Ohio will not offer tax amnesty in 2023

In April 2023, Ohio passed a law authorizing the Director of Budget and Management to create a two-month tax amnesty program during the 2023 calendar year — but only if the director determined by November 1, 2023, that the state needed the revenue the tax amnesty would generate. A pretty clever fail-safe, really.

We now know that Ohio will not have a 2023 tax amnesty program. It doesn’t need to. According to an October 10 State of Ohio Monthly Financial Report, Ohio’s general fund tax collections through September were $56 million above the estimate and $190 million above last year.

“There is no better example of what tax amnesties are really about,” says Scott Peterson, VP of Government Relations at Avalara. “Tax amnesty programs are designed to increase tax collections.” While some states have created amnesty programs specifically to allow sellers to clean up past liabilities, he adds, “even those typically have an ‘amount collected’ component because they always include a fiscal note estimating the amount of tax, penalty, and interest that would be collected.”

A tax amnesty is essentially a quid pro quo. For a designated period, the state reduces or completely waives penalties and/or interest on specified delinquent taxes for taxpayers who voluntarily pay them under the terms of the amnesty. States may also invite unlicensed businesses to come forward without fear of facing criminal penalties. Participating taxpayers get a break on penalties and/or interest (plus a clear conscience); the states increase collections with minimal effort.

Tax amnesties generally do raise revenue: A 2013 Louisiana tax amnesty program brought in a whopping $435 million. But they also come at a cost because the state forgoes any revenue it could have generated through the penalties and interest payments.

“By suspending penalties and fees that are typically charged for failure to pay taxes due or for late filings,” the Ohio Legislative Budget Office (LBO) observes, tax amnesties “reduce revenue from such penalties and fees.” On the other hand, tax amnesties could also “yield an increase in revenue … potentially offsetting any loss in fee revenue.” 

Ohio has offered four general tax amnesty programs over the last 22 years, with varying details and results:

A FY 2002 tax amnesty covering corporate franchise tax, employer withholding tax, individual income tax, pass-through entity tax, personal property tax, public utility excise tax, sales and use tax, school district income tax, and school district withholding tax raised $35.2 million

A FY 2006 tax amnesty covering corporate franchise tax, employer withholding tax, individual income tax, pass-through entity tax, personal property tax, sales and use tax, school district income tax, and employer school district withholding tax raised $58.9 million

A FY 2012 tax amnesty covering individual taxes (pass-through entity, personal income, school district income, and estate) and business taxes (commercial activity, corporation franchise, sales, gross receipts of a natural gas company or a combined electric and gas company, motor fuel, cigarette/other tobacco products, dealers in intangibles, employer withholding, and school district employer withholding) raised $65.7 million

A FY 2018 tax amnesty covering alcoholic beverage tax, cigarette/tobacco products tax, commercial activity tax, employer withholding tax, employer withholding school district tax, individual income tax, individual school district income tax, financial institutions tax, pass-through entity tax, and sales and use tax raised $14.3 million

Ohio also offered a lengthy use tax amnesty from October 1, 2011, to May 1, 2013. It raised more than $27 million.

The LBO admits that it “cannot predict with any precision what a future amnesty might raise,” though it says it could be in the millions. It’s difficult for the LBO to make predictions based on previous amnesties because each program differed somewhat in terms of the duration and specific taxes covered.

Understanding your tax obligations is the first step toward tax compliance. The Avalara Sales Tax Risk Assessment can help you determine where you may have an obligation to register for sales and use tax.