Ohio State University Fact Sheet
Community Development
700 Ackerman Road, Suite 235, Columbus, OH 43202-1578
Taxes-State and Local
CDFS-1177-95
Small Business Series
Gregory R. Passewitz
Many new businesses do not know which taxes apply to them and their
product or service. The following information covers the most common
state and local taxes. It does not explain the tax laws themselves,
but, gives basic information helpful to the business. Consult the
Ohio Department of Taxation for more information.
State of Ohio
Income Tax
The Ohio income tax is based on the federal adjusted gross income as
reported on the federal income tax return. Sole proprietors must pay
on the net earnings of their business. Members of a partnership pay
on their share of the partnership's net earnings. All businesses must
file a quarterly estimated tax return if they expect their tax
liability to exceed the tax withheld by at least $300.
State Income Tax Withholding
Businesses doing business in or maintaining an office in Ohio must
withhold Ohio income tax from their employees. Withholding tables
available through the Ohio Department of Taxation, Income Tax
Division, show the amount of tax to be withheld depending on certain
employee criteria. An employer required to withhold income tax must
register with the Ohio Department of Taxation as a withholding agent
within 15 days after starting a business. Monthly or quarterly
payments of the tax withheld is determined by the amount withheld
from the employees during the quarter. For more information, contact
the Ohio Department of Taxation.
Sales and Use Tax
All businesses with retail sales, rental, repair and installation of
tangible personal property and selected service businesses must
collect and remit sales tax, unless specifically exempted. The state
sales tax is 5 percent with specific brackets for sales in multiples
of one dollar. New retailers must apply for a vendor's license (Form
ST-1) with the county auditor in the county in which the business
will be located. Lawn care, landscaping, detective and security, data
processing, telecommunications service vendors apply with the Ohio
Department of Taxation. There is a $25 application fee and a $10
annual renewal fee.
Retailers who sell based on orders received by
telephone or mail and deliver the merchandise to the consumer, apply
for a license, application fee-$25; renewal fee-$10 with the
Department of Taxation. Vendors making retail sales from a stock of
goods in counties where they have no fixed place of business
(transient vendors) apply for a license (application fee-$100;
renewal fee-$40) with the Department of Taxation. Vendors making
sales at a temporary exhibition in a county where they have no fixed
place of business (limited vendors) may apply for a license (fee-$5)
with the County Auditor or Department of Taxation which is valid for
a maximum of 17 days. Sellers outside of Ohio engaged in the business
of selling in Ohio must register (form UT-1000) with the Department
of Taxation (no fee).
Retailers are requested to file either a
monthly or semi-annual return based on expected tax liability (Form
ST-10). A discount of 0.75% of the tax due is given if returns and
the tax are filed on time.
Corporation Franchise Tax
Ohio has imposed a franchise tax on corporations organized for profit
that do business in Ohio. The tax is imposed annually on income
and/or value of corporate assets with a minimum tax of $50 per year.
Exempt corporations include insurance companies, public utilities,
credit unions, "S" corporations and most non-profit corporations.
Unemployment Compensation Contributions
Employers with one or more workers (except agricultural or domestic
employers to which special rates apply) must pay a payroll tax on
wages paid to employees. Family members such as spouse, parents or
children under 18 years of age are not covered by this tax, unless
employed by a corporation, homeworkers, or independent contractors
meeting certain conditions are not covered by this tax. Check with
the Ohio Bureau of Employment Services for specific information.
Worker's Compensation Premiums
The Worker's Compensation program protects the employee and the
employer when a work-related injury or death occurs. All employees
with one or more full or part-time employees must pay premiums unless
qualified as a self-insurer. Sole proprietors and partners in a
business may elect whether or not they wish to be covered. Household
workers or casual laborers who receive $160.00 or more per quarter
from one employer must be covered.
Specific Business Taxes
Various businesses may be liable for specific taxes related to their
business. Examples are alcoholic beverage tax, cigarette excise tax,
dealers in intangibles tax, highway use tax (trailers used in
business), lodging excise tax and severance tax. Check with the Ohio
Department of Taxation for specific information.
County and Local Taxes
Sales Tax
County and regional transit authorities may each levy sales tax in
multiples of 0.25% up to 1.5%. The total combined rate-state (5%)
county and transit authority may not exceed 8%.
Tangible Personal Property Tax
Businesses owning tangible personal property such as machinery,
equipment, inventories, furniture, or fixtures may have a tax
liability. Tangible personal property is valued at percentages of
true value with the tax rates being determined locally. The first
$10,000 of listed value of taxable tangible personal property owned
by the business is exempt from taxation. A return must be filed on
time even though no tax is due. For more information, contact your
county auditor.
Municipal Income Tax
Approximately 500 cities and villages in Ohio have an income tax. The
tax rate varies, but the most common rate is 1.0 percent. Businesses
located in a municipality having an income tax or hiring employees
who are residents of a municipality having an income tax generally
must withhold taxes from the wages paid to the employees. Check the
municipality where your business is located or where your employees
live for specific information.
Source: Business Tax Guide for Ohio, A
Vendor's Guide to the Ohio Sales Tax. Ohio Department of Taxation.
All educational programs conducted by Ohio State University Extension
are available to clientele on a nondiscriminatory basis without regard
to race, color, creed, religion, sexual orientation, national origin,
gender, age, disability or Vietnam-era veteran status.
Keith L. Smith, Associate Vice President for Ag. Adm. and
Director, OSU Extension.
TDD No. 800-589-8292 (Ohio only) or 614-292-1868
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