(a) An annual tax for the purposes specified in Section 181.01, shall be levied on and after October 1, 1982, at the rate of two percent (2.0%) per annum upon the following:
(1) A. On all qualifying wages earned by residents of the City.
B. On all qualifying wages earned by nonresidents for work done or services performed or rendered in the City.
C. On all qualifying wages earned by persons now employed or hereafter employed by the City of Canton, whether residents or non- residents of the City of Canton, for work done or services performed or rendered for the City of Canton.
D. On all income derived from gambling, wagering, lotteries, including the Ohio State Lottery, and games or schemes of chance earned or received by the residents of this City, except as provided in Section 181.03(d)(4).
(2) A. On any programs to include, but not be limited to, deferred compensation plans and similar plans offered that would reflect a reduction from salaries, wages, commissions and other compensation as reported on a W-2 and/or similar wage reporting form, unless specifically exempted in this chapter and/or under state statutes.
B. On any programs to include, but not be limited to, IRA’s, KEOGH’s and similar plans offered that qualify for reductions in salaries, wages, commissions and other compensation under federal and state tax regulations unless specifically exempted in this chapter and/or under state statutes.
(3) A. On the portion attributable to the City of the net profits earned of all resident associations, S corporations, unincorporated businesses, professions or other entities derived from sales made, work done, services performed or rendered and business or other activities conducted in the City as follows:
1. The tax on resident associations, S corporations, unincorporated businesses, professions or other entities owned by two or more persons is imposed upon the entity rather than the individual members or owners thereof.
2. The tax on resident associations, S corporations, unincorporated businesses, professions or other entities owned by one person is imposed upon the individual owner.
B. On a resident partner’s or owner’s share of the net profits of a resident association, S corporation, unincorporated business, profession or other entity not attributable to the City and not levied against such association or other unincorporated business entity as follows:
1. A resident partner, owner or member of a resident association, S corporation, unincorporated business, profession or other entity is taxed individually on that resident’s entire share of the annual net profits of the association or other business entity which is not attributable to the City and levied upon the entity under subsection (a)(3)A. hereof.
2. A resident person who is the sole owner of a resident association, S corporation, unincorporated business, profession or other entity shall disregard the business allocation formula and pay tax individually on the entire annual net profits of the business activity.
(4) A. On the portion attributable to the City of the net profits earned of all nonresident associations, S corporations, unincorporated businesses, professions or other activities derived from sales made, work done, services performed or rendered or business or other activities conducted in the City, whether or not such association or unincorporated business entity has an office or place of business in the City as follows:
1. The tax on non-resident associations, S corporations, unincorporated businesses, professions or other entities owned by two or more persons is imposed upon the entity rather than the individual members or owners thereof.
2. The tax on non-resident associations, S corporations, unincorporated businesses, professions or other entities owned by one person is imposed upon the individual owner.
B. On a resident partner’s or owner’s share of the net profits of a nonresident association, S corporation, or other unincorporated business entity not attributable to the City and not levied against such association or other unincorporated business entity as follows:
1. A resident partner, owner, or member of a nonresident association, S corporation, unincorporated business, profession or other entity is taxed individually on that resident’s entire share of the annual net profits of the association or other business entity which is not attributable to the City and levied upon the entity under subsection (a)(4)A. hereof.
2. A resident person who is the sole owner of a nonresident association, S corporation, unincorporated business, profession or other entity shall disregard the business allocation formula and pay tax on the entire annual net profits of the business activity.
(5) On the portion attributable to the City of the adjusted federal taxable income earned of all corporations derived from sales made, work done or services performed or rendered and business or other activities conducted in the City, whether or not such corporations have an office or place of business in the City.
(6) On the portion attributable to the City of the income of public utilities, subject to Ohio R.C. Chapter 5745 including, beginning January 1, 2002, the income of an electric company or combined company and, beginning January 1, 2004, the income of a telephone company as defined in Ohio R.C. Section 5727.01.
(b) Net Profits. In amplification of the definitions contained in Section 181.02
(l), but not in limitation thereof, the following additional information and requirements respecting net profits are furnished:
(1) Where necessary to properly reflect income, inventories must be used. The basis of pricing used for the purpose of the Federal Income Tax must in each instance be used.
(2) The same accounting basis used for the filing of Federal Income Tax Returns must be used for the purpose of this tax.
