Ohio’s Proposed Budget Poses Business Tax Hikes: Make Your Voice Heard– February 27, 2017

Posted by Olivia Ringler

Governor Kasich recently released his proposed FY18-19 state budget, which provides for a 17% reduction in personal income tax rates over the next two years. However, the bill calls for numerous tax increases that would negatively impact these same individuals and their businesses.
 
The proposed budget invites an increase in the state sales tax rate to 6.25% (up from 5.75%) and would begin taxing cable television services, lobbying, repossession services, non-medically necessary cosmetic procedures, landscape design, interior design and travel agent services.
 
The CAT tax rate would stay the same in the proposed budget; however, certain tax loopholes would be closed. The interest income exclusion available to lenders under the current CAT law would no longer be available and these receipts would be subject to the 0.26% CAT rate. Additionally, a 10% minimum taxable receipts factor would be applied to companies that sell to qualified distribution centers.
 
There is also a proposal to modify the severance tax on oil, gas, condensate and natural gas liquids. The current structure is a set price of $0.20 per barrel of oil and $0.03 per MCF (1,000 cubic feet of gas). The proposed structure imposes a 6.5% tax rate on the volume of gas or oil multiplied by the spot prices at the exchanges where these commodities are traded, and 4.5% for natural gas liquids.
 
Furthermore, taxes on cigarettes and other tobacco products and alcoholic beverages would significantly increase.
 
One potentially positive change proposed is the further standardization of Ohio’s municipality filings, which would create a centralized system for municipal tax filings and payments. The state proposes to take over all municipal administrative processing of returns, potentially allowing companies to file a single municipal return. In addition, the proposed budget advocates for the elimination of the municipal throwback provisions, which require many companies selling tangible goods to “throwback” receipts destined to locations outside their city limits and even outside of Ohio.
 
Major provisions of the Ohio budget are solidified in May and June; as such, now is the time to analyze how the proposed changes could impact your business and begin reaching out to your local legislators before the final provisions become effective on July 1, 2017. The grass roots efforts by local businesses were the driving force behind blocking several tax increases proposed for the FY16-17 budget bill.
 
For specific questions or to learn more about the proposed changes, contact Hannah Prengler, partner-in-charge of our State and Local Taxation Group, at hprengler@cohencpa.com or a member of your service team.
 
Ohio is also asking for taxpayer feedback. To contact your representative and voice your concerns, visit www.ohiohouse.gov/committee/finance.  

Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.