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Statutes

• Ohio Revised Code section 5703.54, Taxpayer's remedies against Department of Taxation, commonly referred to as "Taxpayer Bill of Rights".  Taxpayers may file suit for damages in state court against the Department, if an auditor disregards a provision of the law during an audit or collection action.
• Ohio Revised Code section 5739.13, Assessment of Sales Tax,
• Section 5739.13(A), When information in the possession of the commissioner indicates that the amount required to be collected or paid under this chapter is greater than the amount remitted by the vendor or paid by the consumer, the commissioner may audit a sample of the vendor's sales or the consumer's purchases for a representative period, to ascertain the per cent of exempt or taxable transactions or the effective tax rate and may issue an assessment based on the audit. The commissioner shall make a good faith effort to reach agreement with the vendor or consumer in selecting a representative sample period.
• Ohio Revised Code section 5741.10, (Senate Bill 200, effective September 6, 2002).  Refund of sales tax paid to vendor in error can be requested from Department of Taxation.
• Ohio Revised Code section 5741.13, Assessment of Use Tax,
• If information in the possession of the commissioner indicates that the tax paid by any consumer is less than that due, the commissioner may audit a sample of that consumer's purchases for a representative period and may issue an assessment based thereon. The commissioner shall make a good faith effort to reach agreement with the consumer in selecting a representative sample period.

Regulations

• Ohio Administrative Code section 5703-9-02.

Board of Tax Appeals Decisions

• A & J Food Mart v. Zaino, BTA Case No. 99-S-1608, 2001 Ohio Tax LEXIS 1386, (Ohio Board of Tax Appeals, August 17, 2001).  Sustained auditor's retail mark-up method when taxpayer had inadequate records.
• Antoun, Inc. v. Roger W. Tracy, Tax Commissioner of Ohio.  BTA Case No. 96-J-846, CCH-STATE-CASE-TAX-CT, OH-TAXRPTR ¶402-558, (Ohio Board of Tax Appeals, August 1, 1997).  A sales tax audit of a convenience store was properly conducted by calculating the percentage of the store's 1993 purchases from suppliers that would be taxable (75.54%) and applying this to calculate taxable sales for October 1990 through October 1993. The convenience store had not used a cash register accurately programmed to charge and collect sales tax, but instead, had arbitrarily estimated its monthly taxable sales as between 17% and 24% of its total sales. Although ownership of the convenience store changed in December of 1992, 1993 records were properly applied to determine the taxable sales for 1990 through 1992 because the convenience store did not submit evidence showing that taxable sales differed during these years. The convenience store also failed to provide evidence that the audit procedure violated the United States and Ohio constitutions.
• Aurora Market, Inc. d/b/a Shop N Go , BTA Case No. 99-S-293, CCH-STATE-CASE-TAX-CT, OH-TAXRPTR ¶402-931,  (Ohio Board of Tax Appeals, 2000). Board held taxpayer had insufficient evidence to overturn audit results.
• Beaver Office Products, Inc., n/k/a BOP USA, Inc. v. Tax Commissioner ,  BTA Case No. 97-J-776 (Ohio Board of Tax Appeals, June 25, 1999).  The Board of Tax Appeals found that the Tax Commissioner may make an assessment based upon an audit of a sample of the vendor's sales for a representative period.  It is rebuttably presumed that the action of the Commissioner was performed in good faith and with sound judgment.  Once an assessment is made, the burden shifts to the taxpayer to prove in what manner and to what extent the assessment was in error.
• Dennison Beverage & Produce Inc. v. Tracy, No. 99-M-2088, Ohio Bd. Tax App., (March 2, 2001).
• Dunhall Pharmaceuticals, Inc. v. Tracy , BTA Case No. 94-T-1340, CCH-STATE-CASE-TAX-CT, 94--96 OH-TAXRPTR-TB ¶402-239, (Ohio Board of Tax Appeals, October 27, 1995).  Board held that to successfully challenge an audit based on a test check the taxpayer must show that the selected test check period is not representative of normal business conditions.
