Changes to Ohio Municipal Taxes Require Businesses to File on a Timely Basis

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The State of Ohio has more than 600 municipal taxing jurisdictions to which businesses are required to file tax returns. Businesses file paper returns to each municipality, with the exception of those that are part of the Regional Income Tax Agency (RITA), which offers the ability to electronically file returns. However, the new budget bill passed in Ohio expands the offering to one electronic filing for all municipalities on one return administered by the state.

In order to file municipal net profit tax with the State of Ohio, businesses will have to opt-in by the first day of the third month after the beginning of the business’ taxable year; for example, if the taxable year begins April 1, registration is due by June 1. The deadline for calendar year filers for tax year 2019 is March 1, 2019; however, a business will not need to opt-in each year. If the business chooses to terminate the state administration of the net profit tax, the state and each municipality must be notified. The first day of the third month of the taxable year is the deadline for the notification. The State of Ohio is requiring electronic filing of municipal net profit tax returns for all businesses that have opted- in.

Businesses can request a different apportionment with the state, according to Ohio Revised Code 718.82 (B)(2). The request is done in writing with the tax return, the timely filed appeal of an assessment or the timely filed amended return. If a business does not opt-in, they will continue to file under the existing rules for each municipality.

The portion of new budget bill that allows the State of Ohio to administer municipal net profit tax was not without controversy. A lawsuit filed by more than 130 cities, including some RITA cities in late 2017, challenged the constitutionality of Ohio to take on the administrative role. Some felt this could erode Ohio’s Home Rule by infringing upon the Ohio municipalities’ power of local self-government. According to the Ohio General Assembly, Home Rule gives municipalities certain powers that exist outside the authority found in the revised code. Others joined the lawsuit due to what they consider a negative financial impact because of the 0.5 percent administrative fee the state charges.

On Feb. 21, 2018, the Franklin County Court of Common Pleas sided with the State of Ohio. Municipalities have made appeals, and there hasn’t yet been a final determination. In the meantime, Ohio is continuing to administer a municipal net profit tax.

Businesses that choose to opt-in can do so by going to the Ohio Business Gateway, and there is a full set of instructions on the Ohio Department of Taxation website. Businesses that choose to file for each municipality separately will not need to make any changes to their current process.