(a) Basis of Imposition: Subject to provisions of Section 181.16, an annual tax for the purposes specified in Section 181.01 is levied, on and after July 1, 1985, at the rate of two per cent (2%) per annum, on or after July 1, 2005, at a rate two and one tenth of a percent (2.1%) per annum, upon the following:
(1) Resident Employee: On all qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan and other compensation paid by an employer or employers, compensation for personal services, other compensation, and other taxable income earned or received by residents of the Municipality.
A. For the purpose of determining the tax on the earnings of resident taxpayers taxed under this section, the sources of the earnings and the place or places in or at which the services were rendered, are immaterial. All such earnings wherever earned or paid are taxable.
B. The following are items which are subject to the tax imposed by this section:
1. Qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan and other compensation paid by an employer or employers, compensation for personal services, other compensation, and other taxable income earned or received by an individual residents whether directly or through an agent and whether in cash or in property for services rendered during the tax period as:
a. An officer, director or employee of a corporation (including charitable and other non-profit organizations), joint stock association, or joint stock company.
b. An employee (as distinguished from a partner or member) of a partnership, limited partnership, or any form of unincorporated enterprise by two or more persons.
c. An employee (as distinguished from a proprietor) of a business, trade or profession conducted by an individual owner.
d. An officer or employee (whether elected, appointed or commissioned) of the United States Government, or any of its agencies; or of the State of Ohio, or any of its political subdivisions or agencies thereof or any foreign country or dependency except as provided in Section 181.03(h) of this Chapter.
e. An employee of any other entity or person, whether based upon hourly, daily, weekly, semi-monthly, monthly, annual unit of production or piece work rate; and whether paid by an individual, partnership, association, corporation (including charitable and other non-profit corporations), governmental administration, agency, authority, board, body, branch, bureau, department, division, sub-division, section, unit, or any other entity.
2. Commissions earned by an individual directly or through an agent and whether in cash or in property for services rendered during the effective period of this Chapter, regardless of how computed or by whom or where paid.
a. If amounts received as a drawing account exceed the commissions earned and the excess is not subject to the demand of the employer for repayment, the tax is payable on the amounts received as a drawing account.
b. Amounts received from an employer for expenses, and not as compensation, and used as such by the individual receiving them are not deemed to be compensation if the employer deducts such expenses or advances as such from his gross income for the purpose of determining his net profits taxable under federal law, and the employee is not required to include such receipts as income on his federal tax return.
c. If commissions are included in the net earnings of the trade, business, profession, enterprise, or activity, carried on by an unincorporated entity of which the individual receiving such commission is owner or part owner and therefore subject to the tax under Sections 181.03(a)(3) or 181.03(a)(4) of this Chapter, they shall not be taxed under Section 181.03(a)(1).
3. Fees, unless such fees are properly includible as part of the net profits of a trade, business, profession, or enterprise, regularly carried on by an unincorporated entity owned or partly owned by said individual and such net profits, are subject to the tax under Section 181.03(a)(3) of this Chapter.
4. Other compensation, including but not limited to: tips, bonuses or gifts or prizes of any type connected with employment or in lieu of pay, and including compensation paid to domestic servants, casual employees and other types of employees.
5. Payments made to an employee by an employer as sick leave, holiday pay, vacation pay, or qualified wages under any other wage continuation plan during periods of disability, sickness, or absence from work are taxable when paid.
6. Payments made by third parties, i.e., Insurance Companies, to an employee for sick or disability pay are taxable if the amount appears on a W-2 form and the employer has paid the premium for this insurance coverage.
7. Losses from the operation of a business or profession are not deductible from employee earnings but may be carried forward as provided in Article III (C) of these rules and regulations.
8. Sums deducted from gross wages or other compensation for retirement purposes (deferred compensation plans and similar plans) are taxable.
9. If the income appears on a W-2 form and is not shown to be an exception in accordance with paragraph (e) hereof (Exceptions), it shall be considered other compensation and therefore taxable to the individual. This includes, but is not limited to:
a. Tips, bonuses, fees, gifts in lieu of pay, gratuities.
b. Supplemental unemployment compensation benefits described in Section 3402 (o) (2) of the Internal Revenue Code.
c. Strike pay; grievance pay.
d. Incentive payments, no matter how described, including, but not limited to payments to induce early retirement.
e. Severance pay; separation pay.
f. Employer paid premiums for group term life insurance to the extent taxable to the federal government.
g. Sick pay or disability pay whether paid by the employer to the employee or through a third party.
h. Contributions by an employee or on behalf of an employee from gross wages, into an employee or third party trust or pension plan as permitted by any provision of the Internal Revenue Code which may be excludable from gross wages for federal income tax purposes (401K plans and similar plans).
i. Nonqualified Deferred Compensation Plans or programs described in Section 3121(v) (2) (c) of the Internal Revenue Code.
j. The ordinary income portion of a stock option or employee stock purchase plan to the extent that it is shown on the W-2 as ordinary income and is includable on the taxpayer's federal income tax return.
k. Trusts not made pursuant to employee's retirement.