• Forest Hills Supermarket, Inc., d/b/a Forest Hills Eagle v. Tax Commissioner, BTA Case No. 97-J-1508 (Ohio Board of Tax Appeals, April 5, 1999). The Board of Tax Appeals found that the Tax Commissioner was authorized to perform a sample audit of a supermarket's business over a representative period for sales tax compliance and assess tax against the taxpayer on the basis of that sample audit.  Even though the taxpayer maintained complete records and made them available to the auditor prior to the audit, the Commissioner possessed information that suggested that the taxpayer was not paying the appropriate amount of tax.  If the Commissioner possesses information indicating that a vendor has remitted less sales tax than the law requires, the Commissioner may audit a sample of the vendor's sales for a representative period and assess tax against the vendor on that basis.  Furthermore, the Board held that the Commissioner's audit findings were presumed correct and the taxpayer failed to provide evidence to substantiate its allegations that the Commissioner's findings were in error.
• Gruen Enterprises, Inc., d/b/a Avenue Beverage v. Roger W. Tracy, Tax Commissioner of Ohio, BTA Case No. 99-T-361, CCH-STATE-CASE-APP-CT, STATE-ARD ¶402-920, (Ohio Board of Tax Appeals, June 30, 2000).  Sustained a use tax assessment for 1994-1997 based on a sample from 1995.  Taxpayer had inadequate records for entire audit period and did not provide evidence sufficient to reduce the assessment.
• HRP Auto Centers, Inc. v. Tax Commissioner, BTA Case No. 93-J-989 (Ohio Board of Tax Appeals, May 5, 1995). The Commissioner is authorized to perform a test check when a vendor's records are inadequate or when there is reason to believe that the full amount of tax collected has not been remitted by the taxpayer.  The taxpayer has the burden of establishing in what manner and to what extent the Commissioner's determination is in error.
• Juva De, Inc. v. Roger W. Tracy, Tax Commissioner of Ohio, BTA Case No. 98-D-382, CCH-STATE-CASE-TAX-CT, OH-TAXRPTR ¶402-926, (Ohio Board of Tax Appeals, July 14, 2000).  Estimated taxable sales made by a bar and carry-out ready-to-eat food outlet that were derived by an Ohio Department of Taxation auditor for Ohio sales and use tax purposes were upheld because the taxpayer failed to maintain sales invoices or daily cash register tapes to verify total taxable sales. The auditor used the taxpayer's purchase invoices for a sample period to estimate the number of drinks sold at estimated prices.
• Khan (Shirley) v. Thomas M. Zaino, Tax Commissioner of Ohio, Docket No. 00-A-108, CCH-STATE-CASE-TAX-CT, OH-TAXRPTR ¶403-000, (Ohio Board of Tax Appeals, April 6, 2001).  An Ohio sales tax assessment against an owner and operator of a convenience store was upheld because the owner failed to maintain and provide complete and accurate records of taxable sales showing that the assessment was inaccurate. The state employed an alternative audit methodology, using whatever records were available, and the owner failed to prove that the audit methodology was erroneous.
• Maplerow Supermarket Inc. v. Lawrence, No. 99-S-352, (Ohio Board of TaxAppeals, August 16, 2000). 
• R.K.E. Trucking, Inc. v. Tracy, No. 98-S-1316, (Ohio Board of TaxAppeals, May 24, 2002).  A trucking company's purchases of trucks to haul construction materials and the repair, maintenance, and parts for these vehicles were subject to Ohio sales and use tax because the taxpayer was not primarily engaged in transportation of property for hire.  The taxpayer did not provide a time and revenue study regarding the usage of the trucks, and only offered a random sampling of invoices to represent its transportation activities. Such a random sampling did not constitute sufficient competent and probative evidence that the trucks were used primarily in the transportation for hire aspect of its business operations.
