PURPOSE
171.0101 Purpose of levy of income tax.
DEFINITIONS
171.0301 Definitions.
171.0302 Administrator.
171.0303 Association.
171.0304 Board of Review.
171.0305 Business.
171.0306 Corporation.
171.0307 Employee.
171.0308 Employer.
171.03081 Fundamental change.
171.03082 Manager.
171.0309 Fiscal year.
171.0310 Gross receipts.
171.0311 Net profits.
171.0312 Nonresident.
171.0313 Nonresident unincorporated business entity.
171.0314 Person.
171.0315 Place of business.
171.0316 Resident.
171.0317 Resident unincorporated business entity.
171.0318 Taxable income.
171.0319 Taxable year.
171.0320 Taxpayer.
171.0321 Qualifying wage.
171.0322 Generic form.
IMPOSITION OF INCOME TAX
171.0501 Rate and income taxable.
171.0502 Effective period.
DETERMINATION OF ALLOCATION OF TAX
171.0701 Method of determination.
171.0702 Sales made in the City.
171.0703 Total allocation.
171.0704 Rentals.
171.0705 Operating loss carry-forward.
EXEMPTIONS
171.0901 Sources of income not taxed.
RETURNS
171.1101 When return required to be made.
171.1102 Form and content of return.
171.1103 Extension of time for filing of returns.
171.1104 Consolidated returns.
171.1105 Amended returns.
PAYMENT OF TAX
171.1301 Payment of tax on filing of return.
171.1302 Collection at source.
171.1303 Declaration of income not collected at source.
171.1304 Filing of declaration.
171.1305 Form of declaration.
171.1306 Payment to accompany declaration.
171.1307 Annual return.
171.1308 Extensions.
INTEREST AND PENALTIES
171.1501 Interest on unpaid tax.
171.1502 Penalties on unpaid tax.
171.1503 Exceptions.
171.1504 Abatement of interest and penalty.
171.1505 Violations.
171.1506 Limitation on prosecution.
171.1507 Failure to procure forms not excuse.
COLLECTION OF UNPAID TAXES AND REFUNDS OF OVERPAYMENTS
171.1701 Unpaid taxes recoverable as other debts.
171.1702 Refunds of taxes erroneously paid.
171.1703 Amounts of less than one dollar.
TAXPAYER RELIEF AND CREDIT PROVISIONS
171.1901 South Euclid resident subject to income tax in other municipality.
DISBURSEMENTS OF RECEIPTS OF TAX COLLECTION
171.2101 Disbursement of funds collected.
DUTIES AND AUTHORITY OF THE ADMINISTRATOR
171.2301 Duty to receive tax imposed.
171.2302 Duty to enforce collection.
171.2303 Authority to make and enforce regulations.
171.2304 Authority to arrange installment payments.
171.2305 Authority to determine amount of tax due.
171.2306 Authority to make investigations.
171.2307 Authority to compel production of records.
171.2308 Refusal to produce records.
171.2309 Confidential nature of information obtained.
171.2310 Taxpayer required to retain records.
171.2311 Authority to contract for central collection facilities.
BOARD OF REVIEW
171.2501 Board of Review established.
171.2502 Duty to approve regulations and to hear appeals.
171.2503 Right of appeal.
OTHER PROVISIONS
171.2701 Declaration of legislative intent.
171.2702 Collection of tax after termination of chapter.
CROSS REFERENCES
Municipal income taxes - see Ohio R.C. Ch. 718
Payroll deductions - see Ohio R.C. 9.42
Division of Taxation - see ADM. 125.06
Tax limitation - see CHTR. Art. IX-A
PURPOSE
DEFINITIONS
For the purposes of this chapter, the terms, phrases, words and their derivatives shall have the meanings given in the next succeeding sections of this chapter. The singular shall include the plural, and the masculine shall include the feminine and the neuter.
(Ord. 36-83. Passed 11-14-83.)
"Board of Review" means the Board created by and constituted as provided in Section 171.2501.
(Ord. 36-83. Passed 11-14-83.)
"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 nonprofit corporations which are exempt from the payment of Federal income tax.