C. Where compensation is paid or received in property, its fair market value, at the time of receipt, shall be subject to the tax and to withholding. Board, lodging and similar items received by an employee in lieu of additional cash compensation shall be included in earnings at their fair market value.
1. In the case of domestics and other employees whose duties require them to live at their place of employment or assignment, board and lodging shall not be considered as wages or compensation earned.
2. Rentals or housing given to clergy are not to be considered as income.
(2) Non-Resident Employee: On all qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan and other compensation paid by an employer or employers, compensation for personal services, other compensation, and other taxable income earned or received by nonresidents for work done or services performed or rendered in the Municipality or as a result of employment in the Municipality whether such compensation or remuneration is received or earned directly or through an agent and whether paid in cash or in property.
A. The location of the place from which payment is made is immaterial.
C. The Municipality shall not tax the compensation of an individual if all of the following apply:
1. The individual does not reside in the Municipality;
2. The compensation is paid for personal services performed by the individual in the Municipality on twelve (12) or fewer days during the calendar year;
3. In the case of an individual who is an employee, the principal place of business of the individual's employer is located outside the Municipality and the individual pays tax on compensation described in item 2. above of this sub-section to the municipality, if any, in which the employer is located and no portion of that tax is refunded to the individual;
4. The individual is not a professional entertainer or professional athlete, the promoter of a professional entertainment or sports event, or an employee of such a promoter, all as may be reasonably defined by the Municipality.
D. For purposes of the 12-day calculation, "Day" means any part of a 24-hour calendar day where compensation is earned for work performed in the Municipality.
E. Beginning with the thirteenth (13) day, the individual shall no longer be considered an occasional entrant and is liable for taxes on income earned for the first twelve (12) days.
(3) Resident Unincorporated Businesses: On the portion attributable to the Municipality of the net profits earned by all resident, associations, enterprises, unincorporated businesses, pass-through entities, professions or other activities, derived from sales made, work done, undertakings or other entities conducted, operated, engaged in, prosecuted or carried on, services performed or rendered, and business or other activities conducted in the Municipality irrespective of whether such taxpayer has an office or place of business in St. Bernard.
A. The tax imposed on resident associations or other unincorporated entities owned by two or more persons is upon the entities rather than the individual members or owners thereof, but the tax imposed on an unincorporated resident entity or by one person is upon the individual owner.
B. The tax imposed by this Section 181.03(a)(3) is imposed on all resident unincorporated entities having net profits attributable to the Municipality under the Business apportionment formula provided for in this Chapter regardless of where the owner or owners of such resident unincorporated business entity reside.
C. Resident associations or unincorporated businesses, professions, or other unincorporated entities owned by two or more persons all of whom are residents of St. Bernard may disregard the Business apportionment formula provided for in this Chapter and pay the tax on their entire net profits if no apportionment by the entity to another municipality exists. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of such net profits; however, an additional return shall be required from any such owner or member having Taxable Income other than the distributive share of the net profits from the entity.
D. The tax imposed shall not apply to income derived within the Village of St. Bernard by any person from interstate commerce if the only business activities within the State of Ohio by or on behalf of such person, are either or both of the following:
1. Solicitation of orders by such person, or his representative, in the State of Ohio for sales of intangible personal property, which orders are sent outside of the State of Ohio for approval or rejection, and if approved, are filled by shipment or delivery from a point outside the State of Ohio; and
2. The solicitation of orders by such person, or his representative in the State of Ohio, in the name of, or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitations are orders described in paragraph 1. above; provided, however, that the provisions of this sub-section shall not apply to any corporation which is incorporated under the laws of the State of Ohio or any individual who is domiciled in or a resident of the State of Ohio.
a. For the purpose of this subsection a person shall not be considered to have engaged in a business activity within the State of Ohio during any taxable year merely by reason of sales in the State of Ohio, or the solicitation of orders for sales within the State of Ohio of tangible personal property on behalf of such person by one or more independent contractors, or by reason of the maintenance of an office within the State of Ohio by one or more independent contractors whose activities, on behalf of such person in the State of Ohio, consist solely of making sales, or soliciting orders for sales of tangible personal property.
b. For the purposes of this subsection, the term "independent contractor" means a commission agent, broker, or other independent contractor who is engaged in selling, or soliciting orders for sales of tangible personal property for more than one principal and who holds himself out as such in the regular course of his business activities. For the purpose of this sub-section the term "representative" does not include an independent contractor.