• Sears, Roebuck and Co. v. Lindley, Docket No. F.323, CCH-STATE-CASE-TAX-CT, 76--82 OH-TAXRPTR-TB ¶200-762, (Ohio Board of Tax Appeals, June 30, 1981).  Board held the taxpayer's agreement with the auditor on the audit sampling and grouping methodology is binding on the taxpayer.  Heard on other issues by Ohio Supreme Court, 70 Ohio St. 2d 249, 436 N.E.2d 1029, 24 Ohio Op 3d 339, CCH-STATE-CASE-HIGH-CT, 76--82 OH-TAXRPTR-TB ¶200-927, (Ohio Supreme Court, June 23, 1982).
• T&D Tavern, Inc., d/b/a Cagny’s v. Tax Commissioner , BTA Case No. 97-S-1179 (Ohio Board of Tax Appeals, August 6, 1999). The auditor used a sampling method to reconstruct the taxpayer’s sales figures on the basis of purchase information.  The taxpayer did not present any sales records or other relevant information as to its amounts of sales.  The taxpayer, a tavern, maintained that the total sales figure calculated in the audit was too high and did not reflect discounted sales of drinks or alcohol that were stolen or given away.  The Board of Tax Appeals upheld the assessment because the Tax Commissioner has the authority to use any information in the Commissioner's possession to calculate a deficiency assessment when the taxpayer does not have records sufficient to determine the accuracy of reported taxable sales and tax collected and remitted.
• Wooley Bulley's Inc. v. Zaino, Tax Commissioner of Ohio, Nos. 99-M-1362 and 99-M-1363, CCH-STATE-CASE-TAX-CT, OH-TAXRPTR ¶403-006, (Ohio Board of Tax Appeals, May 11, 2001). Post-audit Ohio sales tax assessments against a nightclub operator were upheld because the evidence presented by the operator neither accurately estimated liquor sales nor was not supported by competent and probative data.
• 24 Hours, Inc. v. Zaino, Tax Commissioner, BTA Case No. 00-G-112 (Ohio Board of Tax Appeals, February 22, 2002).  Upheld alternative estimation audit methodology used to assess sales and use tax on a conveneince store when the taxpayer lacked adequate records.  Taxpayer failed to present adequate evidence to rebut auditor's findings, except for lottery sales and cigarette returns.

Court Cases

• Akron Home Med. Services, Inc. v. Lindley, 25 Ohio St.3d 107, 495 N.E.2d 417, (Ohio Supreme Court, 1986).  Court held that when a vendor signs a test period agreement with the Tax Commissioner, it waives any objections covering the test period.
• Ali v. Tracy, Docket No. 78331, CCH-STATE-CASE-APP-CT, STATE-ARD ¶403-010, (Ohio Court of Appeals, Eighth Appellate District, June 7, 2001).   An inner-city retail grocery store failed to keep adequate records of taxable sales.  Auditor used a mark-up method on a sample of transactions to estimate tax assessment.  Taxpayer's accountant submitted a different sample to estimate the mark-up percentage.  The Board of Tax Appeals sustained the auditor's method and sample period.  The Appellate Court sustained the Board of Tax Appeals.
• Basic Distribution Corp. v. Ohio Department of Taxation, Docket No. 00-1911, 2002 STT 42-47,  , (Ohio Supreme Court, February 27, 2002).  The Supreme Court held that Ohio R.C.5739.13(A) expressly authorizes the sample method for audits, and that the Ohio Department of Taxation was expressly authorized to project a sample over the audit period in the taxpayer's audit.  Taxpayer may challenge assessment of sales and use tax under the remedial provisions of the Ohio Taxpayers' Bill of Rights before exhausting the Ohio Department of Taxation's administrative process.
• Basic Distribution Corp. v. Ohio Department of Taxation, Docket No. 99AP-1309, 2000 Ohio App. LEXIS 3874, CCH-STATE-CASE-APP-CT, STATE-ARD ¶402-948, (Ohio Court of Appeals, Tenth Appellate District, August 29, 2000). 
