Centralized collection enacted in budget bill

Written on Jun 29, 2017

OSCPA staff report

Gov. John Kasich signed Ohio’s biennial budget bill Friday night, enacting legislation that CPAs have said includes a number of necessary steps to improve the state’s business environment.

Friday was the constitutional deadline for the budget bill, House Bill 49 – which retains major OSCPA-supported provisions, including optional centralized collection on municipal net profits taxes and elimination of the municipal throwback rule.

“We applaud Gov. Kasich and the legislature for this important step,” said OSCPA President and CEO Scott Wiley, CAE. “Several provisions of this bill were ideas that OSCPA’s Ohio Tax Reform Task Force advanced last year as being necessary. We look forward to continuing the dialogue with lawmakers on how we can improve our state’s economic condition to the benefit of all Ohioans.”

From an OSCPA perspective, the only change on the centralized collection issue from the Senate-passed version is that the Ohio Department of Taxation would only retain 0.5% as an administrative fee from the cities on municipal net profits tax collections, instead of the previous 1%.

Another key provision OSCPA actively advocated for would have provided greater clarity that non-taxable services could not be subject to the sales tax simply because they are provided electronically. However, this provision was among the 47 upon which the governor used his line-item veto authority.

The bill passed the Senate, 24-8, and the House 59-38. Wednesday’s action came a day after the Conference Committee on HB 49 approved the report on the bill. That vote was 4-2 on a party line: Reps Scott Ryan, R-Newark, and Ryan Smith, R-Gallipolis, and Sens. Gayle Manning, R-North Ridgeville, and Scott Oelslager, R-North Canton, voted in favor; Reps. Jack Cera, D-Bellaire, and Mike Skindell, D-Lakewood, voted against.

OSCPA has long advocated for centralized collection of municipal net profits taxes as a meaningful way to improve the state’s business regulatory climate. The bill will, effective Jan. 1, permit Ohio businesses to choose to file their net profits returns on one form and make one payment to municipalities through the Ohio Business Gateway, and have their net profits filings administered by the Ohio Department of Taxation (ODT) rather than by each individual city. ODT has committed to funding software improvements allowing the uploading of returns prepared on commercial tax preparation software – a longtime barrier for many tax professionals to efficiently using the Gateway.

The Ohio Society of CPAs applauds the Kasich Administration and the Ohio General Assembly for their significant efforts to achieve these meaningful improvements to municipal tax compliance and other areas, which will make Ohio an even more attractive state in which to operate a business.

6 comments

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  1. Greg Saul | Jul 06, 2017

    Don, the opt-in is effective for taxable years beginning on or after January 1, 2018 and it's under new R.C. Sec. 718.80.

    (B)(1) A taxpayer shall make the initial election on or before the first day of the third month after the beginning of the taxpayer's taxable year by notifying the tax commissioner and each municipal corporation in which the taxpayer conducted business during the previous taxable year, on a form prescribed by the tax commissioner.

  2. Don Gipe | Jul 05, 2017
    How and when does one opt-in to business filing
  3. Don Gipe | Jul 05, 2017
    Good question.  Somebody tell us.
  4. Leon W. Maginnis, CPA/CFF, CFE | Jul 03, 2017
    This does not do a thing for the most troublesome problem of dealing with city tax withholding. Sounds like more complexity and duplication. 
  5. Greg Saul | Jun 29, 2017

    Mike, the legislation only applies to the business net profits tax, which on average is 15% of cities' total intake.  Therefore, the remaining withholding and individual filing will still take place at the local level. 

    Also, this is not mandatory.  It's up to each business whether or not to opt-in to the centralized filing at the state level, so businesses can continue to file net profits taxes at the local level if they so choose. 

  6. Mike Sherwood, CPA | Jun 29, 2017
    What happens to RITA, CCA and other private city tax collection agencies? 

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