Ohio Business Taxes | Youngstown/Warren Regional Chamber

Ohio Business Taxes

OHIO MAJOR BUSINESS TAXES

In 2005, Ohio enacted a sweeping tax reform—which is highly beneficial to business.

COMMERCIAL ACTIVITY TAX (CAT) - This tax replaces the Corporation Franchise Tax which is being phased out over five years. Most company doing business in Ohio will be subject to the commercial activity tax, a broad-based, low rate business privilege tax measured by gross receipts. The CAT will be levied at a rate of 0.26% on gross receipts in excess of one million dollars. Businesses with receipts of $150,000-$1 million will pay a minimum tax of $150. Businesses with receipts of less than $150,000 are not subject to the CAT. Note– Tax only applies to sales in Ohio. Sales outside of Ohio are exempt.

For more information about the CAT - contact the Ohio Department of Taxation at 1-888-7-CATTAX. or visit www.tax.ohio.gov.

CORPORATION FRANCHISE TAX - This tax is being completely phased out over five years at approximately 20% per year starting in tax year 2006 (payable in 2007). This is the higher of 0.004 percent of net worth or 5.1 percent of the first $50,000 net income and 8.5 percent of net income in excess of $50,000. Net income is apportioned to Ohio operations using a three-factor formula based on Ohio property, payroll, and sales. Ohio sales are double-weighted, resulting in a reduced percentage of Ohio taxable net income.

TANGIBLE PERSONAL PROPERTY TAX - This tax will begin a four year phase out starting in tax year 2006, payable in 2007, and ending with no tax due in tax year 2009, payable in 2010. This phase out applies to most businesses and includes furniture & fixtures, machinery & equipment, and inventory. New manufacturing machinery & equipment purchased/first used in Ohio after January 1, 2005 is exempt from the tangible personal property tax.

PROPERTY - Real estate is assessed at 35 percent of market value, the tax rates vary by location.

INDIVIDUAL INCOME TAX - Income tax rates will be cut 4.2% for all tax brackets for each tax year 2005 through 2009 for a total rate cut of 21% based on 2004 rates.

SALES AND USE - A state rate of 5.5 percent applies to retail sales and rental of tangible personal property. Counties and regional transit authorities may levy additional sales taxes, which vary from county to county: Trumbull (6.5%), Mahoning (6.0%), Columbiana (6.5%).

UNEMPLOYMENT COMPENSATION CONTRIBUTIONS - Employers must make contributions on the first $9,000 of each covered employee's wages. The contribution rate for new employers is 2.7%, except for those engaged in the construction industry, who pay 3.7%. Employers pay this rate until they qualify for an "experience rate". Experience rates vary yearly, but ranged from 0.2% to 7.5% for 2004.

WORKERS' COMPENSATION PREMIUMS - All employers make premium payments unless they qualify as self-insurers. Rates based on the hazards involved vary by industry classification.

MOTOR VEHICLE FUEL USE - A tax levied on the difference between the fuel purchased and that consumed in Ohio by vehicles with three or more axles, the flat charge is $.28 per gallon consumed in Ohio.

MOTOR VEHICLE LICENSE - Commercial vehicles pay a prorated tax based on the ratio of mileage traveled in Ohio to total mileage. The tax is based on gross weight of the vehicle and it ranges from $45 for 2,000 pounds to $1,340 for those in excess of 78,000 pounds.

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