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To provide funds for the purposes of road, street and highway construction and improvement, improvement of police protection, improvement of fire protection, improvement and construction of storm drainage and the improvement of general municipal functions of the City there is levied a tax on all salaries, wages, commissions and other compensations, other income, lottery winnings and other gambling winnings, and on net profits as hereinafter provided.
(1969 Code 92.01)
For the purpose of this chapter the terms, phrases, words and their derivatives shall have the meanings given in this section. The singular shall include the plural, and the masculine shall include the feminine and the neuter.
(a) Administrator means the individual designated to administrate and enforce the provisions of this chapter and the administrator shall be the City Finance Director.
(b) Assignment shall mean the assignment made by a resident of Mentor of a claim for refund due from another taxing municipality granting credit to non-residents thereof.
(c) Association means any pass-through entity, as defined in Chapter 718 of the Ohio Revised Code, or any unincorporated enterprise or unincorporated business entity owned by one or more persons.
(e) Business means any enterprise, activity, profession, or undertaking of any nature conducted for profit or ordinarily conducted for profit, whether by an individual, partnership, association, corporation or any other entity, excluding however, all non-profit corporations which are exempt from the payment of federal income tax.
(f) Corporation means a corporation or joint stock association organized under the laws of the United States, the State of Ohio, or any other state, territory, or foreign country or dependency, but shall not include any entity which meets the definition of a pass-through entity as set forth in this chapter.
(g) Employee means one who works for wages, salary, commission or other type of compensation in the service of an employer.
(h) Employer means an individual, partnership, association, corporation, government body, unit or agency, or any other entity, whether or not organized for profit, who or that employs one or more persons on a salary, wage, commission or other basis of compensation, and includes all corporate officers for purposes of Section 181.17.
(i) Fiscal year means an accounting period of 12 months or less ending on any day other than December 31st.
(j) Gross receipts means the total income from any source whatever.
(k) Net profits means a net gain from the operation of a business, profession, enterprise, or other activity after provision for all ordinary and necessary expenses either paid or accrued In accordance with the accounting system used by the taxpayer for federal income tax purposes without deduction of taxes imposed by this chapter, federal, state, and other taxes based on income; and in the case of an association without deduction of salaries paid to partners and other owners.
(1) Non-resident means an individual domiciled outside the City.
(m) Non-resident unincorporated business entity means an unincorporated business entity not having an office or place of business within the City.
(n) Person means every natural person, partnership, fiduciary, association or corporation. Whenever used in any clause prescribing and imposing a penalty, the term "person" as applied to any unincorporated entity, shall mean the partners or members thereof, and as applied to corporations, the officers thereof.
(o) Place of business means any bona fide office (other than a mere statutory office), factory, warehouse, or other space which is occupied and used by the taxpayer in carrying on any business activity individually or through one or more of his regular employees regularly in attendance.
(p) Resident means an individual domiciled in the City.
(q) Resident unincorporated business entity means an unincorporated business entity having an office or place of business within the City.
(r) Taxable income means any and all income earned or received by an individual or an entity, the taxation of which by the City is not prohibited by federal law, state law or specifically exempted under Section 181.10
of this chapter. Wages, salaries, lottery winnings, and other winnings from any and all types of gambling shall be considered taxable income. All employee compensation before any deduction, and/or the net profits from the operation of a business, profession or other enterprise or activity adjusted in accordance with the provisions of this chapter shall be considered taxable income.
(s) Taxable year means the calendar year, or the fiscal year upon the basis of which the net profits are to be computed under this chapter, and in the case of a return for a fractional part of a year, the period for which such return is required to be made.
(t) Taxing municipality means any municipal corporation levying a municipal income tax on salaries, wages, commissions and other compensation earned by individuals, and the net profits earned from the operation of a business, profession or other activity.
(u) Taxpayer means a person, whether an individual, partnership, association, or any corporation or other entity, required hereunder to file a return or pay a tax.
(1969 Code 92.02)
An annual tax for the purposes specified in Section 181.01 hereof shall be imposed on and after May 1, 1987 at the rate of two percent (2%) per annum upon the following:
(a) On all salaries, wages, commissions and other compensation, lottery winnings, other gambling winnings, and other income earned or received on or after May 1, 1987 by residents of the City.
