The Ohio House of Representatives passed legislation that aims to allow wholesalers experiencing “bad debt” to claim a refund on cigarette, tobacco, and vapor products from the state for the tax they pay upfront when they are unable to obtain reimbursement from a retailer.
The House passed the legislation by an 85-3 vote with all Republicans and all but three Democrats voting in favor of the bill.
House Bill (HB) 66 sponsored by State Representatives Thomas Hall (R-Madison Township) (pictured above, left) and Reggie Stoltzfus (R-Paris Township) (pictured above, right) provides a “bad debt refund” on cigarette, tobacco, and vapor product taxes similar to the current sales tax refund for retail bad debt. This would allow those wholesalers experiencing a bad debt to be able to claim a refund from the state for the tax they had to pay upfront.
The lawmakers noted that statewide, there are over 100 wholesalers in operation, accounting for approximately 700 to 1,000 jobs. Ohio routinely generates over $100 Million annually through excise taxes on these operations.
Stoltzfus said that the state collecting certain excise taxes at the wholesale level of commerce has inadvertently created a situation where the responsible tax-paying party is left on the hook for payments they were supposed to be able to recoup.
“This is unjust and we as a legislature ought to remedy this issue by passing HB 66,” Stoltzfus said.
According to Hall, this bill makes a minor change that is of minimal fiscal consequence to the state but will go a long way to help Ohio wholesalers recoup their costs.
“Wholesalers play a crucial role in Ohio’s supply chain, and in an environment as competitive as markets today, Ohio’s wholesalers need every tool at their disposal to efficiently and effectively get products to store shelves. Unfortunately, there are some circumstances in which wholesalers have to deal with “bad debt” that occurs when they do not recoup costs from the retailers selling their products. As part of these costs, wholesalers are also paying Ohio excise taxes up front,” Hall said.
HB 66 aims to provide some financial relief to tobacco wholesalers rather than continue to double down on the wholesalers dealing with bad debt situations. The lawmakers noted that while this is not the only
product these wholesalers provide to retail stores, it is the most common.
To apply for a refund, a wholesaler must, within the first three years after the debt became uncollectable, submit to the Department of Taxation a copy of the original invoice and evidence that the order was filled, the retailer did not pay the wholesaler for the product, and the wholesaler attempted to collect the debt using reasonable collection practices.
The measure also grants the Tax Commissioner the power to grant the claimant a tax credit in an amount equal to the bad debt.
Hall noted that it would not be mandatory for wholesalers to file for this refund, rather, it is a tool provided to them to help ease their fiscal responsibility for bad debts.
According to Hall, based on the uptake in other states with similar laws they do not anticipate the legislation will significantly constrain the state budget.
“2014 estimates from the Ohio Wholesale Marketers Association found a likely fiscal impact of less than $200,000 and a maximum of under $1 million. Therefore, we also do not anticipate that this legislation would significantly constrain the state budget, and we believe these dollars would best be put to use if kept in the private sector,” Hall said.
This bill is identical to HB 513 from the 134th General Assembly which unanimously passed out of the House last session.
The legislation has the support of both the Ohio Wholesale Marketers Association and the Ohio Chamber of Commerce.
The bill now awaits consideration by the Ohio Senate.
– – –
Hannah Poling is a lead reporter at The Ohio Star and The Star News Network. Follow Hannah on Twitter @HannahPoling1. Email tips to [email protected]
Photo “Thomas Hall” by Thomas Hall for State Representative. Photo “Reggie Stoltzfus” by Reggie for Ohio. Background Photo “Ohio House Chamber” by Minh Nguyen. CC BY-SA 4.0.
