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How Can The Department Of Taxation Still Attempt To Collect This Debt

Photo of change in a jar

One question that I routinely receive from my clients is “How can the Department of Taxation still attempt to collect this debt?” The answer to this question depends largely on the type of tax in dispute.

R.C. 5703.58(A) states that the Tax Commissioner shall not issue an assessment after the expiration of 10 years from the date the tax return was due when such amount was not reported and paid.  R.C. 5703.58(B) states that the Tax Commissioner shall not issue an assessment for any tax due under R.C. 5741 (use tax) after the expiration of seven years from the date the tax return was due when such amount was not reported and paid. Both the 10-year period and the 7-year period shall be extended for any lawful stay. However, R.C. 5703.58(A) and (B) shall not apply to any amount collected by a vendor or seller under R.C. 5739 (sales tax), any amount withheld by an employer under 5747 (income tax) or any person who fraudulently attempts to avoid such tax.

Interestingly, and although R.C. 5703.58 was enacted in 2006, the Ohio Supreme Court has not yet applied the statute. Instead, the Ohio Supreme Court has held that the statute did not apply in a specific situation. The lack of case law applying R.C. 5703.58 can hopefully be tied to the Department of Taxation not issuing assessments beyond the statutory requirements, or if an erroneous assessment is issued, that the Department of Taxation remedies its error.

The main point is R.C. 5703.58 does not protect (1) vendors or sellers that collect sales tax and fail to remit it to the State of Ohio, or (2) those individuals or business that are fraudulently attempting to avoid paying taxes. So if you collected sales tax and you did not remit it to the State of Ohio, R.C. 5703.58 offers you no protection.

Written by Partner Damion M. Clifford, the partner-in-charge of the state and local tax practice at James E. Arnold & Associates, LPA.