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Upcoming Considerations for COVID-19 Tax Relief in Ohio

A 3D concept map for Ohio tax relief after COVID-19.

Ohio is among the states whose revenue went up despite the economic slowdown resulting from the pandemic thanks in large part to government relief. Now, Ohio intends to give back part of that back to its residents. The state budget proposal for the next financial biennium (2022-2023) released by the senate exempts sales and use tax for employment services and placement services. It also includes a 5% tax reduction to personal income taxes and solves the issue of cities imposing taxes on commuting non-resident workers. Let's dive deeper and look at the upcoming considerations for COVID-19 tax relief in Ohio.

Sales and Use Tax Relief in Ohio

Sales tax is the tax a business pays to the state or local authorities after selling certain goods and services. Once you pay the Ohio sales tax on a product, you won't pay use tax on the same. Use tax applies where you pay sales tax on a product in a different state and use it in Ohio.

If you are a business owner in Ohio and sell taxable goods and services, you are an agent of the state since you collect tax from buyers and pass it along to the relevant tax authority. Therefore, the sale tax you collect belongs to the state. Then, you have a duty to manage the taxes you collect in a manner that complies with the laws.

Collecting Sales Tax in Ohio

You should collect sales tax in Ohio if:

  1. You have nexus in Ohio. A business has a nexus in Ohio if it sells goods in the state, even without a sales tax nexus.
  2. You sell taxable goods or services to Ohio residents
  3. Your buyers are required to pay sales tax

If a business meets the above criteria, it should register with the state tax authority, collect the appropriate sales tax amount per sale, file returns, and remit tax to the state. If you fail to do so, you are subject to penalties and interests. Businesses need to deploy tax collection at the point of sale since it's impossible after completing a transaction.

If your business already pays sales and use tax, note any latest changes in Ohio regarding the same. The state legislature introduced a bill for the financial biennium 2022-2023, touching employment services and placement services.

Sales and Use Tax Relief

The Senate bill comes to the rescue of businesses by exempting sales and use tax for employment services and placement services. It is necessary to keep it out of the tax base to avoid tax pyramiding which involves taxing a service several times along the delivery process.

The exemption becomes effective on October 1, 2021, and therefore the services will remain taxable through September 30. The proposal also gets rid of the tax expenditure commission and, as such, it requires a change of billing and payment systems for businesses paying the taxes or charging for the services.

Pass-Through Business Incomes

The Senate tax-cut plan kicks off over two years, slashing rates by 3.5% in the first year and 1.5% in the second year. However, the house cut would become effective this year. Currently, pass-through business income is subject to a 3% flat rate, but Ohio also gives a generous exemption of $250,000, though these enterprises are subject to the statewide gross receipts tax, Commercial Activity Tax (CAT).

Get Professional Tax Audit Services

Amid the upcoming tax changes in Ohio, businesses will increasingly require tax audit services. At Sales Tax Helper, we provide sales tax audit services. This includes sales tax audit defense, consulting, challenge evaluation, and litigation. We have an experienced team in Ohio consisting of sales tax advisors, former auditors, and lawyers ready to help your business with an audit or protest. Contact us for your tax audit or tax relief needs.

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