Ohio’s Sales Tax Administration – One of the Best in the Country

A recent report by the Council On State Taxation (COST), has put the spotlight on the fact that the state of Ohio’s sales tax administration is among the best in the country. Ohio tied for first with Indiana, Michigan and Wisconsin. The four most highly rated states, each receiving the top grade of A-, are importantly each a full member of the Streamlined Sales and Use Tax Agreement (SSUTA) which is designed to make sales tax administration simpler and more uniform.

COST is a state tax organization representing business taxpayers and is considered to be the most influential nongovernmental organization in the state tax policy arena. COST is a non-profit trade association consisting of nearly 600 multistate corporations and was formed in 1969 as the “Committee on State Taxation” by a handful of companies under the sponsorship of the Council of State Chambers of Commerce, an organization with which COST remains associated. The Ohio Chamber of Commerce is a member.

The Scorecard on State Sales and Use Tax Adminis­tration, otherwise titled “The Best and Worst of Sales Tax Administration” fo­cuses on and grades specific sales tax administration processes being employed by the states. There are forty-five states that impose sales taxes, raising over $360 billion in tax revenue yearly. The report shows how much differently the states act.

The COST scorecard is intended to point out areas of concern and to improve tax administrative systems ultimately increasing compliance and effectiveness. COST objectively evaluated state statutes and rules that govern state and local tax depart­ments’ administration of their sales taxes. They gave scores on seven different areas. They are:

  • Exemptions on Business to Business Inputs – Ideally taxing final personal consumption
  • Fair Sales Tax Administration – Not imposing a good faith requirement on sellers
  • Centralized Sales Tax Administration – Not allowing locals to have different rules
  • Simplification and Transparency – Following Streamlined Sales and Use Tax Agreement.
  • Reasonable Payment – Timing of a seller’s remittance
  • Fair Audits – Written process allowing level playing field
  • Other – Unique issues that don’t apply to most other states

The states bringing up the bottom were Colorado, New Mexico and Louisiana. None of the three are members of SSUTA and scored particularly badly on Central Administration and business input exemptions.

Ohio scored best in Fair Administration, Central Administration, Simplification & Transparency and Fair Audits. It didn’t do as well with Exemption for Business Inputs and Reasonable Payment Procedures. A comment in the report mentions Ohio’s onerous taxes on employment services, an issue we have been working towards fixing over the last few years. The COST report can be found here.

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