(4) Resident's Distributive Share of Profits of a Resident Unincorporated Business Entity, Not Attributable to the Municipality: 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 by the municipality or any other municipality at the same or a higher rate.
A. A resident individual who is sole owner of a resident unincorporated entity shall disregard the business apportionment formula and pay the tax on the entire net profits of his resident unincorporated business entity. If apportionment to another municipality exists, the taxpayer may qualify for credit for tax paid to another locality.
B. In the case of a resident individual partner or part owner of a resident unincorporated entity, there is imposed an annual tax at the current rate on such individual's distributive share of net profits earned during the effective period of this Chapter not attributable to the Municipality, under the Business apportionment formula provided for in Section 181.03(b) of this Chapter, and not taxed against the entity.
(5) Non-Resident Unincorporated Businesses: On the portion attributable to the Municipality on the net profits by all nonresident associations, unincorporated businesses, pass-through entities, professions or other unincorporated activities or entities, derived from sales made, work done, services performed or rendered, and business or other activities conducted in the Municipality, whether or not such nonresident associations, unincorporated businesses, pass-through entities, professions or other unincorporated activity has an office or place of business in the Municipality.
A. The tax imposed on non-resident associations, unincorporated businesses, pass-through entities, professions or other unincorporated activities or entities owned by two or more persons are upon the entities rather than the individual members or owners thereof.
B. The tax imposed by this Section 181.03(a)(5) is imposed on all non-resident associations and other non-resident unincorporated entities having net profits attributable to the Municipality under the business apportionment percentage formula provided for in this Chapter, regardless of where the owner or owners of such non-resident unincorporated business or non-resident unincorporated associations reside.
C. Non-resident associations, unincorporated businesses, pass-through entities, professions or other unincorporated activities or entities owned by two or more persons all of whom are residents of the Municipality may elect to disregard the Business apportionment percentage formula provided for in this Chapter and pay the tax on their entire net profits if no apportionment by the entity to another taxing municipality exists. In such case, the tax paid by the entity shall constitute all tax due from the owners or members of the entity for their distributive share of the net profits from the entity; however, an additional return shall be required from such owner or members having taxable income other than the distributive share of the net profit from the entity.
(6) Resident's Share of Profits of a Non-Resident Unincorporated Business Entity Not Attributable to the Municipality: On the portion of the distributive share of the net profits earned by a resident owner of a nonresident association, unincorporated business entity, pass-through entity, profession or other unincorporated association not attributable to the Municipality and not levied against such nonresident association, unincorporated business entity, pass-through entity, profession or other unincorporated association by the Municipality or any other municipality at the same or higher rate.
A. A resident individual who is sole owner of a non-resident unincorporated business entity shall disregard the Business apportionment formula and pay the tax on the entire net profits of his unincorporated entity. If apportionment to another municipality exists, the taxpayer may qualify for credit for tax paid to another municipality under Section 181.15.
B. In the case of a resident individual partner or part owner of a non-resident unincorporated entity, the tax is imposed on such individual's distributive share of net profits not attributable to the Municipality under the Business apportionment percentage formula provided for in Section 181.03(b) of this Chapter and not taxed against the entity.
(7) Net Profits of Corporations: On the portion attributable to the Municipality of the net profits earned by all corporations, whether domestic or foreign, that are not pass-through entities from sales made, 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.
A. The tax is imposed on the net profits attributable to the Municipality under the Business apportionment percentage formula provided for in this Chapter.
B. In determining whether a corporation is conducting a business or other activity in the Municipality, the provisions of this Chapter along with any additional Rules and Regulations in effect, shall be applicable.
C. A corporation whose sole business location is within the Municipality shall be considered a resident of the Municipality and shall disregard the business apportionment formula and pay the tax on the entire net profits of the corporate entity. If apportionment to another municipality exists, the taxpayer may qualify for credit for tax paid to another locality.
D. Corporations which are required by the provisions of Section 5727.38 to 5727.42, inclusive of the Ohio Revised Code, to pay an excise tax in any taxable year as defined by this Chapter, may exclude that part of their gross receipts upon which the excise tax is paid. In such case, expenses incurred in the production of such gross receipts shall not be deducted in computing net profits subject to the tax imposed by this Chapter.
(8) Winnings and Gambling Winnings: On all income received as winnings and gambling winnings as set forth in this section.