(b) On all salaries, wages, commissions, other compensation and other income earned or received on or after May 1, 1987 by non-residents of the City for work done or services performed or rendered or activities conducted within the City.
(c) On the portion attributable to the City on the net profits earned on and after May 1, 1987, of all resident unincorporated business entities or pass-through entities or professions or other activities derived from sales made, work done, services performed or rendered and business or other activities conducted in the City. The distributive share of the profits of a pass-through entity is to be taxed in the hands of the owner or partner, but the entity is still required to report all income and to pay any tax owed on said profits on behalf of the owner or partner.
(d) On the portion of the distributive share of the net profits earned on and after May 1, 1987 of a resident partner or owner of a resident association not attributable to the City and not levied against such association. The distributive share is to be taxed in the hands of the owner or partner, but the entity is still required to report and pay the tax on behalf of the owner or partner.
(e) On the portion attributable to the City of the net profits earned on and after May 1, 1987 of a resident partner or owner of resident unincorporated business entities or professions or pass-through entities or other activities derived from sales made, work done, services performed or rendered and business or other activities conducted in the City.
(f) On the portion of the distributive share of the net profits earned on and after May 1, 1987 of a resident partner or owner of a non-resident association not attributable to the City and not levied against such association.
(g) On the portion attributable to the City of Mentor of the net profits earned on and after May 1, 1981 of all corporations derived from sales made, work done, services performed or rendered and business or other activities conducted in the City of Mentor, whether or not such corporations have an office or place of business in the City of Mentor.
(h) Lottery and gambling losses are deductible against lottery and gambling winnings. The Administrator shall provide by rules and regulations the manner in which to determine such losses.
(1969 Code 92.03)
Said tax of two percent (2%) shall be levied, collected and paid on and with respect to the salaries, wages, commissions, and other compensation, and other income, and paid on and with respect to the net profits of businesses, professions or other activities earned or received on and after May 1, 1987 and further identified in Section 181.03 and said tax shall continue, remain and be in full force and effect through December 31, 2017.
(Ord. 11-O-99. Passed by Voters 3-6-12.)
DETERMINATION OF ALLOCATION OF TAX
In the taxation of income which is subject to City income tax if the books and records of a taxpayer conducting a business or profession both within and without the boundaries of the City shall disclose with reasonable accuracy what portion of its net profit is attributable to that part of the business or profession conducted within the boundaries of the City, then only such portion shall be considered as having a taxable situs in the City for the purposes of municipal income taxation. The portion of the entire net profits of a taxpayer to be allocated as having been derived from within the City in the absence of actual records thereof, shall be determined as follows: Multiply the entire net profits by a business allocation percentage to be determined by a three factor formula of property, payroll, and sales, each of which shall be given equal weight, as follows:
(a) The average net book value 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 net book value of all the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated. 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.
(b) Salaries, wages, commissions, other compensation and other income paid during the taxable period to persons employed in the business or profession for services performed in the City to salaries, wages, commissions, other compensation and other income paid during the same period to persons employed in the business or profession, wherever their services are performed.
(c) 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. In the event that the foregoing allocation formula does not produce an equitable result, another basis may, under uniform regulations, be substituted so as to produce such result.
(1969 Code 92.05)
As used in paragraph (c) of Section 181.05, "sales made in the City" means:
(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 of 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.
(1969 Code 92.06)
Add together the percentages determined in accordance with sub-paragraphs (a), (b) and (c) of Section 181.05 or such of the aforesaid percentages as are applicable to the particular taxpayer and divide the total so obtained by the number of percentages used deriving said total in order to obtain the business allocation percentage referred to in Section 181.05. A factor is applicable even though it may be allocable entirely in or outside the City.
(1969 Code 92.07)
Rental income received by a taxpayer shall be included in the computation of net profits from business activities under sub-paragraphs (c), (d), (e), (f), and (g) of Section 181.03, only if and to the extent that the rentals are derived (whether so rented, managed or operated by a taxpayer individually or through agents or other representatives) constitutes a business activity of the taxpayer in whole or in part.
