BIENNIAL BUDGET BOASTS RELIEF FOR OHIO BUSINESSES
How Will New Rules Impact Your Business’ s Bottom Line?
This past summer, Gov. John Kasich signed Ohio’ s biennial budget into law. Tucked within its pages were several key tax provisions that could impact your bottom line.
New Year, New Tax Collection Rules For Out-of-State Retailers
State legislators have tried to get a handle on how to define a retailer’ s nexus, or sufficient physical presence, for a while. So, it’ s no surprise that Gov. Kasich took a stab at it in his current budget.
Beginning on Jan. 1, 2018, a seller is deemed to have substantial nexus with the state if it:
• Uses in-state computer software to sell or lease tangible personal property or services and has gross receipts totaling more than $ 500,000 in the current or preceding calendar year from sales of tangible personal property consumed or intended for consumption in Ohio.
• Enters into an agreement with a third-party to provide a content distribution network in an attempt to accelerate or enhance the delivery of its web site to Ohio consumers and has gross receipts totaling more than $ 500,000 in the current or preceding calendar year from sales of tangible personal property consumed or intended for consumption in Ohio.
OBG Filing / Payment for City Net Profits Returns
Beginning Jan. 1, businesses may begin to file their net profit tax returns and remit payment through the Ohio Business Gateway( OBG). While businesses are not necessarily required to use this option, those that do may find the OBG to be a significant time-saver, particularly among those required to file in 10 or more cities. Instead of completing and filing a stack of forms, business owners can file one form on the OBG, which would satisfy the filing requirement in other Ohio municipalities. Additionally, rather than writing a handful of checks and mailing returns all over the state, the gateway significantly simplifies the payment process.
Throwing Out The Throwback Rule
Also beginning Jan. 1, the law will change how sales are allocated on business returns. Currently, if a good is shipped from a warehouse in an Ohio municipality to an out-of-state customer, that sale would be apportioned to the Ohio municipality where the good was shipped. In 2018, that sale would not be apportioned to the Ohio municipality. Additionally, if a good is shipped from municipality“ A” to municipality“ B,” but employees do not regularly solicit business in municipality
“ B,” the sale is not apportioned to either municipality. Current law apportions this sale to municipality“ A.”
The big winners here are our Ohio companies that ship out of state or
to other municipalities without soliciting sales at the place of delivery. Ohio-based manufacturers and distributers could see significant tax savings starting in 2018.
Estimate and Pentaly Housekeeping Changes
Starting in taxable years beginning in 2018, individual fourth quarter estimates for municipalities will be due by Jan. 15. Business fourth quarter payments will still be due by Dec. 15. So if a taxpayer is in subject to alternative minimum tax( AMT) in 2018, he or she could wait until January to make a fourth quarter estimate for a potential Schedule A deduction in 2019.
Also, if municipal income tax withholding is not paid on time, the penalty is no longer required to be 50 percent of the unpaid amount – which is what current law dictates. Moving forward, while the penalty may be as high as 50 percent, depending on the municipality, it can also be less. Current law mandates a 50 percent penalty.
Ohio Tax Help
For help with your state and local tax planning efforts or to learn more about how this new budget will affect you, give us a call.
by: Tom Jeffries CPA, Principal
212 North Washington St. Millersburg, OH 44654
( 330) 521-4533 tom. jeffries @ reacpa. com