A. On all income received as winnings and gambling winnings as required to be reported on IRS form W-2G, Form 5754, or required under section 6041 of the Internal Revenue Code, or any other form required by the Internal Revenue Service that reports winnings from gambling, prizes, and lottery winnings.
Winnings include, but is not limited to, the following:
1. Prizes, awards and winnings derived from play, gaming, wagering, lotteries, sweepstakes, bingo, keno, slot machines, casino games, horse racing, dog racing, jai alai, wagering pools, prizes, games of chance and any other wagering transactions or activities related to the winning of such income by residents of the Village;
2. Prizes, awards and winnings derived from play, gaming, wagering, lotteries, sweepstakes, bingo, keno, slot machines, casino games, horse racing, dog racing, jai alai, wagering pools, prizes, games of chance and any other wagering transactions or activities related to the winning of such income resulting from play, wagering, or activities related to the winning of such income within the Village by non-residents;
3. Prizes, awards and winnings from a casino facility or casino operator as defined in Ohio Constitution Section 6(c)(9) of Article XV of Ohio Revised Code Section 3772.01 resulting from play, wagering, or activities related to the winning of such income by residents;
4. Prizes, awards and winnings of residents derived from a video lottery terminal facility or licensed video lottery sales agent as authorized in Ohio Revised Code Section 3770.21 where such winnings are obtained by a resident;
5. Prizes, awards and winnings paid to residents of the Village derived from the State Lottery and paid by the State Lottery Commission.
(9) Rentals From Real Property: The rental of real estate is ordinarily a business activity, and the income from such rentals are taxable.
A. Where the taxpayer's entire rental activity produces gross rentals less than three hundred ($300.00) dollars per month, it will be prima facie evidence that such rental activities are not a business activity. (If gross rentals equal or exceed three hundred ($300.00) dollars per month, the entire net income from rentals is taxable.) In determining the amount of gross monthly rental of any real property, periods during which, by reason of vacancy or any other cause, rentals are not received shall not be taken into consideration by the taxpayer.
B. Rentals received by a taxpayer engaged in the business of buying and selling real estate shall be considered as part of business income.
C. Real property shall include commercial property, residential property, farm property, and any and all other types of real estate.
D. In determining the taxable income from rentals, the deductible expenses shall be of the same nature, extent and amount as are allowed by the Internal Revenue Service for federal income tax purposes.
E. Residents of the Municipality are subject to taxation upon the net income from rentals, regardless of the location of the real property owned. However, if any such properly is located outside the Municipality and is subject to another municipal income tax, credit shall be claimed in accordance with Section 181.15.
F. Non-residents of the Municipality are subject to such taxation only if the real property is situated within the Municipality.
G. Businesses owning or managing real estate are taxed only on that portion of income derived from property located in the Municipality.
(10) Amplification: In amplification of the definitions contained in Section 181.02 of this Chapter, but not in limitation thereof, the following additional information respecting net business profits is furnished.
A. Net profits:
1. "Net profit" for a taxpayer other than an individual means adjusted federal taxable income. "Net profit" for a taxpayer who is an individual means the individual's profit, other than amounts described in Section 181.03(f), required to be reported on schedule C, schedule E, or schedule F.
B. Adjusted Federal Taxable Income:
1. "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, adjusted as follows:
a. Deduct intangible income to the extent included in federal taxable income. The deduction shall be allowed regardless of whether the intangible income relates to assets used in a trade or business or assets held for the production of income.
b. Add an amount equal to five percent (5%) of intangible income deducted in Section 181.03(a)(10)B.1.a., but excluding that portion of intangible income directly related to the sale, exchange, or other disposition of property described in Section 1221 of the Internal Revenue Code;
c. Add any losses allowed as a deduction in the computation of federal taxable income if the losses directly relate to the sale, exchange, or other disposition of an asset described in Section 1221 or 1231 of the Internal Revenue Code;
d. (i) Except as provided in following Section 181.03(a)(10)B.1.d.(ii), deduct income and gain included in federal taxable income to the extent the income and gain directly relate to the sale, exchange, or other disposition of an asset described in section 1221 or 1231 of the Internal Revenue Code;
(ii) The previous sub-section [Section 181.03(a)(10)B.1.d.(i)] does not apply to the extent the income or gain is income or gain described in Section 1245 or 1250 of the Internal Revenue Code.
e. Add taxes on or measured by net income allowed as a deduction in the computation of federal taxable income;
f. In the case of a real estate investment trust and regulated investment company, add all amounts with respect to dividends to, distributions to, or amounts set aside for or credited to the benefit of investors and allowed as a deduction in the computation of federal taxable income;
g. If the taxpayer is not a C corporation and is not an individual, the taxpayer shall compute adjusted federal taxable income as if the taxpayer were a C corporation, except;
(i) Guaranteed payments and other similar amounts paid or accrued to a partner, former partner, member, or former member shall not be allowed as a deductible expense; and
(ii) Amounts paid or accrued to a qualified self-employed retirement plan with respect to an owner or owner-employee of the taxpayer, amounts paid or accrued to or for health insurance for an owner or owner employee, and amounts paid or accrued to or for life insurance for an owner or owner-employee shall not be allowed as a deduction.
