Tips for Agreeing to Utilize a Test Check PDF Print E-mail
Saturday, 31 August 2013 15:47

In a previous post, we discussed the increased scrutiny quick service restaurants and others with large reported carry-out orders are facing for under collecting Ohio sales tax. These restaurants under audit must be extremely careful before allowing the Ohio Department of Taxation to conduct a test check or sample audit, as a taxpayer who enters into such an agreement is usually unable to challenge the audit methodology set forth therein.

Two specific items to address in negotiating a favorable method with the Department include site selection and providing for an offset in the calculation. For vendors with multiple locations, site location for the test check will have a significant impact on the ultimate liability since the results from the sample locations will be extrapolated to the remaining locations. The vendor must ensure the sample locations are representative of the whole business. Second, in our experience, the initially proposed sample agreement does not provide a reduction for periods which the statistical analysis results in an overpayment. Under the proposed calculation, if one month results in a $100 liability and the next month results in a $100 overpayment, the Department would ignore the second month and assess a $100 liability. This contravenes the very premise of a statistical sample, which is that some periods will be above the average ratio and some below. Moreover, the purpose of the test check is to measure overall compliance. So, as long as the aggregate results are in-line with the average, no liability should result.

We have extensive experience in helping restaurants navigating through a sales tax audit, including negotiating the terms of the agreement to ensure the test check / sample audit reflects the restaurant’s actual operations and to avoid inequitable results, as well as minimize penalties. 

Last Updated on Tuesday, 03 September 2013 19:13
 
Taxpayer Allowed To Present New Appraisal in Property Tax Appeal PDF Print E-mail
Tuesday, 02 August 2011 12:20

In a property tax valuation case, Steve Dimengo and Dave Hilkert recently succeeded in obtaining a favorable judgment with the Ohio Supreme Court for their client, WCI Steel, Inc.  The Court's 7-0 decision essentially allows a property owner to introduce a new appraisal to the Ohio Board of Tax Appeals (BTA) even though it was not previously presented at the administrative appeal to the Ohio Tax Commissioner.  Further, the decision ruled that "The jurisdiction of the Board of Tax Appeals (BTA) is invoked to review an assessment in which the tax commissioner has determined the value of personal property if the notice of appeal from the determination (1) states the appellant's objection to the commissioner's actions in valuing the property and (2) identifies the treatment the commissioner should have applied."  The Supreme Court remanded the case to the BTA to address the value of WCI's property, taking into consideration the appraisal at issue. View the full summary here.

Last Updated on Tuesday, 02 August 2011 18:21
 
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Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.

 

Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.

News

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

 

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