Ohio Basic Business Taxes 2011
Ohio's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include sales and use taxes, a commercial activity tax, and property tax exemptions.
Area Development Research Desk (March 2011)
Sales and use tax:
5.5 percent on the sale and/or rental of tangible personal property and selected services, unless specifically exempt by law. Counties and transit authorities may impose sales and use taxes; however the maximum combined local sales and use tax rate is two percent.
There is no state property tax. Assessed by cities, counties, and/or special tax districts on 35 percent of market value for real property.
Commercial activity tax:
The commercial activity tax (CAT) is an annual privilege tax on the gross receipts generated by business. Businesses with gross receipts under $150,000 as well as all exports out of Ohio are exempt from the tax. The tax rate is $150 on gross receipts between $150,000 and $1 million and $150, plus 0.26 percent of the excess receipts above $1 million, on gross receipts above $1 million.
Property tax exemption:
Under Ohio's Enterprise Zone Program, local governments may grant an eligible business investing in a new plant or equipment in a designated enterprise zone a tax exemption of up to 75 percent (municipal location) or 60 percent (unincorporated location) of the value of the eligible improvements for up to 10 years. Eligible improvements include new construction, renovation of existing structures, new machinery, equipment and fixtures, and new inventory. A project must create or retain Ohio job opportunities.
Under the Community Reinvestment Program, municipalities and counties may designate an area within their jurisdiction to grant a real property tax exemption of up to 100 percent on the value of improvements. The term of the exemption can be: up to 10 years on residential rehabilitation exceeding $2,500; up to 12 years on multi-unit dwellings, commercial or industrial remodeling/improvements exceeding $5,000; or up to 15 years on new construction activities.
Job creation tax credit:
A refundable tax credit is available for up to 10 years based on a percentage of the new state income taxes withheld from the employees who received the newly created jobs. Eligibility of businesses, period of the credit, and percentage to be credited are determined by a five-member authority, headed by the Director of Development. The process requires local jurisdictions to support the proposal. The average credit awarded is 60 percent over a seven-year term.
Research and development exemption:
Equipment used in "qualified research and development activities," including both "pure" and "directed" research work, is exempted from state sales tax.
New research tax credit:
A nonrefundable credit is allowed against Ohio's Commercial Activities Tax for increases in a corporation's qualified research expenses. The credit equals seven percent of the excess of qualified research expenses incurred by the taxpayer in Ohio that exceeds the average annual qualified research expenses for the three preceding years.
Goods in transit:
Sales and use tax exemptions are provided for property manufactured in Ohio and sold to out-of-state retailers. Sales of motor vehicles to nonresidents are also exempt from sales and use taxation. Agricultural products and merchandise stored in the state in interstate commerce are also exempt.
Certified pollution-control equipment is not considered a corporate asset for corporate income tax. It is exempt from property taxation and is also exempt from sales and use taxes.
Industrial machinery and equipment:
Manufacturing machinery and equipment; machinery for packaging, handling, and transportation equipment; and ships in commerce are exempt from the sales and use tax.
An exemption for industrial machinery and equipment is provided for tools, dies, molds, and other machinery used directly in the manufacture of property that is then used or consumed in the production of other property used one last time in the production of a final product for sale (a use-on-use exemption).
Materials used in the construction of new single-purpose livestock and horticulture structures are exempt from state sales tax.
Industrial fuels and raw materials:
Packaging, water, steam, and natural gas, as well as certain motor vehicle fuels used in manufacturing, are exempt from sales and use taxes.
Energy and fuel conservation measures:
Energy conversion facilities, thermal efficiency facilities, and solid waste energy conversion facilities are exempt from sales and use taxes and property tax. Such facilities are not considered assets in determining the value of property owned for net income tax.
Ohio State Contact:
Ohio Department of Development
77 S. High Street
P. O. Box 1001
Columbus, OH 43216-1001
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.