(Ord. 36-83. Passed 11-14-83.)
"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.
(Ord. 36-83. Passed 11-14-83.)
(a) "Net profits" for taxable years prior to 2004, "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. For taxable years 2004 and later, see "adjusted Federal taxable income".
(b) "Adjusted Federal taxable income" means a "C" corporation's Federal taxable income before net operating losses and special deductions as determined under the Internal Revenue Code, but including subsequent adjustments from required additions and deductions. Pass-through entities must compute "adjusted Federal taxable income" as if the pass-through entity was a "C" corporation. This definition does not apply to any taxpayer required to file a return under Ohio R.C. 5745.03 or to the net profit from a sole proprietorship. This definition is effective for tax years beginning on or after January 1, 2004.
(Ord. 36-83. Passed 11-14-83; Ord. 84-04. Passed 12-27-04.)
"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, means the partners or members thereof, and as applied to corporations, the officers thereof.
(Ord. 36-83. Passed 11-14-83.)
"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.
(Ord. 36-83. Passed 11-14-83.)
"Taxable income" means wages, salaries and other compensation paid by an employer or employers 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.
(Ord. 36-83. Passed 11-14-83.)
"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.
(Ord. 36-83. Passed 11-14-83.)
"Qualifying wage" are wages as defined in Section 3121(a) of the Internal Revenue Code, without regard to any wage limitations, but including subsequent adjustments from required additions and deductions. "Qualifying wage" represents employees' income, including non-qualified deferred compensation and stock options from which municipal tax shall be deducted by the employer, and any wages not considered a part of "qualifying wage" shall not be taxed by the City of South Euclid. This definition is effective January 1, 2004, for taxable years 2004 and later.
(Ord. 87-04. Passed 12-27-04.)
"Generic form" means an electronic or paper form designed for reporting estimated municipal income taxes, and/or annual municipal income tax liability, and/or requests for refunds, which contain all the information required on a Regional Income Tax Agency tax return, estimated payment forms, and request for refund forms, and are in a similar format that will allow processing of generic forms without altering the Regional Income Tax Agency's procedures for processing forms.
(Ord. 03-05. Passed 1-10-05.)
IMPOSITION OF INCOME TAX.
An annual tax for the purposes specified in Section 171.0101 shall be imposed on and after January 1, 2006, at the rate of two percent (2%) per annum upon the following:
(a) On all salaries, wages, commissions and other compensation earned on and after January 1, 1984, and lottery winnings entitlement to which accrued after January 26, 2004, in excess of five thousand dollars ($5,000.00) by residents of the City of South Euclid.
(b) On all salaries, wages, commissions and other compensation earned on and after January 1, 1984 by nonresidents of the City of South Euclid for work done or services performed or rendered within the City.
(c) (1) On the portion attributable to the City on the net profits earned on and after January 1, 1984, of all resident unincorporated business 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.
(2) On the portion of the distributive share of the net profits earned on and after January 1, 1984 of a resident partner or owner of a resident unincorporated business entity not attributable to the City and not levied against such unincorporated business entity in the City.
(d) (1) On the portion attributable to the City of the net profits earned on or after January 1, 1984 of all nonresident unincorporated business entities, professions or other activities, derived from sales made, work done, services performed or rendered and business and other activities conducted in the City, whether or not such unincorporated business entity has an office or place of business in the City.
(2) On the portion of the distributive share of the net profits earned on or after January 1, 1984, of a resident partner or owner of a nonresident unincorporated business entity not attributable to the City and not levied against such unincorporated business entity by the City.
(e) On the portion attributable to the City of the net profits earned on and after January 1, 1984, of all corporations derived from sales made, work done, 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.
(f) A non-resident individual who works in the City 12 or fewer days per year shall be considered an occasional entrant, and shall not be subject to the City municipal income tax for those 12 days. For purposes of the 12-day calculation, any portion of a day worked in the City shall be counted as one day worked in the City.