Where the gross monthly rental of any and all real properties, regardless of number and value, aggregate in excess of $125 per month, it shall be prima facie evidence that the rental, ownership, management or operation of such properties is a business activity of such taxpayer, and the net income of such rental property shall be subject to tax; provided that in the case of commercial property, the owner shall be considered engaged in a business activity when the rental is based on a fixed or fluctuating percentage of gross or net sales, receipts or profits of the lessee, whether or not such rental exceeds $125 per month; provided further that in the case of farm property the owner shall be considered engaged in a business activity when he shares in crops or when the rental is based on a percentage of the gross or net receipts derived from the farm, whether or not the gross income exceeds said $125 per month; and provided further that the person who operates a licensed rooming house shall be considered in business whether or not the gross income exceeds $125 per month.
(1969 Code 92.08)
(a) The portion of a net operating loss sustained in any taxable year subsequent to January 1, 1968 allocable to the City may be applied against the portion of the profit of succeeding tax 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.
(b) The portion of net operating loss sustained shall be allocated to the City in the same manner as provided herein for allocating net profits to the City.
(c) The Administrator shall provide by rules and regulations the manner in which such operating loss carry-forward shall be determined.
(1969 Code 92.09)
EXEMPTIONS
The tax provided for herein shall not be levied on the following:
(a) Pay or allowance of active members of the armed forces of the United States or the income of religious, fraternal, charitable, scientific, literary or educational institutions to the extent that such income is derived from tax exempt real estate, tax exempt tangible or intangible property or tax exempt activities.
(b) Poor relief, unemployment insurance benefits, old age pensions or similar payments including disability benefits received from local, state or federal governments or charitable, religious or educational organizations.
(c) Proceeds of insurance paid by reason of the death of the insured; pensions, disability benefits, annuities or gratuities not in the nature of compensation for services rendered from whatever source derived.
(d) Receipts from seasonal or casual entertainment, amusements, sports events and health and welfare activities when any such are conducted by bona-fide charitable, religious or educational organizations and associations.
(e) Alimony received.
(f) Personal earnings of any natural person under 18 years of age.
(g) Compensation for personal injuries or for damages to property by way of insurance or otherwise.
(h) Interest, dividends and other revenue from intangible property subject to the Ohio Intangible Property Tax or specifically exempted therefrom.
(i) Gains from involuntary conversion, cancellation of indebtedness, interest on federal obligations, items of income already taxed by the State of Ohio from which the City is specifically prohibited from taxing, and income of a descendant's estate during the period of administration (except such income from the operation of a business).
(j) Salaries, wages, commissions and other compensation and net profits, the taxation of which is prohibited by the United States Constitution or any act of Congress limiting the power of the states or their political subdivisions to impose net income taxes on income derived from interstate commerce.
(k) Salaries, wages, commissions and other compensation and net profits, the taxation of which is prohibited by the Constitution of the State of Ohio or any act of the Ohio General Assembly limiting the power of the City to impose net income taxes.
(1969 Code 92.10)
RETURNS
(a) Each taxpayer, except as herein provided, shall, whether or not a tax is due thereon, make and file a return on or before April 15 of each year. When the return is made for a fiscal year or other period different from the calendar year, the return shall be filed on or before the 15th day of the fourth month following the end of such fiscal year or period. Any person who has no income need not file an annual return. Any person who has exempt income must file a return and declare to the Administrator the nature of his or her exemption. Any person who has taxable income must file a tax return with the Tax Administrator.
(b) If a taxpayers entire income is exempt from taxation by the City, the taxpayer, in lieu of filing a return, shall file a one-time individual declaration of exemption stating the reasons the taxpayer is exempt. If at any time thereafter the taxpayer once again earns and/or receives income taxable to the City, the Taxpayer must reactivate his City tax account by informing the Finance Director within thirty (30) days after earning or receiving such income.
(Ord. 08-0-48. Passed 5-6-08.)
The return shall be filed with the administrator on a form or forms furnished by or obtainable upon request from such Administrator, setting forth:
(a) The aggregate amounts of salaries, wages, commissions, lottery winnings, other gambling winnings, other compensation and other income earned or received and gross income from business, profession or other activity, less allowable expenses incurred in the acquisition of such gross income earned or received during the preceding year and subject to said tax; and
(b) The amount of the tax imposed by this chapter on such income; and
(c) Such other pertinent statements or other information as the Administrator may require. (1969 Code 92.16)
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