2. Nothing in this section shall be construed as allowing the taxpayer to add or deduct any amount more than once or shall be construed as allowing any taxpayer to deduct any amount paid to or accrued for purposes of federal self-employment tax.
3. Nothing in this chapter shall be construed as limiting or removing the ability of any municipal corporation to administer, audit, and enforce the provisions of its municipal income tax.
C. Gross Receipts:
1. Gross receipts shall include but not be limited to income in the form of commissions, fees, directors' fees, sub-pay, profit sharing from nonqualified plans, rentals from real and tangible personal property, and other compensation for work or services performed or rendered as well as income from sales of stock in trade.
2. Gross receipts shall include ordinary income as determined on federal Form 4797
D. Expenses:
1. 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 withdrawal of a proprietor or of the partners, members, or other owners of an unincorporated business or enterprise.
2. 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 casually, 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 the federal income tax.
Provided, however, that loss on the sale, exchange or other disposition of depreciable property or real estate, used in the taxpayer's business shall not be allowed as a deductible expense.
3. Current amortization of emergency facilities under the provisions of the Internal Revenue Code, if recognized as such for federal income tax purposes, may be included as an expense deduction.
4. Where depreciable property is voluntarily destroyed, only the cost of demolition and the un-depreciated balance will be allowed as an expense in the year of such demolition, to the extent allowable for federal income tax purposes.
5. Bad debts in a reasonable amount may be allowed in the year ascertained worthless and charged off, or at the discretion of the Tax Commissioner (if the reserve method is used), a reasonable addition to the reserve may be claimed, but in no event shall the amount exceed the amount allowable for federal income tax purposes.
6. Only taxes directly connected with the business may be claimed as a deduction. If for any reason the income from property is not subject to the tax, then taxes imposed on and other expenses of said property are not deductible. In any event, the following taxes are not deductible from income: (1) the tax under this Chapter; (2) federal or other taxes based upon income; (3) gift, estate, or inheritance taxes; and (4) taxes for local benefit or improvements to property which tend to appreciate the value thereof, and (5) self-employment taxes for unincorporated businesses or other entities, including credit for employment taxes as allowed for federal tax purposes.
7. If the taxpayer reports income that is non-taxable under this Chapter and such amounts are deducted in order to reconcile the Municipal return with the taxpayer's federal income tax return, expenses attributable to this non-taxable income shall not be allowed as a deduction from the remaining taxable income.
The expenses attributable to such non-taxable income shall be deemed to equal five percent (5%) of such non-taxable income. Non-taxable income given capital gain treatment on the federal return, from which attributable expenses were already deducted, is not subject to this subsection.
8. An employee who is paid on a commission or other compensation basis and who pays his business expense from his commissions or other compensation, without reimbursement from his employer, may deduct from his gross commissions or other compensations, business expenses allowed as a deduction by the Internal Revenue Service for federal income tax purposes but only to the extent said expenses are incurred in earning commissions or other compensations subject to the tax imposed by this Chapter.
Business expenses allowed shall be those expenses allowed to be claimed on the federal Form 2106 and upon the request of the Tax Commissioner, verifiable with supporting schedules and/or receipts.
No expenses claimed on federal Form "Schedule A, Itemized Deductions" shall be allowed.
Failure to produce the supporting schedules and/or receipts upon request by the Tax Commissioner shall result in disallowance of the expenses in question.
9. Expenses incurred while attending educational courses may not be deducted from wages.
10. Moving expenses included in gross earnings shall be an allowance as a deductible expense. No deduction will be allowed if the taxpayer does not provide Federal Form 3903, "Employee Moving Expenses Information", for moving deductions. Only moving expenses incurred, as part of income included in gross earnings, will be allowed.
11. No deduction shall be allowed for self-employed health insurance against income as allowed for federal or state tax purposes for unincorporated entities or the like.
12. 401(k), IRA, SEP, KEOGH plans or any other type of deferred compensation plans shall not be allowed as a deduction against income for unincorporated entities or the like as allowed for federal purposes.
(11) Royalties:
A. Income in the form of royalties is taxable if taxpayer's activities produced the publication or other product, the sale of which produces the royalties.