(1) Beginning with the 13th day, the employer of said individual shall begin withholding the City income tax from remuneration paid by the employer to the individual, and shall remit the withheld income tax to the City in accordance with the requirements of this chapter. Since the individual can no longer be considered to have been an occasional entrant, the employer is further required to remit taxes on income earned in the City by the individual for the first 12 days.
(2) If the individual is self-employed it shall be the responsibility of the individual to remit the appropriate income tax to the City.
(3) The 12-day occasional entry rule does not apply to entertainers or professional athletes, their employees or individuals who perform services on their behalf, or to promoters and booking agents of such entertainment events and sporting events.
(Ord. 36-83. Passed 11-14-83; Ord. 05-04. Passed 1-26-04; Ord. 18-04. Passed 3-22-04; Ord. 02-05. Passed 1-10-05; Ord. 01-05. Passed by electors 8-2-05.)
DETERMINATION OF ALLOCATION OF TAX
In the taxation of income which is subject to City income taxes, determine net profits as follows:
(a) 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:
(1) 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" includes 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.
(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.
(b) In the event that the foregoing allocation formula does not produce an equitable result, the following method shall apply:
(1) The net profits allocable to the City from business, professional or other activities conducted in the City by corporations or unincorporated entities (whether resident or non-resident) may be determined from the records of the taxpayer only if the taxpayer has bona fide records which disclose with reasonable accuracy what portion of his net profits is attributable to that part of his activities conducted within the City.
(2) If the books and records of the taxpayer are used as the basis for apportioning net profits, a statement must accompany the return explaining the manner in which such apportionment is made in sufficient detail to enable the Tax Administrator to determine whether the net profits attributable to the City are apportioned with reasonable accuracy.
(3) In determining the income allocable to the City from the books and records of a taxpayer, an adjustment may be made for the contribution made to the production of such income by headquarters activities of the taxpayer, whether such headquarters is within or without the City.
(Ord. 35-83. Passed 11-14-83; Ord. 85-04. Passed 12-27-04.)
As used in Section 171.0701(c), "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.
(Ord. 36-83. Passed 11-14-83.)
Add together the percentages determined in accordance with Section 171.0701(a) to (c) 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 in deriving such total in order to obtain the business allocation percentage referred to in Section 171.0701.
A factor is applicable even though it may be allocable entirely in or outside the City.
(Ord. 36-83. Passed 11-14-83.)
Rental income received by a taxpayer shall be included in the computation of net profits from business activities under Section 171.0501(c) to (e), only if and to the extent that the rental ownership, management or operations of the real estate from which such 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, aggregates in excess of two hundred fifty dollars ($250.00) 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 two hundred fifty dollars ($250.00) 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 two hundred fifty dollars ($250.00) 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 two hundred fifty dollars ($250.00) per month.
The taxpayers subject to the provisions of this section shall submit or cause to be submitted to the Tax Administrator a list of names and addresses of all persons, firms, corporations or other entities occupying, leasing, renting or otherwise using any premises belonging to the taxpayer within the City in such a manner as to produce economic benefit to the taxpayer, whether or not such benefit is collected as "rent" and whether or not such benefit results in a profit or loss. The required list shall be prepared as of December 31 of each year and submitted on or before January 31 of the following year and at such other times as may be prescribed by the Tax Administrator.
(Ord. 36-83. Passed 11-14-83.)
(a) The portion of a net operating loss sustained in any taxable year subsequent to January 1, 1967 allocable to the City of South Euclid may be applied against the portion, of the profit of succeeding tax years allocable to the City until exhausted, but in no event for more than five taxable years immediately following the year in which the loss occurred. No portion of a net operating loss shall be carried back against net profit 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 net operating loss carry-forward shall be determined.
(Ord. 36-83. Passed 11-14-83.)
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 for 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 eighteen 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, such intangible property shall include patents, copyrights, trademarks, investments in real estate investment trusts, investments in regulated investment companies, and appreciation on deferred income. Intangible income does not include prizes, awards, or other income associated with any lottery winnings or other similar games of chance.
(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 decedent'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.
(Ord. 36-83. Passed 11-14-83; Ord. 86-04. Passed 12-27-04.)
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