Taxpayers in Ohio utilizing Direct Payment Permits should be aware. GBQ recently learned of the Ohio Department of Taxation’s intention to increase its audit focus on Direct Pay holders. The ODT publicly stated that it will be auditing all such taxpayers in the near future. It is undecided at this time how the audits will be conducted (using normal audit procedures or managed/participatory audit format).
Direct Pay holders not already on a continuous audit cycle should expect to be contacted shortly. In preparation, GBQ recommends a review of taxpayers’ current compliance levels to identify any exposure and/or offsetting overpayments for the open four year statute period.
Following are some hot button issues we are seeing consistently in our audit defense work:
1. Electronic Information Services / Automatic Data Process – Risk areas include any services involving hosted software programs, Platform as a Service (“PaaS”), access to databases of information and access to the service provider’s IT infrastructure.
2. Classification of capital improvements as taxable business fixtures vs. real property
3. Temporary employment services
4. Building Maintenance and Janitorial services
5. Software installation vs. modification/enhancement/implementation
If you are a Direct Payment Permit holder in Ohio and have any questions as you prepare for this ODT initiative, please reach out to a member of the GBQ SALT team.