(b) Apportionment of Business Profits for Business Both In and Outside the Municipality: This Section does not apply to taxpayers that are subject to and required to file reports under Chapter 5745, of the Ohio Revised Code. Except as otherwise provided in subsection (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:
(1) Business Apportionment Percentage Method: Multiply the entire net profits of the business by a business apportionment percentage to be determined by the following steps:
A. STEP 1: Determine the percentage of 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.
1. The original cost of real and tangible personal property includes, property rented or leased, leasehold improvements, and all real and tangible personal property owned or used in the business.
2. The percentage of taxpayer's real and tangible personal property within the Municipality is determined by dividing the original cost of such property within (without deduction of any encumbrances) by the original cost of all such property within and without the Municipality. In determining such percentage, property rented to the taxpayer as well as real and tangible personal property owned by taxpayer must be considered.
a. The original cost of real and tangible personal property rented by tax payer shall be determined by multiplying gross annual rents by eight (8).
b. Gross rents mean the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer for the use or possession of property and include:
(i) Any amount payable for the use or possession of real and tangible personal property or any part thereof, whether designated as a fixed sum of money or as a percentage of sales profits or otherwise;
(ii) Any amount payable as additional rent or in lieu of rent such as interest, taxes, insurance, repairs, or other amounts required to be paid by the terms of a lease or other arrangement.
c. A residence may not be considered an office unless a separate portion of the structure such as a room or basement is used exclusively for business purposes.
B. STEP 2: Determine the percentage of the total salaries, wages and other compensation paid during the taxable period to persons employed in the business or profession for services performed within the Municipality compared to the total salaries, wages and other compensation paid during the same period to persons employed in the business or profession, within and without the Municipality, wherever their services are performed, excluding compensation that is not taxable by the municipal corporation under Section 718.011 of the Ohio Revised Code.
1. Salaries, wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan and other compensation, subject to Municipal income tax, paid owners or credited to the account of owners or partners during the period covered by the return are considered wages for the purpose of this computation.
2. Salaries, wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan and other compensation, subject to Municipal income tax, shall be computed on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.
3. In the case of an employee who performs services both within and without the Municipality, the amount treated as compensation for service performed within the Municipality shall be deemed to be:
a. In the case of an employee whose compensation depends directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within the Municipality.
b. In the case of an employee whose compensation depends on other results achieved, the proportion of the total compensation received which the value of his services within the Municipality bears to the value of all his services; and
c. In the case of an employee compensated on a time basis, the proportion of the total amount received by him which his working time within the Municipality is of his total working time.
d. Provided, however, all employees regularly connected with or working out of a place of business maintained by the taxpayer in the Municipality who performs 75% or more of their services within the Municipality shall be considered employees within the Municipality.
4. Non-resident professional persons shall use the factor of days spent within the Municipality to total working days. All employees regularly connected with or working out of a place of business maintained by the taxpayer outside the Municipality who performs 25% or less of their services within the Municipality shall be considered employees outside the Municipality. (The provisions of this sub section are not applicable in determining the tax liability of a non-resident who works in and outside the Municipality.)
C. STEP 3: Determine the percentage of gross receipts of the business or profession from sales made and services performed during the taxable period in the Municipality compared to gross receipts of the business or profession during the same period from sales and services, wherever made or performed.
1. The following sales shall be considered Municipal sales:
a. All sales made through retail stores located within the Municipality to purchasers within or without the Municipality except such of said sales to purchasers outside the Municipality that are directly attributable to regular solicitations made outside the Municipality personally by taxpayer's employees.
b. All sales of tangible personal property delivered to purchasers within the Municipality if shipped or delivered from an office, store, warehouse, factory, or place of storage located within the Municipality.
c. All sales of tangible personal property delivered to purchasers within the Municipality even though transported from a point outside the Municipality if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within the Municipality and the sale is directly or indirectly the result of such solicitation.
d. All sales of tangible personal property shipped from an office, store, warehouse, factory or place of storage within the Municipality to purchasers outside the Municipality if the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place of delivery.
e. Charges for work done or services performed incident to a sale, whether or not included in the price of the property shall be considered gross receipts from such sale.
2. In the application of the foregoing sub-sections, a carrier shall be considered the agent of the seller, regardless of the FOB point or other conditions of the sale, and the place at which orders are accepted or contracts legally consummated shall be immaterial.
3. Solicitation of customers outside the Municipality by mail or phone from an office, or place of business within the Municipality shall not be considered a solicitation of sales outside the Municipality.
D. STEP 4: Add the percentages determined in accordance with the first three STEPS above, or such percentages as may be applicable to the particular taxpayer's business, and divide the total by the number of percentages used in ascertaining the total. The result is the business apportionment percentage.
