(A) Basis of imposition. Subject to provisions of § 39.20, an annual tax shall be, and is hereby, levied on and after January 1, 1994, at the rate of 2% per annum upon the following.
(1) Resident individuals. On all qualifying wages, commissions, other compensation, and other taxable income earned or received by residents of the municipality.
(2) Nonresident individuals. On all qualifying wages, commissions, and other compensation, and other taxable income earned or received by nonresidents for work done, or services performed or rendered, in the municipality.
(3) Resident unincorporated businesses.
(a) On the portion attributable to the municipality of the net profits earned by all resident unincorporated businesses, pass-through entities, professions or other activities, derived from work done or services performed or rendered, and business or other activities conducted in the municipality; or
(b) On the portion of the distributive share of the net profits earned by a resident owner of a resident unincorporated business entity or pass-through entity not attributable to the municipality and not levied against such unincorporated business entity or pass-through entity.
(4) Nonresident unincorporated businesses.
(a) On the portion attributable to the municipality on the net profits by all nonresident unincorporated businesses, pass-through entities, professions or other activities, derived from work done or services performed or rendered and business or other activities conducted in the municipality, whether or not such unincorporated business entity has an office or place of business in the municipality; or
(b) On the portion of the distributive share of the net profits earned by a resident owner of a nonresident unincorporated business entity or pass-through entity not attributable to the municipality and not levied against such unincorporated business entity or pass-through entity.
(5) Corporations. On the portion attributable to the municipality of the net profits earned by all corporations that are not pass-through entities from work done or services performed or rendered and business or other activities conducted in the municipality, whether or not such corporations have an office or place of business in the municipality.
(6) Gambling winnings. On all income received as gambling winnings as reported on IRS Form W-2G, Form 5754 and or any other form required by the Internal Revenue Service that reports winnings from gambling, prizes and lottery winnings.
(B) Businesses both in and outside the municipal boundaries. This section does not apply to taxpayers that are subject to and required to file reports under Ohio R.C. Chapter 5745. Except as otherwise provided in division (D) of this section, net profit from a business or profession conducted both within and without the boundaries of a municipal corporation shall be considered as having a taxable situs in such municipal corporation for purposes of municipal income taxation in the same proportion as the average ratio of the following: multiply the entire net profits of the business by a business allocation apportionment percentage formula to be determined by:
(1) (a) The average original cost of the real and tangible personal property owned or used by the taxpayer in the business or profession in such municipal corporation 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;
(b) As used in the preceding paragraph, 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 such municipal corporation 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 municipal corporation under Ohio R.C. § 718.011;
(3) Gross receipts of the business or profession from sales made and services performed during the taxable period in such municipal corporation to gross receipts of the business or profession during the same period from sales and services, wherever made or performed; and
(4) Adding together the percentages determined in accordance with divisions (B)(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 deriving such total.
(a) A factor is applicable even though it may be apportioned entirely in or outside the municipality.
(b) Provided however, that in the event a just and equitable result cannot be obtained under the business apportionment percentage formula provided for herein, the Tax Administrator, upon application of the taxpayer, shall have the authority to substitute other factors or methods calculated to effect a fair and proper apportionment.
(C) Definition. As used in division (B) above of this section, SALES MADE IN A MUNICIPAL CORPORATION mean:
(1) All sales of tangible personal property delivered within such municipal corporation regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation;
(2) All sales of tangible personal property delivered within such municipal corporation regardless of where title passes even though transported from a point outside such municipal corporation if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion; and
(3) All sales of tangible personal property shipped from a place within such municipal corporation to purchasers outside such municipal corporation 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) Net profit from rental activity. Except as otherwise provided in division (E) of this section, net profit from rental activity not constituting a business or profession shall be subject to tax only by the municipal corporation in which the property generating the net profit is located.
(E) Applicability. This section does not apply to individuals who are residents of the municipality and, except as otherwise provided in Ohio R.C. § 718.01, the municipality may impose a tax on all income earned by residents of the municipality to the extent allowed by the United States Constitution.
(F) Net operating loss (NOL).
(1) The portion of a net operating loss sustained in any taxable year, beginning with the year 1973, apportioned to the municipality may be applied against the portion of the profit of succeeding tax years apportioned to the municipality, until exhausted, but in no event for more than the three taxable years immediately following the year in which the loss occurred. No portion of a net operating loss shall be carried back against net profits of any prior year.
(2) The portion of a net operating loss sustained shall be apportioned to the municipality in the same manner as provided herein for apportioning net profits to the municipality.
(3) The Tax Administrator shall provide by rules and regulations the manner in which such net operating loss carryforward shall be determined.
(4) The net operating loss of a taxpayer that loses its legal identity, by any means such as merger or consolidation, shall not be allowed as a carryforward loss deduction to the surviving or new taxpayer.
(5) The net operating loss sustained by a business or profession is not deductible from employee earnings, but may be carried forward as provided in division (1) above. However, if a taxpayer is engaged in two or more taxable business activities to be included in the same return, the net loss of one unincorporated business activity (except any portion of a loss reportable for municipal income tax purposes to another municipality) may be used to offset the profits of another for purposes of arriving at overall net profits.
