×

Marietta opposes Kasich business tax plan

Centralized collections would violate home rule, cost taxpayers, city officials say

Included within Ohio Gov. John Kasich’s proposed 2018-2019 budget is a set of provisions centralizing the collection of municipal business net profit taxes.

According to Kasich’s administration, the goal of centralization is to streamline the filing process for Ohio companies and aid in business compliance with tax law.

“This is a pro-business proposal that’s not focused as much on the state as it is about how we make life better for businesses,” said Ohio Tax Commissioner Joe Testa. “We hear stories about businesses spending more to file and comply with different rules of municipal taxes in different cities than what they actually owe. By centralizing the filing we would provide one uniform municipal net profits return, one set of rules and procedures and one place to receive an audit if needed. Businesses need consistency across the state.”

If passed by state

legislature, businesses would be required to file profit taxes through the state’s online Ohio Business Gateway, rather than through each municipality in which they are located.

The proposal outlines that all municipal business tax filings and payments made centrally through the state’s system and then the state tax department would administer the filing process, audit returns when appropriate and distribute tax receipts to the intended municipality, with a 1 percent fee applied for administrative services.

Businesses within Marietta’s municipal borders currently pay a 1.7 percent income tax rate on their net profits just like individuals do on earned income.

“Our ability to ensure compliance is greater because we already have the capacity to handle the traffic of returns,” said Testa. “And we have a close connection with the IRS so that we’re able to look at compliance even higher up the line.”

But local government officials say they believe the centralization will be more cumbersome to local business owners than the current status quo.

“This is Kasich’s way to balance the state budget on the backs of the cities,” said Marietta Law Director Paul Bertram. “If this passes, you’re paying double the tax without even realizing it because you’re already paying state taxes and with this they would also take another piece off the top of it.”

Testa said the 1 percent administrative service fee to process the net profit tax would benefit municipalities in Ohio which currently pay an outside service upwards of 3 percent of their business tax profits to complete their returns.

He said half of Ohio’s municipalities employ such a service, including Belpre. Marietta does not and instead uses its own income tax department to process the returns.

Marietta City Council passed a resolution last week against this provision of House Bill 49, which contains Kasich’s proposed budget.

The resolution said the proposed change would be fought by affected municipal corporations and that the loss of revenue if the state-operated program should pass through state legislature would further add to the financial malaise of the city’s coffers and ability to provide public peace and safety.

“This is a clear violation of home rule,” said Council’s Finance Committee Chair Tom Vukovic. “And at our last committee meeting even local city business owners expressed that they don’t want to file with the state because it’s so much easier and more efficiently done by our own tax department.”

Marietta Deputy Tax Administrator Bonnie Duff explained to council that the city’s income tax department processes 1,128 business returns each year and brings in approximately $900,000 in business tax revenue annually. She said with the administrative service fee proposed with the centralization approximately $9,000 of that revenue from business taxes would remain with the state.

“The Ohio Business Gateway is a mess for filing,” said Duff. “Local (certified public accountants) have come to us saying they want to keep the filing local instead of dealing with it.”

City Treasurer Cathy Harper said city officials are awaiting further discussions with state legislature with the hopes that the final budget will have changes to requirements for business taxes.

“Part of this was driven by the statewide (certified public accountants) association but we have a good relationship with our local accountants and businesses and the taxpayers as well,” said Harper. “We know how we operate well and are waiting to see what will change with this budget.”

At a glance

¯ Gov. John Kasich’s 2018-2019 budget has proposed a centralization of business tax filings in Ohio.

¯ State officials say centralization is pro-business and would provide a singular filing system for businesses that draw profits from different municipalities.

¯ Marietta officials are against the centralization because of a proposed 1 percent administrative service fee to process business taxes at the state level.

Source: Times research.

NEWSLETTER

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *

Starting at $4.15/week.

Subscribe Today