1. In determining the average percentage, a factor shall not be excluded from the computation merely because the factor is found to be apportioned entirely in or outside the Municipality.
2. A factor is excluded only when it does not exist anywhere.
3. Provided, however, that in the event a just and equitable result cannot be obtained under the formula provided for, the Tax Commissioner, upon application of the taxpayer, shall have the authority to substitute other factors or methods calculated to effect a fair and proper apportionment.
E. STEP 5: The business apportionment percentage determined in Step 4 above shall be applied to the entire taxable net profits of the taxpayer wherever derived to determine the net profits apportioned to the Municipality.
(2) Substitute Method:
A. In the event a just and equitable result cannot be obtained under the business apportionment percentage formula, the Tax Commissioner, upon application of the taxpayer may substitute other factors in the business apportionment percentage formula or prescribe other methods of apportioning net income calculated to effect a fair and proper apportionment.
B. Application to the Tax Commissioner to substitute other factors in the business apportionment percentage formula or to use a different method to apportion net profits must be made in writing before the end of the tax year and shall state specific grounds on which the substitution of factors or use of a different method is requested and the relief sought to be obtained. A copy thereof shall be served at the time of filing upon the taxpayer or Tax Commissioner as the case may be. No specific form need be followed in making such application. Once a taxpayer has filed a return based upon a substitute method, he must continue to so file based upon that same method until given permission to change by the Tax Commissioner.
C. The decision of the Tax Commissioner on subsections (2)A. and B. above may be appealed by the taxpayer to the Board of Review, which shall have the power to adjust, modify or overrule such decision of the Tax Commissioner.
(3) Professional and Personal Service: In the case of professional people and others furnishing personal services, if their only place of business is within the Municipality, all their net profits shall prima facie be attributable to the Municipality.
(4) Resident Sales Apportionment Percentage Less Than One Hundred Percent:
A. All resident corporations, unincorporated businesses, or other entities whose principal place of business is within the Municipality, shall be considered a resident Municipal business and be subject to the following provision:
B. If the sales apportionment percentage is less than one hundred percent (100%), a statement shall be submitted with the return indicating: (1) other municipalities to which sales are apportioned; (2) percentage of sales apportioned to each municipality; (3) whether or not a return was filed and tax paid on the sales apportioned to each municipality. Failure to submit this statement (or when the statement indicates no other municipal tax was filed and paid), shall result in all sales being considered as sales of the Municipality.
(c) As used in subsection (b) 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;
(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) Except as otherwise provided in subsection (e) of this Section, net profit from rental activity not constituting a business or profession shall be subject to tax only by reason of their location within the Municipality where the property generating the net profit is located.
(e) This Section does not apply to individuals who are residents of the Municipality and, except as otherwise provided in Section 718.01 of the Ohio Revised Code, 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, 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 five (5) taxable years immediately following the year in which the loss occurred.
(2) No portion of a net operating loss shall be carried back against net profits of any prior year.
(3) In the event net profits are apportioned both within and without the Municipality, the portion of a net operating loss sustained shall be allocated to the Municipality in the same manner as provided for apportioning net profits to the Municipality. The portion of a net operating loss to be carried forward shall be determined in the year the net operating loss is sustained utilizing the basis of the apportionment factors applicable to that year.
(4) The same method of accounting and apportionment must be used in the year to which an operating loss is carried as was used in the year in which the operating loss was sustained.
(5) 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 carry forward loss deduction to the surviving or new taxpayer.
(6) A short fiscal year (a fiscal year of less than twelve (12) months) brought about by a change in accounting period, a new taxpayer selecting a short fiscal year, or a taxpayer operating in the Municipality for less than a full accounting period, shall be considered as a full taxable fiscal year for purposes of loss carry-forward.
(7) In any return in which a net operating loss deduction is claimed, a schedule should be attached showing:
A. Year in which net operating loss was sustained.
B. Method of accounting and apportionment used to determine the portion of net operating loss apportioned to the Municipality.
C. Amount of net operating loss used as a deduction in prior years.
D. Amount of net operating loss claimed as a deduction in the current year.
(8) With respect to a return combining taxable income from two or more sources, the following rules shall be applied:
A. The net operating loss sustained by a business or profession are not deductible from employee earnings but may be carried forward as set forth in this section.
B. 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 taxing municipality) may be used to offset the profits of another for purposes of arriving at overall net profits.
(9) Loss from an unincorporated business subject to income tax from another municipal taxing authority.
