Ohio Taxation Department Of - Ohio Department Of Taxation

OhioDepartment ofTaxationJohn R. KasichGovernorJoseph W. TestaTax CommissionerANNUAL REPORTFiscal Year 2018

2018Annual ReportPrepared by theCommunications Office, Chief Counsel’s Office, and Legislative andTax Analysis Divisions with theassistance of numerous operating divisionsJoseph W. Testa,Ohio Tax Commissioner

Table of ContentsFiscal Year 2018Message from the Tax Commissioner .4Year in Review.5Responsibilities.14State Taxes Administered by the Tax Commissioner. 23Alcoholic Beverage Taxes . 23Cigarette and Other Tobacco Products Taxes. 28Commercial Activity Tax . 32Financial Institutions Tax . 36Gross Casino Revenue Tax. 39Horse Racing Tax .42Individual Income Tax. 46Kilowatt-Hour Tax.56Motor Vehicle Fuel & Use Tax . 58Municipal Net Profits Tax . 63Natural Gas Distribution Tax. 65Pass-through Entity & Trust Withholding Tax . 67Petroleum Activity Tax. 72Public Utility Excise Tax . 74Replacement Tire Fee . 78Sales and Use Taxes . 80Severance Tax .90Wireless 9-1-1 Fee .94Taxes No Longer in Effect . 96Revenue Sharing .97Local Government Fund . 97Public Library Fund . 99Tangible Property Tax Replacement Fund. 100Local Taxes . 103Admissions Tax. 103Alcoholic Beverage Taxes – County. 105Cigarette Tax – County . 107Individual Income Tax – School Districts. 109Lodging Tax. 112Municipal Income Tax . 114Municipal Income Tax for Electric Light and Telephone Companies . 117ii

Table of ContentsFiscal Year 2018Property Tax –Manufactured Home Tax. 120Property Tax – Public Utility Property. 122Property Tax – Real Property. 126Property Tax – Real Property Conveyance Fees. 132Resort Area Gross Receipts Tax . 133Sales and Use Taxes – County and Transit Authority. 135Other Resources . 138Business Tax Credits . 138Recent State Legislation. 140Recent Ohio Appellate Decisions . 142Data Appendix. 143Index of Tables and Charts . 179iii

Message from the Tax CommissionerFiscal Year 2018From the Tax CommissionerDear Governor, Senators, and Representatives,It is my responsibility and privilege to provide you the Fiscal Year2018 Annual Report of the Ohio Department of Taxation. Thisreport highlights the department’s activities during the year incompliance with Ohio Revised Code 5703.42.The report provides a complete description of the tax base, ratesand provisions of each of the state taxes administered by thedepartment, three revenue sharing funds administered by thedepartment and 13 local taxes. It also provides detailed statisticaldata concerning each tax and an accounting of departmentactivities during the fiscal year.My hope is that the contents of this report will be of value andinterest to you, the General Assembly, and the people of Ohio.Respectfully,Joseph W. TestaTax Commissioner4

Year in ReviewYear in ReviewFiscal Year 2018Ohioans enjoyed one of the biggest tax cuts in the nation under the Kasich Administration with more than 5billion in net tax relief. Over the past eight years, Ohio reduced income tax rates 16 percent, eliminated stateincome taxes for many small businesses, killed the estate tax and provided targeted tax relief for low- andmiddle-income workers. Also, a taxpayer- and business-friendly law was passed to ensure that businesses arenotified when they have overpaid their taxes.Lowering the Income TaxPersonal income tax rates are now at their lowest rate since 1982 as Ohio cut the personal income tax rate by16 percent. Ohio’s top marginal income tax rate has been cut from 5.925 percent when Gov. Kasich came intooffice in 2011 to 4.997 percent. Kasich also reduced the number of state income tax brackets from nine toseven.Helping Small Businesses GrowUnderstanding that small businesses are the drivers of our economy, making up roughly 98 percent of allOhio businesses and employing half of our state’s private-sector workforce, Gov. Kasich worked with the Ohiolegislature to improve the state’s business climate by phasing out income taxes for virtually all smallbusinesses. These businesses continue to be subject to the commercial activity tax, the same as largercorporations.Demise of the ‘Death Tax’Gov. Kasich eliminated the Estate Tax that was harmful to family small businesses. In concert with other taxrelief measures for small businesses, the repeal of the Estate Tax helped drive Ohio’s sustained record ofsmall business creation every year of the Kasich Administration.Cutting Taxes for Lower-income OhioansGov. Kasich created Ohio’s first Earned Income Tax Credit (EITC) in 2013 for low-income Ohioans anddoubled it the next year. Ohio also increased the state income tax personal exemption from 1,700 to 2,200for families earning less than 40,000 a year and raised the exemption from 1,700 to 1,950 for familieswith incomes between 40,000 and 80,000.It’s the Taxpayer’s MoneyThe Ohio Department of Taxation and Governor Kasich made a commitment and then worked with theGeneral Assembly to pass a law memorializing the responsibility to get tax refunds back to businesses thatare due a refund but not aware they have overpaid. This ended a decades-long practice uncovered by theKasich Administration whereby the Department deliberately didn’t tell business taxpayers of overpaymentsunless they asked about them. The Department began in 2012 by refunding about 14 million of commercialactivity tax overpayments and then expanded the program to include all major business taxes and returningabout 30 million of overpayments. and that’s not all. The past eight years have included a number of significant improvements to anddevelopments in Ohio’s system of taxation.5

Year in ReviewFiscal Year 2018Fiscal Year 2018Reforming the Municipal Income Tax on Business Net ProfitMore than 400,000 Ohio businesses are now able to significantly reduce paperwork and a major source oftax-season frustration by opting for centralized administration of their municipal net profit tax returns.Rather than file a separate tax return in each and every municipality in which they earn income – as requiredin the past – businesses can now file just one return through the Ohio Business Gateway (OBG) to cover alltheir local net profit tax obligations.Going forward, for a business choosing to “opt-in” by registering for this new system, the Department willprocess that business’s local net profit returns and then distribute tax payments to the appropriatecommunities, all based on a single filing and payment made by the business. The Department will also handleall administrative functions associated with the tax, including audits and appeals. Like other income taxes, the2018 municipal net profit tax return will be due in April of 2019.New CAUV Law Produces Bountiful Yield for FarmersThe Current Agricultural Use Value, or CAUV, program was designed to hold down property taxes on land devotedto agricultural use. It has largely succeeded by reducing taxes over time an average 50 percent below residentialproperty tax rates. Recent changes in the agricultural economy began eating away at that tax relief causingsignificant increas

Year in Review . Understanding that small businesses are the drivers of our economy, making up roughly 98 percent of all Ohio businesses and employing half of our state’s private -sector workforce, Gov. Kasich worked with the Ohio legislature to improve the state’s business climate by phasing out income taxes for virtually all small businesses. These businesses continue to be subject to .