• Belgrade Gardens, Inc. v. Kosydar, 311 N.E.2d 1, 38 OS2d 135, 67 Ohio Op 2d 147, (Ohio Supreme Court, May 8, 1974).  The finding of an erroneous overpayment of sales tax upon completion of a mandatory test check of a restaurant's business is substantive evidence of the amount of overpayment even though the restaurant had no primary records to support a claim for refund.  Neither party contested the accuracy of the test check.  In accordance with Sec. 5703.05(B) of the Revised Code, the Tax Commissioner had the duty of ascertaining the amount of overpayment and, since the restaurant did not contest the amount of overpayment established by the test check, the Commissioner could not deny its use to support a refund claim.
• Brandy's Inc., d/b/a Brandy's Cafe v. Zaino, Tax Commissioner of Ohio,  No. 5-01-43, (Ohio Court of Appeals, Third Appellate District, April 18, 2002).  Sustained sales tax assessment against a nightclub owner whose records were incomplete.
• Cherry Street Corp. v. Porterfield , 272 N.E.2d 124, 27 O. S. 2d 260, 56 Ohio Op 2d 156, CCH-STATE-CASE-HIGH-CT, 68--72 OH-TAXRPTR-TB ¶200-410, (Ohio Supreme Court, July 21, 1971).  The Tax Commissioner's test checks of hamburger restaurants that failed to maintain adequate sales tax records were not defective on the ground that customers were not asked whether the food purchased was for consumption off the taxpayer's premises when the taxpayer did not ask this question of customers during the audit period in question.
• Dean Supply Co. v. Roger W. Tracy, Tax Commissioner, Docket No. 77834, 2000 Ohio App. LEXIS 5602, CCH-STATE-CASE-APP-CT, STATE-ARD ¶402-975, (Ohio Court of Tax Appeals, Cuyahoga County, Eighth Appellate District, November 30, 2000).  Upheld a one month sample of a restaurant and bar supplier's sales revenues to estimate revenue for a 36 month audit period.  Denied taxpayer's assertion that the month was not representative.  The sampling agreement was not executed under duress as it is uncontroverted that the taxpayer's representative voluntarily chose the sample month used by the tax commissioner in the audit and expressly agreed to the methodology used.
• Federated Department Stores, Inc., Rike-Kumler Division v. Lindley , 450 N.E.2d 687, 8 OS 3d 35, CCH-STATE-CASE-HIGH-CT, 82--86 OH-TAXRPTR-TB ¶201-193, (Ohio Supreme Court, June 29, 1983), affirming Ohio Board of Tax Appeals, No. 79-B-640, October 4, 1982.  Although the Tax Commissioner may issue a sales tax assessment based on any information in his possession, the assessment is not conclusively correct. When the Tax Commissioner issued an assessment based on the amounts of money placed in a sales tax clearing account within the taxpayer's department store, the taxpayer was able to meet its burden of showing in what manner and to what extent the Commissioner's investigation and audit and the findings and assessments based thereon were incorrect. The taxpayer met this burden by showing that the clearing account was used only as an internal management tool and that the records were not fully accurate. Actual tax returns were filed from audited sales records.
• Foster v. Evatt, 144 Ohio 65, 56 N.E.2d 265 (1944).
• J.B.L. Construction Co., Inc. v. Joanne Limbach, Tax Commissioner of Ohio, CCH-STATE-CASE-APP-CT, 89 OH-TAXRPTR-TB ¶400-101, (Ohio Court of Appeals, 4th District, Lawrence County, No. 1846, December 22, 1988), affirming Ohio Board of Tax Appeals, No. 84-D-138, January 7, 1987.  Because a construction company operating in several states failed to keep accurate records of items purchased and used in Ohio as required by Sec. 5741.15, the Tax Commissioner was authorized to estimate the taxpayer's Ohio sales and use tax liability on the basis of available records. The taxpayer had used an "800" prefix on purchases to designate an Ohio use or storage and thus was assessed on all such items. The company unsuccessfully argued that certain "800" items were allocable among several states. The taxpayer could not use the proposed methodology in lieu of keeping accurate records.
• King Drug of Dayton v. Bowers, 171 Ohio 461, 172 N.E.2d 3 (1961).