A. A loss from the operation of a business or profession maybe offset against net profits from other business or professional activities in the amount of the loss commensurate with the portion of profits, if profits existed, with respect to which credit could not be claimed for tax paid to another municipality.
Accordingly, if the profits of an activity are subject to tax by another municipality, the portion of a loss that may be used to offset profits is determined by calculating the difference in the tax rates, expressed as a percentage to the Municipality's current tax rate, and multiplying that percentage by the current year loss.
For example, if a business is located in another municipality with a tax rate of 1.5% with a loss of $10,000. The loss allowable against the Municipality business income is $2857. (ie. 2.1% - 1.5% = .6%, then .6% divided by 2.1% = .2857, then $10,000 x .2857 = $2857) The remaining loss is only allowable against the other taxing authority.
(10) Losses from the operation of a farm, determined in accordance with accounting methods used by taxpayer for federal income tax purposes, shall be allowable as an offset to net profit as set forth herein.
(g) Consolidated Returns:
(1) Consolidated returns 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 Section 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, the consolidated group must continue to file consolidated returns in subsequent years unless:
A. Permission in writing is granted by the Tax Commissioner to file separate returns.
B. A new corporation other than a corporation created or organized by a member of the group has become a member of the group during the taxable year.
C. A corporation member of the group is sold or exchanged. Liquidating a corporation or merging one of the corporations of the group into another will not qualify the group for filing separate returns.
(h) Exceptions: The provisions of this Chapter shall not be construed as levying a tax upon the following and shall not be considered taxable:
(1) Proceeds from welfare benefits, unemployment insurance benefits, supplemental unemployment benefits, pensions, Social Security benefits, or similar payments received from local, state, or federal governments, or charitable or religious organizations, or 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 Section 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 is not taxed to the recipient nor is it allowed as a deduction by the payor.
(7) Compensation for damage to property by way of insurance or otherwise.
(8) Interest and dividends from intangible property and distributions for a descendant's estate or a trust.
(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 Revised Code 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. is exempt from payment of the tax imposed by this Chapter, but only to the extent enumerated in Section 718.01 of the Ohio Revised Code.
(11) Any association or organization falling in the category listed in the preceding paragraph 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 and is required to file declarations and final returns and remit the taxes levied under this Chapter.
(12) Any association or organization falling in the category listed in the preceding paragraph is required to file declarations and final returns and remit the taxes levied under this Chapter on all net profits from activities, the income from which is not specifically exempt from taxation in Section 718.01 of the Ohio Revised Code.
(13) 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.
(14) Where such non-profit association or organization conducts income producing business both within and without the corporate limits, it shall calculate its profits apportioned to the Municipality under the method or methods provided in these rules and regulation.
(15) Income from fellowship or scholarship grants are exempt from municipal tax only to the same extent they are exempt for federal income tax purposes.
(16) The rental value of a home furnished to a minister of the gospel as part of his compensation, or the rental allowance paid to a minister of the gospel as part of his compensation, to the extent used by him to rent or provide a home pursuant to Section 107 of the Internal Revenue Code.
(17) Compensation paid under Section 3501.28 or 3501.36 of the Ohio Revised Code to a person serving as a precinct official, to the extent that such compensation does not exceed one thousand dollars ($1,000) annually. Such compensation in excess of one thousand dollars may be subjected to taxation. The payer of such compensation is not required to withhold Municipality tax from that compensation.
(18) Compensation paid to an employee of a transit authority, regional transit authority or a regional transit commission created under Chapter 306 of the Ohio Revised Code 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.
(19) The Municipality shall not tax the compensation paid to a nonresident individual for personal services performed by the individual in the Municipality on twelve (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.
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.
(20) The income of a public utility, when that public utility is subject to the tax levied under Section 5727.24 or 5727.30 of the Ohio Revised Code, except the Municipality may tax the following, subject to Chapter 5745 of the Ohio Revised Code:
A. The income of an electric company or combined company;
B. The income of a telephone company.
As used in subsection (f)(17) of this Section, "combined company", "electric company", and "telephone Company" have the same meanings as in Section 5727.01 of the Ohio Revised Code.
(21) 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 Section 3121(a) of the Internal Revenue Code or net earnings from self-employment as defined in Section 1402(a) of the Internal Revenue Code, to the extent such distributive share would not be allocated or apportioned to this state under division (B)(1) and (2) of Section 5733.05 of the Ohio Revised Code if the S corporation were a corporation subject to the taxes imposed under Chapter 5733 of the Ohio Revised Code.
(22) 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.
(23) Compensation earned by itinerant ministers, pastors, or preachers.
(24) Personal earnings of all persons under eighteen (18) years of age.
(Ord. 02-2014. Passed 1-2-14.)