Loophole for retailers costs Ohio $60 million a year
Posted February 23, 2018 in Press Releases
Ohio gives out more than $9 billion a year in tax breaks. Many of these are unnecessary, outdated or unproductive. As the legislature’s new Tax Expenditure Review Committee prepares to review them all, Policy Matters Ohio is launching a new series, “Tax Break Take,” which takes a close look at select expenditures to determine whether the benefit (if any) is worth the cost.
In the first installment, Senior Project Director Wendy Patton analyzes the vendor discount tax break, which the Ohio Department of Taxation estimates will cost $59.7 million in 2018 and $61.5 million in 2019.
The vendor discount wasn’t created to spur job growth. Under a 1981 law, Ohio gives retail stores a 0.75 percent discount on state and local sales tax collections for the tedious work of collecting them and for paying on time — something that’s less needed today with the ability to file electronically.
The largest retailers benefit the most. In 2017, only .7 percent of vendors, those that collect more than $1 million a year, got more than 60 percent of the estimated value of the tax break.
Twenty-eight states have a similar tax break for vendors, but Ohio is one of just 12 states that doesn’t cap the maximum amount vendors can get.
“Both Governors Strickland and Kasich wanted to cap the discount,” Patton said. “At the very least, policymakers should do that. The millions of dollars the state loses from this break could be spent investing in our public schools, rebuilding the public transportation system or a host of other worthy, and needed programs.”