(3) If the return is made on a “cash basis”, gross profit shall include:
A. Receipts from commissions, fees and rental and other compensation for work or service performed, plus
B. The gross profit or loss from sales of merchandise, chattels, goods, wares, securities, notes, choses-in-action and services except as hereinafter provided.
(4) If the return is made on an “accrual basis”, gross profit shall include:
A. Commissions, fees and rental and other compensation earned, plus;
B. The gross profit or loss from sales of merchandise, chattels, goods, wares, securities, notes, choses-in-action and services, except as hereinafter provided.
(5) From gross profit there shall be subtracted allowable expenses to arrive at the net profits subject to tax.
A. All ordinary and necessary expenses of doing business, including reasonable compensation paid employees, shall be allowed (but no deduction may be claimed for “salary” or withdrawals of a proprietor or of the partners, members or other co-owners of an unincorporated business or enterprise).
B. If not claimed as part of the cost of goods sold or elsewhere in the return filed, there may be claimed and allowed a reasonable deduction for depreciation, depletion, obsolescence, losses resulting from theft or casualty not compensated for by insurance or otherwise, of property used in the trade or business, but the amount may not exceed that recognized for the purpose of Federal Income Tax. Provided, however, that loss on the sale, exchange or other disposition of depreciable property and real estate used in the taxpayer’s business, shall not be allowed as a deductible expense.
C. Bad debts in a reasonable amount may be allowed in the year ascertained worthless and charged off, or, if the reserve method is used, a reasonable addition to the reserve may be claimed, but in no event shall the amount allowed exceed the amount recognized as a deduction for the purpose of the Federal Income Tax.
D. Only taxes directly connected with the taxpayer's business may be claimed as a deduction. If, for any reason, the income from property is not subject to tax, then the tax and other expenses on such property are not deductible. In any event, the following taxes are not deductible from income:
1. The tax under this chapter;
2. Any Federal or State taxes based upon income;
3. Gifts, estate or inheritance taxes; and
4. Taxes for local benefits or improvements to property which tend to appreciate the value thereof.
(6) A. Net profits and net losses from passive and nonpassive activities for the tax year shall be separately identified on a schedule attached to the City income tax return. The passive net profits and passive net losses, if any, shall be aggregated to provide either one net aggregate passive net profit or one net aggregate passive net loss. The nonpassive net profits and nonpassive net losses, if any, shall additionally be aggregated to provide either one net aggregate nonpassive net profit or one net aggregate nonpassive net loss.
B. The following rules shall be utilized in determining the taxable income from the foregoing:
1. Net aggregate nonpassive net losses may be offset against net aggregate passive net profits. Net aggregate passive net losses shall not offset net aggregate nonpassive net profits. Net aggregate passive net losses which are not utilized in any tax year may be carried forward only three years and may offset only future net aggregate passive net profits. Net aggregate nonpassive net losses which are not utilized in any tax year may be carried forward only three years and may offset both future net aggregate passive and nonpassive net profits.
2. Net aggregate passive and nonpassive net losses may not be carried back to prior tax years for any purpose or under any circumstance.
3. Passive or nonpassive losses may not be utilized to offset income from salaries, wages, commissions and/or other compensation for any purpose or under any circumstance.
C. In the interpretation and application of this section, the City Income Tax Director may utilize the Internal Revenue Code and Regulations for the purpose of determining whether any given activity constitutes a passive or nonpassive activity. The rules established herein concerning offsetting, carry forward and carry back, however, supersede any conflicting provisions contained in the Internal Revenue Code and Regulations.
(7) In general, all business expenses, to the extent allowed as such for the purpose of determining Federal Income Tax, will be recognized and allowed for unless specifically exempted in determining Canton Income Tax under the provisions of this chapter; however, all expenses connected with the acquisition or carrying of securities, the income from which is not recognized as taxable under this chapter, may not be deducted in determining taxable net profits hereunder.
(8) In general, unearned income and expenses incurred in connection therewith are not to be included in computing the tax levied hereunder. Income from intangibles by way of dividends, interest and the like, should not be included if the intangible income is specifically exempted from municipal taxation under the Ohio Revised Code.
(9) Residents of Canton are subject to taxation upon the net income from rentals regardless of the location of the real property owned. Nonresidents of Canton are subject to such taxation only if the real property is situated in the City of Canton.