• S. S. Kresge Co. v. Bowers, 206 N.E.2d 905, 2 O. S. 2d 2d 113, 31 Ohio Op 2d 188, CCH-STATE-CASE-HIGH-CT, 64--68 OH-TAXRPTR-TB ¶200-602, (Ohio Supreme Court, April 28, 1965).  A taxpayer that fails to maintain complete and accurate sales tax records, as required by Sec. 5739.10, R. C., may not use the test check method unless this method is employed by the Tax Commissioner in rejecting the taxpayer's report of its taxable sales. A taxpayer is not entitled to a sales tax refund based on a claimed overcancellation of prepaid tax receipts (under prior law) if, due to its failure to keep the required records, the taxpayer is unable to prove this allegation. Since the taxpayer has failed to carry the burden of proving that it did not actually collect money from customers as taxes in the amount of stamps canceled, it has no choice but to pay the money presumably collected to the state, regardless of its actual liability.
• Lubrizol Corporation v. Tracy, Case No. 94-L-151, 1195 CCH-STATE-CASE-TAX-CT, 94--96 OH-TAXRPTR-TB ¶402-073, Ohio App. LEXIS 3092,1995 WL 453125 (Ohio Court of Appeals - 11th District, 1995). Court held that Ohio statute expresses authorizes sampling even when the taxpayer has all records available for a a complete audit. The taxpayer was given an opportunity to participate in the audit planning, and cannot challenge the auditor's account selection after the completion of the audit. The commission is not required to find and correct errors that result in a refund to the taxpayer.
• McDonald's of Springfield, Ohio v. Kosydar, 43 Ohio 2d 5, 330 N.E. 2d 699 (1975).
• Narmac, Inc. v. Tracy, 614 NE2d 1042, 66 O.S.3d 637, CCH-STATE-CASE-HIGH-CT, 92-94 OH-TAXRPTR-TB ¶401-682,  (Ohio Supreme Court, July 14, 1993).  Court held that the assessment for a 33 month audit period was valid because there was no evidence that the restaurant's sales on the two test check days were unusual or differed in any way from its sales under normal business conditions.
• Owens-Illinois, Inc. v. Joanne Limbach, Tax Commissioner of Ohio, CCH-STATE-CASE-APP-CT, 88 OH-TAXRPTR-TB ¶202-614, (Ohio Court of Appeals, Sixth District, No. L-86-258, September 30, 1987), affirming in part and reversing in part Ohio Board of Tax Appeals, June 23, 1986.  The Tax Commissioner did not have the authority to assess sales taxes against a consumer on the basis of a test check, because at the time of the assessment, Sec. 5739.13 only subjected vendors to a test check. Although case law authorized the Commissioner to make assessments on the basis of a test check when inadequate records were maintained, in this case, there was no evidence that the taxpayer failed to maintain adequate records. In addition, the taxpayer never consented to the use of a test check for making a retroactive assessment. Thus, the Commissioner's use of the test check was unlawful.
• Pato Foods, Inc. v. Lindley , 7 Ohio App. 3d 22, 453 N.E.2d 1274 (1982).
• Quality Food and Vending Co. v. Lindley, Case No. CA 9261, CCH-STATE-CASE-APP-CT, 82--86 OH-TAXRPTR-TB ¶201-739, (Ohio Court of Appeals,  July 22, 1985).  Taxpayer had inadequate records to determine taxable on premises sales and nontaxable off premises sales from vending machines.  Court upheld audit method of observing machines for 12 hour test check periods.
• Shugarman Surgical Supply, Inc. v. Zaino, 97 Ohio St3d 183, 777 NE2d 244, , (Ohio Supreme Court, November 6, 2002).  Court upheld assessment of sales tax against retail medical equipment supplier.  Taxpayer agreed in writing to a four month test period of April through June 1991 as representative of a 31-month audit period December 1988 through June 1991. Court held that when taxpayer signed sampling agreement, it waived any objection to that period.  Taxpayer did not produce exemption certificates or acceptable letters of usage within the grace periods allowed by the auditor.
• Zapitelli v. Lindley, 1981 Westlaw 4376 (Ohio App. 1981).

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