(G) Consolidated returns.
(1) A consolidated return may be filed by a group of corporations who are affiliated through stock ownership if that affiliated group filed for the same tax period a consolidated return for federal income tax purposes pursuant to § 1501 of the Internal Revenue Code. A consolidated return must include all companies that are so affiliated.
(2) Once a consolidated return has been filed for any taxable year, consolidated returns shall continue to be filed in subsequent years unless the applicable requirements of the rules and regulations for discontinuing the filing of consolidated returns have been met.
(H) Exemptions. The provisions of this subchapter shall not be construed as levying a tax upon the following:
(1) Proceeds from welfare benefits, unemployment insurance benefits, pensions, social security benefits, and qualified retirement plans as defined by the Internal Revenue Service;
(2) Proceeds of insurance, annuities, workers' compensation insurance, permanent disability benefits, compensation for damages for personal injury and like reimbursements, not including damages for loss of profits and wages;
(3) Compensation attributable to a plan or program described in § 125 of the Internal Revenue Code;
(4) Dues, contributions and similar payments received by charitable, religious, educational organizations, or labor unions, trade or professional associations, lodges and similar organizations;
(5) Gains from involuntary conversion, cancellation of indebtedness, interest on federal obligations and income of a decedent's estate during the period of administration (except such income from the operation of a business);
(6) Alimony;
(7) Compensation for damage to property by way of insurance or otherwise;
(8) Interest and dividends from intangible property;
(9) Military pay or allowances of members of the Armed Forces of the United States and of members of their reserve components, including the Ohio National Guard (ORC 718.01);
(10) Income of any charitable, educational, fraternal or other type of nonprofit association or organization enumerated in Ohio R.C. 718.01 to the extent that such income is derived from tax-exempt real estate, tax-exempt tangible or intangible property, or tax-exempt activities;
(11) Any association or organization falling in the category listed in the preceding division receiving income from non-exempt real estate, tangible or intangible personal property, or business activities of a type ordinarily conducted for profit by taxpayers operating for profit shall not be excluded hereunder;
(12) In the event any association or organization receives taxable income as provided in the preceding paragraph from real or personal property ownership or income producing business located both within and without the corporate limits of the municipality, it shall calculate its income apportioned to the municipality under the method or methods provided above;
(13) If exempt for federal income tax purposes, fellowship and scholarship grants are excluded from municipal income tax;
(14) The rental value of a home furnished to a minister of the gospel as part of his or her compensation, or the rental allowance paid to a minister of the gospel as part of his or her compensation, to the extent used by him or her to rent or provide a home pursuant to § 107 of the Internal Revenue Code;
(15) Compensation paid under Ohio R.C. §§ 3501.28 or 3501.36 to a person serving as a precinct official, to the extent that such compensation does not exceed $1,000 annually. Such compensation in excess of $1,000 may be subjected to taxation. The payer of such compensation is not required to withhold municipal tax from that compensation;
(16) Compensation paid to an employee of a transit authority, regional transit authority, or a regional transit commission created under Ohio R.C. Chapter 306 for operating a transit bus or other motor vehicle for the authority or commission in or through the municipality, unless the bus or vehicle is operated on a regularly scheduled route, the operator is subject to such tax by reason of residence or domicile in the municipality, or the headquarters of the authority or commission is located within the municipality;
(17) The municipality shall not tax the compensation paid to a nonresident individual for personal services performed by the individual in the municipality on 12 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 municipality in Ohio that imposes a tax applying to compensation paid to the individual for services paid on those days; and the individual is not liable to that other municipality for tax on the compensation paid for such services; or
(b) The individual is a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event, or an employee of such promoter, all as may be reasonably defined by the municipality;
(18) (a) The income of a public utility, when that public utility is subject to the tax levied under Ohio R.C. §§ 5727.24 or 5727.30, except a municipal corporation may tax the following, subject to Ohio R. C. Chapter 5745:
1. The income of an electric company or combined company; and
2. The income of a telephone company.
(b) As used in this section,
COMBINED COMPANY, ELECTRIC COMPANY, and TELEPHONE COMPANY have the same meanings as in Ohio R.C. § 5727.01.
(19) An S corporation shareholder's distributive share of net profits of the S corporation, other than any part of the distributive share of net profits that represents wages as defined in § 3121(a) of the Internal Revenue Code or net earnings from self-employment as defined in § 1402(a) of the Internal Revenue Code, to the extent such distributive share would not be allocated or apportioned to this state under Ohio R.C. § 5733.05 (B)(1) and (2) if the S corporation were a corporation subject to the taxes imposed under Ohio R.C. Chapter 5733;
(20) An S corporation shareholder's distributive share of net profits or losses of the S corporation; or
(21) Generally the above noted items in this section are the only forms of income not subject to the tax. Any other income, benefits, or other forms of compensation shall be taxable.
(1995 Code, § 39.22) (Ord. 73-11, passed 2-19-1973; Am. Ord. 93-O-23, passed 12-15-1993; Am. Ord. 2001-O-3, passed 2-26-2001; Am. Ord. 2003-O-53, passed 12-22-2003)
Statutory reference:
Municipal income tax, see Ohio R.C. §§ 718.01 through 718.07