(c) Allocation of Net Profits. Except as otherwise provided in subsections (c)(5) and (6) hereof, net profit from a business or profession conducted both within and outside the boundaries of the City of Canton shall be considered as having a taxable situs within the City for purposes of City income taxation in the same proportion as the average ratio of the following:
(1) The average original cost of the real and tangible personal property owned or used by the taxpayer in the business or profession in the City during the taxable period to the average original cost of all of the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated. Real property shall include property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight;
(2) Wages, salaries, and other compensation paid during the taxable period to persons employed in the business or profession for services performed in the City to wages, salaries, and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed, excluding compensation that is not taxable by the City under Ohio R.C. Section 718.011;
(3) Gross receipts of the business or profession from sales made and services performed during the taxable period in the City to gross receipts of the business or profession during the same period from sales and services, wherever made or performed. Sales made within the City shall be deemed to include:
A. All sales of tangible personal property which is delivered within the City, regardless of where title passes if shipped or delivered from a stock of goods within the City.
B. All sales of tangible personal property which is delivered within the City, regardless of where title passes even though transported from a point outside the City, if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within the City, and the sales result from such solicitation or promotion.
C. All sales of tangible personal property which is shipped from a place within the City to purchasers outside the City regardless of where title passes if the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.
D. All sales of tangible personal property made through retail stores located within Canton to purchasers within or without Canton except such sales to purchasers outside Canton that are directly attributable to regular solicitations made outside Canton personally by taxpayer’s employees.
(4) Adding together the percentage determined in accordance with subsections (c)(1), (2) and (3) hereof or such of the aforesaid percentages as are applicable to the particular taxpayer and dividing the total so obtained by the number of percentages used in ascertaining the total.
A factor is applicable even though it may be allocable entirely in or outside the City.
(5) The foregoing apportionment formula does not apply to taxpayers who are subject to and required to file reports under Ohio R.C. Chapter 5745, including electric companies or combined companies and telephone companies.
(6) The foregoing apportionment formula does not apply to taxpayers who are resident individuals or to the income from rental property having taxable situs in the City.
(7) If the foregoing apportionment formula does not produce an equitable result, another basis may be substituted, under uniform regulations, so as to produce an equitable result. If, for any taxable year, the foregoing apportionment formula produces an amount less than zero, the taxpayer shall not be entitled to a refund with respect to that taxable year of any amounts other than amounts the taxpayer has paid in estimated taxes for the taxable year and any overpayment from a previous taxable year credited towards the taxable year for which the foregoing apportionment formula produces an amount less than zero.
(d) Exemptions. The tax provided for herein shall not be levied on the following:
(1) Funds received from local, State or Federal governments because of service in the Armed Forces of the United States by the person rendering such service, or as a result of another person rendering such service.
(2) Poor relief, pensions, unemployment compensation, social security benefits and disability payments.
(3) Alimony received.
(4) Prizes and cash received from any association, organization, corporation, club, or trust, which is exempt from Federal tax on income by reason of its charitable, religious, educational, literary, scientific or related purposes, and has received from the Internal Revenue Service a determination letter currently in effect stating that the organization is exempt under subsection 501(a) and described in subsection 501(c)(3) of the Internal Revenue Code.
(5) Any association, organization, corporation, club or trust, which is exempt from Federal tax on income by reason of its charitable, religious, educational, literary, scientific, etc., purposes.
(6) Gains from involuntary conversion, cancellation of indebtedness, interest on Federal obligations, items of income already taxed by the State from which the City is specifically prohibited from taxing and income of a decedent’s estate during the period of administration, except such income from the operation of a business.
(7) Earnings and income of all persons under eighteen years of age whether residents or nonresidents.
(8) Dividends.
(9) Interest.
(10) In the case of a member of the clergy:
A. The rental value of a home furnished to him as part of his compensation; and/or
B. The rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.
(11) Compensation paid to a nonresident individual for personal services performed by the individual in the City on twelve or fewer days in a calendar year unless one of the following applies:
A. The individual is an employee of another person; the principal place of business of the individual’s employer is located in another municipal corporation that imposes a tax applying to compensation paid to the individual for services performed on those days; and the individual is not liable to that other municipal corporation for tax on the compensation paid for such services.
B. The individual is a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event, or an employee of such a promoter.
(12) Compensation paid under Ohio R.C. Section 3501.28 or 3501.36 to a person serving as a precinct election official, to the extent that such compensation does not exceed one thousand dollars annually.
(e) Credits. All persons sixty-five years or older shall receive a tax credit in an amount not to exceed two hundred dollars ($200.00), or the amount of tax due to the City, whichever is less.
(Ord. 275-2003. Passed 12-15-03.)
(Ord. 275-2003. Passed 12-15-03.)