Tax Information
Ohio offers a moderate tax climate
The 2000 Census indicates Ohio ranks 34th among the 50 states in the amount of
state taxes (personal income, sales, corporate, public utility and gasoline)
collected per capita. When county sales, property and municipal income taxes
are added, Ohio ranks 20th highest in the country.
Summaries of Major Ohio Business Taxes
Most manufacturing, research & development, distribution, and business
services corporations in Ohio will have the greatest state tax liability
through Ohio’s Corporate Franchise Tax (or personal income tax for owners of
Subchapter S Corporations, partnerships and proprietorships) and Real Property
and Tangible Personal Property Taxes. These taxes are summarized below. For
more information on taxes in Ohio, please to the Ohio Department of Taxation
website at www.state.oh.us/tax/.
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Ohio’s Corporate Franchise Tax
Who Remits the Corporate Franchise Tax
Domestic corporations organized for profit under Ohio law and foreign
corporations organized for profit which do business in Ohio (unless
specifically exempt).
Tax Base
The corporate franchise tax has two alternative tax bases with the liability
determined by the base that yields the higher tax:
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The Ohio net worth (net book value of assets less net carrying value of assets
less net carrying value of liabilities) of the corporation; or
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The Ohio net income (profits) of the corporation.
Apportionment Factor
An apportionment factor is used to determine a corporation’s Ohio tax liability
under both the net worth calculation and net income calculation. The
apportionment factor calculates the percentage of property, payroll and sales
in Ohio: 20%, 20%, and 60% respectively. This triple-weighted sales factor
provides an advantage to corporations selling goods and services outside of
Ohio.
Apportioned Ohio net income/net worth = (% Property in Ohio x .2) + (% Payroll
in Ohio x .2) + (% Sales in Ohio x .6)
Rates
General Rate (Excluding Financial Institutions):
The general franchise tax rate is the greater of:
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4.00 mills on net worth with $150,000 maximum liability (start-up
high-technology firms are exempt); or
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5.1% on the first $50,000 of net income plus 8.5% on net income in excess of
$50,000; or
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minimum tax of $50.
Two Additional Rates (Excluding Financial Institutions)
The rate for all corporations except financial institutions and “litter stream
corporations”* is the greater of:
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0.14 mill on net worth; or
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0.11 percent on the first $50,000 of net income plus 0.22 percent on net income
in excess of $50,000.
Maximum tax charged by these rates is limited to $5,000.
The rate for “litter stream corporations” is the greater of:
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0.14 mill on net worth; or
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0.11 percent on the first $50,000 of net income plus 0.22 percent on net income
in excess of $50,000.
Maximum tax charged by these rates is limited to $5,000.
* Litter stream corporations include corporations manufacturing or selling
alcoholic beverages, soft drinks, containers, and other litter stream products.
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Ohio’s Personal Income Tax
Business owners who pay personal income tax on company profits (rather than
through the corporate franchise tax) will have their taxable income based upon
federal adjusted gross income reported to the U.S. Internal Revenue Service
plus or minus adjustments, according to Ohio law. Rates are as follows:
| Ohio Taxable Income |
Tax Calculation |
| 0 - $5,000 |
.691% Ohio Taxable Income |
| $5,000 - $10,000 |
$37.15 + 1.486% of excess over $5,000 |
| $10,000 - $15,000 |
$111.45 + 2.972 of excess over $10,000 |
| $15,000 - $20,000 |
$260.05 + 3.715% of excess over $15,000 |
| $20,000 - $40,000 |
$445.80 + 4.457% of excess over $20,000 |
| $40,000 - $80,000 |
$1,337.20 + 5.201% of excess over $40,000 |
| $80,000 - $100,000 |
$3,417.60 + 5.943% of excess over $80,000 |
| $100,000 - $200,000 |
$4,606.20 + 6.9% of excess over $100,000 |
| over $200,000 |
$11,506.20 + 7.5% of excess over 200,000 |
The personal exemption for 2000 is $1,100 for all exemptions.
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Ohio’s Real Property Tax
Tax Base
Land and buildings are subject to real property taxes in Ohio. The taxable
value of real property is assessed at 35% of market value, except for certain
agricultural land. The tax rate (called millage) applied to the assessed value
varies by local government jurisdiction. Counties must reappraise all real
estate once every six years. Equalization adjustments are made in the third
year following reappraisal. State law mandates a 10% reduction (or rollback) on
each taxpayer’s bill. The State makes up for that reduction with direct
assistance to local governmental entities.
Tax Rates
The total tax rate (millage) includes all levies enacted by legislative
authority or approved by voters for all taxing jurisdictions within which the
property is located, including county, township, municipal corporation, school
district, and special districts) The Ohio Constitution prohibits governmental
units from levying property taxes, which exceed 1% of true value, unless
approved by voters. In 1999, the average statewide gross tax rate was 78.25
mills. (A mill is $1 for every $1,000 of taxable value.) Application of
“reduction factors” resulted in an average statewide net rate of 51.91 mills.
Property tax rates in southeast Ohio are generally less than statewide
averages.
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Ohio’s Tangible Personal Property Tax
Tax Base
Ohio’s Tangible Personal Property Tax is applied to machinery, equipment and
inventory used in business. The “taxable value” is determined by applying a
listing or assessment percentage to the “true value” of tangible property. The
“true value” of machinery and equipment is calculated according to the
Department of Taxation’s depreciation schedule, unless the assessor determines
otherwise. The value of manufacturers’ inventories is determined by the average
monthly value (basically cost of acquisition) of inventories. After “true
value” is determined, the assessment percentage used to determine “taxable
value” is 25% for tax year 2000. Starting in the tax year 2005, the assessment
rate on inventory will be reduced by 2 percentage points per year.
Tax Rate
Tax millage rates vary with taxing jurisdictions. The rates applied to tangible
personal property taxable values are the full voted and unvoted millage rates.
However, gross taxes levied on real property are reduced when real property
values increase, while taxes levied on tangible personal property are not
reduced. The 2000 average personal property tax rate in Ohio was 73.86 mills.
Property tax rates in southeast Ohio are generally less than statewide
averages.
Major Exemptions
The first $10,000 of taxable value for each business.
Licensed motor vehicles and aircraft.
Patterns, dies, jigs and drawings used in business and held for use not held
for sale.
Certified air, water, and noise pollution control equipment.
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