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Ohio Sales Tax Exemptions Businesses ... Generally, in Ohio, sales of tangible property are taxable unless an exemption exists, whereas services are generally...Blog
November 27, 2024 • 5 min read
From understanding how businesses are taxed to navigating changes in Ohio tax regulations, it’s important to be aware of potential tax hurdles and how to proactively avoid them. This article from Buckingham, Doolittle & Burroughs discusses the intricate landscape of state and local tax regulations in Ohio, shedding light on potential challenges businesses may encounter.
The Basics of Ohio State and Local Tax
Ohio imposes various taxes, including income, property, sales and use tax, commercial activity tax, and pass-through entity tax, each with its own set of rules and implications. Businesses that grasp the fundamentals of these taxes and ensure compliance can optimize their financial strategies and operations in Ohio. We’ve previously written about navigating business tax audits, while maximizing exemptions and deductions for Ohio businesses. This article addresses Ohio’s basic tax framework and planning opportunities to help businesses comply with their legal obligations and take advantage of opportunities.
How Do Local Taxes Work in Ohio?
Municipalities impose tax on wages, salaries, and other compensation earned by residents and nonresidents who work within that municipality. The tax also applies to net profits a business earns within the municipality, along with the net profits from rental activities. Localities impose taxes on real property and set their own incremental sales tax rates (in addition to state sales tax).
How Do State Taxes Work in Ohio?
State taxes consist of income, sales, and property taxes, among others. In addition to these major taxes, Ohio also imposes other taxes and fees, such as the Commercial Activity Tax, and various excise taxes on specific goods and services.[1] Simply having knowledge of these various taxes businesses are subject to is the first step toward strategic financial planning.
Potential Tax Challenges
Here are a few potential challenges and good-to-know bits of information:
Complex Tax Code
Ohio tax law can be complicated, especially when businesses are juggling multiple obligations like sales tax, income tax, property tax, etc. It’s critical for businesses to be aware of taxes they must pay to the state to avoid penalties and audits. Below are a few key concepts that taxpayers can use to comply with their tax obligations and possibly reduce their liabilities.
Tax Incentives and Credits
Ohio taxes don’t just create challenges, however. Ohio has many opportunities for businesses to claim tax benefits based upon the work they do. Ohio offers several tax incentives and credits to businesses to encourage economic growth and investment. Some of the key incentives and credits include:
These are just a few examples of the tax incentives and credits available to businesses in Ohio.[10] Eligibility requirements and application processes vary for each incentive, so businesses should consult with tax professionals before they attempt to obtain them. The lawyers at Buckingham, Doolittle & Burroughs are experienced in these matters and may be contacted for more information. Our attorneys have helped many taxpayers navigate audits, refund claims, planning and litigation all the way to the Ohio Supreme Court to resolve their Ohio state and local tax issues.
If you have questions regarding your Ohio State & Local tax obligations and opportunities, contact the SALT attorneys at Buckingham, Doolittle & Burroughs to discuss your matter. Steven A. Dimengo, Richard B. Fry III, Nathan M. Fulmer, and Noah Veres are ready to assist you.
[1] Annual Report Fiscal Year 2023, Ohio Dept. of Taxation, pp. 8-11; See Ohio’s Taxes, Ohio Dept. of Taxation (https://tax.ohio.gov/professional/ohtaxalert/ohio-taxes) (last visited Nov. 1, 2024) .
[2] Commercial Activity Tax¸ Ohio Dept. of Taxation (https://tax.ohio.gov/help-center/faqs/commercial-activity-tax-cat) (last visited Nov. 1, 2024).
[3] Merwine, Andrew, Ohio’s System for Challenging Property Values and Taxes, Ohio Bar (Mar. 26, 2023); See e.g. Board of Revisions, Hamilton County Auditor Online (https://www.hamiltoncountyauditor.org/bor.asp) (last visited Nov. 1, 2024).
[4] O.R.C. §122.17.
[5] Ohio Motion Picture Tax Credit, Ohio Dept. of Development, https://development.ohio.gov/business/ohio-film-office/ohio-film-program (last visited, Nov. 1, 2024); O.R.C. §122.85.
[6] O.R.C. §5726.56.
[7] Ohio Historic Preservation Tax Credit Program, Ohio Dept. of Development https://development.ohio.gov/community/redevelopment/ohio-historic-preservation-tax-credit-program (last visited Nov. 1, 2024); See O.R.C. § 149.311.
[8] O.R.C. §122.171.
[9] O.A.C. 5703-9-21.
[10] See Annual Report Fiscal Year 2023, Ohio Dept. of Taxation, pp. 148-149.
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